Can my loan be sold? What happens if my lender goes out of business?
Your loan can be sold at any time. There is a secondary
mortgage market in which lenders frequently buy and sell pools of
mortgages. This secondary mortgage market results in lower rates for
consumers. A lender buying your loan assumes all terms and conditions
of the original loan. As a result, the only thing that changes when a
loan is sold is to whom you mail your payment. If your loan has been
sold, your existing lender will notify you that your loan has been
sold, who your new lender is, and where you should send your payments
from now on.
If your lender goes out of business, you are still obligated
to make payments! Typically, loans owned by a lender going out of
business are sold to another lender. The lender purchasing your loan is
obligated to honor the terms and conditions of the original loan.
Therefore, if your lender goes out of business, it makes little
difference with regards to your loan payments. In some cases, there may
be a gap between the date of your lender's going out of business and
the date that a new lender purchases your loan. In such a situation,
continue making payments to your old lender until you are asked to make
payments to your new lender.
