Better Mortgage Loan Sales: A Closer Look at Their Practices

When shopping for a new mortgage or looking to refinance an existing home loan, many borrowers consider online lenders like Better Mortgage. With their fast and easy online loan process, these lenders aim to simplify the home financing experience. 

One common question that borrowers have when getting a mortgage from an online lender is: does Better Mortgage sell their loans?

Yes, Better Mortgage does sell their loans. After originating a loan, Better Mortgage typically sells it to investors, often government-sponsored enterprises like Freddie Mac and Fannie Mae. The sale replenishes Better Mortgage’s funds for new loans and transfers the loan servicing to the purchasing entity. The terms of the loan remain unchanged for borrowers.

While the sale of your mortgage to another servicer does not impact the terms and conditions of the loan, it does mean that a new company will handle the billing and other aspects of your loan. As such, it’s helpful for borrowers to understand the loan servicing process when they finance a home with Better Mortgage or any other lender.

Why Do Lenders Sell Mortgages?

Most lenders sell at least some of the loans they originate on the secondary mortgage market. They do this for a few key reasons:

• To raise capital – By selling mortgage loans to investors, lenders free up money to issue new loans. This provides them with capital to lend to more homebuyers.
• Manage risk – Selling loans reduces the lender’s risk if borrowers default. The risk is passed on to the investors who buy the loan.
• Operational efficiency – Servicing mortgages requires staff and infrastructure. Lenders can reduce expenses by selling the right to service loans.

Selling mortgages provides advantages to lenders while also supplying investors with relatively low-risk investments in the form of mortgage-backed securities (MBS). It also gives homebuyers access to affordable financing from lenders that sell loans.

Does Better Mortgage Sell Their Loans?

Like most lenders today, Better Mortgage sells at least some of the loans they originate to investors. Many of these loans are bought by government-sponsored enterprises like Freddie Mac and Fannie Mae. Others are purchased by private banks and investors.

So while you get your mortgage directly from Better, it will likely be sold after you close on your home loan. The loan servicing – the collecting of payments, account management, etc. – will then transfer to the new owner of the mortgage. 

Better Mortgage states that they sell loans to replenish their available funds so they can provide more mortgages to borrowers. The sale of your loan doesn’t change the interest rate, monthly payment, or other terms you agreed to at closing.

How Does the Sale of a Mortgage Affect Borrowers?

When a mortgage servicer takes over your loan, they are legally bound to adhere to the original loan terms and conditions agreed upon with the initial lender. This means the sale of your loan should not impact you as the borrower.

Here’s what happens when your mortgage loan is sold:

• The loan servicer will change – You will make your monthly payments and interact with the new servicer.
• The principal and interest payment remains the same – Your monthly mortgage payment does not change when your loan is sold.
• The loan terms remain intact – Interest rate, loan balance, due dates etc. stay the same after the mortgage is sold.
• You will be notified about the change – Written notice must be provided indicating the new servicer. 

While your experience may change slightly dealing with a new servicer, the core details of your loan stay the same.

What Happens When Your Mortgage Is Sold to Another Company?

The process of transferring your mortgage loan to another servicer typically follows these steps:

• Your lender sells your loan to an investor or servicing company. This usually happens within a few months after closing.
• The new servicer sends you a notification letter indicating that they now own the right to service your home loan. This letter provides their contact information and payment mailing address.
• The new servicer transfers relevant loan data. Your balance, interest rate, payment history and other details are passed on to them.
• You begin making your monthly mortgage payments to the new servicer. The new company handles your payments, correspondence, and account management going forward.
• All terms and conditions of your loan remain the same. It is simply handled by a different servicing company now.

During the transfer process, it’s common for borrowers to initially make a payment or two to their original lender before the switch is completed. Any additional payments will get redirected to the new servicer.

What Are Your Rights When Your Mortgage Is Sold?

Under the Truth in Lending Act (TILA), borrowers retain certain rights whenever their mortgage loan is transferred to a new servicer:

• You must be notified in writing by your new servicer prior to the first payment being owed to them.
• The notification letter must include details such as the new servicer’s name, business address, and contact information for making payments.
• You have the right to have your payments applied accurately and on time by the new servicer.
• Errors made by the new servicer during the loan transfer process must be resolved.
• You retain all borrower rights outlined in the original loan documents and agreements after the mortgage is sold.

If the new servicer violates any of these rights or makes errors, you can submit a complaint to the Consumer Financial Protection Bureau (CFPB). This helps hold them accountable.

How Can You Find Out If Your Mortgage Has Been Sold?

Your lender is legally obligated to notify you if they sell your loan. However, you can also look out for some telltale signs that indicate your mortgage was likely sold:

• You receive a letter from a company you don’t recognize stating that they now service your loan.
• Your lender stops accepting your monthly mortgage payments.
• You notice a different company name on your payment reminders and correspondence. 
• Loan documents referencing a new servicer arrive in your mailbox.
• The name of the payee on your payment coupons changes.

If you suspect your mortgage has been transferred, you can contact your original lender directly to find out if they sold your loan and get information on the new holder and servicer.

What Should You Do If You Have Problems with the New Servicer of Your Loan?

If issues arise after your mortgage is sold, here are some steps to take:

• Review the notification letter from the new servicer. Verify all the loan details and servicer information provided are accurate.
• If you find errors in the transfer details, contact the new servicer right away to get them resolved. 
• Request written confirmation from the new servicer showing they received the full and accurate details about your loan from the originating lender.
• Document any problems in writing. Note conversations, errors, disputes, or issues encountered with dates and details.
• Submit a complaint to the CFPB if the new servicer violates your borrower rights or fails to correct errors.
• Contact the original lender if the problems persist. See if they can help resolve the issues.

Thoroughly documenting servicer errors and submitting regulatory complaints creates a paper trail. This can help get problems corrected and hold negligent servicers accountable for not meeting legal borrower protections.

Conclusion

When you get a mortgage through Better Mortgage or most other lenders today, there is a good chance they will sell your loan soon after you close. This is simply how the secondary mortgage market operates to supply mortgages efficiently and affordably. 

The sale of your loan does not change your obligations or the terms of your financing. But it does mean that a new company will handle collecting payments and servicing your mortgage. While this transition is usually seamless, it pays to understand the process and your rights in case any issues arise with the new servicer.

Knowing what to expect from the loan servicing process will help ensure that things continue running smoothly if and when Better Mortgage transfers your mortgage to a new holder. You can enjoy the benefits of financing your home through an online lender without worry.

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