What Happens to Your Mortgage Loan when the Lender Changes Ownership?

A lender changes ownership when it merges with another lender or files for bankruptcy. In either case, the process of the takeover is very similar. The loan is purchased. During the period when the sale is finalized, there may be a grace period on your mortgage payments. Once the sale is finalized, payments resume with the new owner. You will only notice a difference in a few unique situations.

Variable Rate Mortgages

Variable rate mortgages may adjust at a number of different times, according to the mortgage contract. When a new lender takes over, the lender will assess the mortgage to determine if the current rate is appropriate. Unless the mortgage limits when a rate can adjust or how it will adjust, you may be subject to a re-evaluation of your rate. In most cases, the new lender will raise the rate and not lower it. If your monthly payments or mortgage rate become too high, you should contact the lender immediately to discuss the problem. The new lender will not want your loan to go into default as a result of the adjustment as defaults cost them money just like they cost you money. Discuss your options immediately to prevent problems.

Mortgage Servicing

Mortgage servicing is a blanket term used to describe many different customer service options a lender provides. For example, some lenders offer direct debit features. Other lenders may allow you to suspend payments during different portions of your loan. These services are partly determined by the lender itself and partly by the terms of your loan. Anything that is written into your loan terms cannot change; the new owner of your lender purchased the contract outright. Any mortgage service, though, that was policy of the lender and not written into your loan terms may be subject to change.

Prepayment and Refinancing Options

Particularly if a new lender has purchased all loans from a lender, the new lender may be looking for opportunities to gain quick cash. While the previous lender may have prevented you from shortening your loan or prepaying, the new lender may be more open to the option. You can contact the new lender immediately to ask about refinancing or paying down your mortgage early. If you can offer cash quickly, the lender may be open to exploring the option with you. 

Loan Forgiveness

Some very lucky borrowers can find a portion of their loan principal or interest forgiven during the process of a takeover or sale. Again, this can occur in high numbers when a lender is sold due to bankruptcy. The purchasing lender may want to simply unload a portion of the loans in order to save on servicing those loans. It is rare to have a loan forgiven unless the lender determines it would be more expensive to resolve the debt than to simply forgive the debt. If you do have your loan forgiven, you should be aware of tax obligations that may fall on you as a result of the forgiven debt.