Why am I sending my payment elsewhere?

The short answer: Your mortgage was sold. Keep reading to find out why it was sold and why that’s not such a bad thing.

Buying a home is one of the most significant financial decisions you’ll ever make. It’s a journey filled with excitement, anticipation, and sometimes a bit of anxiety. Amidst the whirlwind of paperwork and negotiations, you might hear a term that raises eyebrows: mortgage sales. Yes, you read that right – your mortgage, the one you painstakingly secured from your trusted lender, might end up in someone else’s hands. But why does this happen? Let’s delve into the world of mortgage sales and uncover the reasons behind this practice.

The Role of Stockton Mortgage

Before we dive into the why, let’s first understand the who. Mortgage originators, like Stockton Mortgage, are the initial entities that provide you with the funds to buy your dream home. We evaluate your financial situation, assess the property’s value, and extend a loan tailored to your needs. Sometimes we hold onto your mortgage, servicing it throughout its term, but we also have the option to sell it.

Revenue and Risk

Mortgages are big financial assets, and like any asset, they carry risks and rewards. When a lender (like Stockton Mortgage) issues a mortgage, they tie up a significant portion of their capital in doing so. Sometimes this can strain their ability to extend more loans and grow their business. As you make payments toward your mortgage, the lender earns interest on the loan, which is revenue for the lender. However, the money that was lent for issuing the mortgage is locked in for the duration of the mortgage term, which creates risk for the lender.

Managing Money Flow and Resources

By selling mortgages, originators unlock their money flow. Instead of waiting years to recoup their investment, they can sell the mortgage to other financial institutions, such as government-sponsored enterprises like Fannie Mae or Freddie Mac, or to investors in the secondary market. This influx of cash allows originators to issue new loans, fostering more homeownership and stimulating economic growth.

Impact on Borrowers

You might wonder: how does this affect you, the borrower? In most cases, not much changes. Your terms and conditions remain the same. The only noticeable difference might be where you send your monthly payments. If your mortgage is sold, you’ll receive a notification detailing the transfer, along with instructions on where to direct your payments.

While it might seem odd at first, understanding the reasoning behind this practice can alleviate concerns and shed light on the complexities of the mortgage industry.

If you hear that your mortgage has been sold, rest assured that it’s all part of the large network that makes homeownership possible for millions of people around the world.