Its common for lenders to sell home loans to another company, including Freddie Mac. This practice allows lenders to make more home loans. If you received a letter titled “Borrower Notification: Freddie Mac Has Purchased Your Mortgage Loan,” don’t be alarmed. The letter is for informational purposes only, and you do not need to take action.
If you’re a homeowner, you may have received a letter informing you that Freddie Mac has purchased your mortgage This understandably raises questions about what this means and how it impacts your loan Don’t worry, I’ll walk you through everything you need to know about Freddie Mac buying your mortgage.
Who is Freddie Mac?
Freddie Mac, officially called the Federal Home Loan Mortgage Corporation (FHLMC), is a private company created by Congress in 1970 Along with its counterpart Fannie Mae, Freddie Mac operates in the secondary mortgage market This means they buy mortgages from lenders and sell them to investors.
By doing this, Freddie Mac provides liquidity and stability to the US housing finance system. They ensure lenders have the funding to offer affordable mortgage options to consumers. Freddie Mac currently owns or guarantees over $2 trillion in home loans.
Why Do Lenders Sell Loans to Freddie Mac?
There are a few key reasons why lenders sell mortgages to Freddie Mac:
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Get more money: Lenders get extra money when they sell loans to Freddie Mac. This allows them to offer more mortgages to prospective homebuyers.
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Reduce risk: Lenders give Freddie Mac the risk of default when they sell the loans off their books. This frees up their money so they can keep up with lending rules.
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Increase Homeownership: With more funds, lenders can provide mortgages to borrowers who might not qualify through traditional lending channels. This helps expand homeownership.
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Meet Conforming Loan Standards: Freddie Mac sets guidelines for the mortgages they’ll purchase. Lenders sell loans to confirm they meet these conforming loan requirements.
When Does Freddie Mac Buy My Mortgage?
Freddie Mac often purchases loans soon after you close on your home. However, they can buy mortgages at any point. Generally, here’s the process:
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You get a mortgage from an approved lender.
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After closing, the lender can opt to sell your loan to Freddie Mac. This transfer is called mortgage securitization.
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Freddie Mac will bundle your loan with others into a mortgage-backed security (MBS).
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They sell this MBS to investors like pension funds, banks, etc.
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You’ll receive a notification letter informing you Freddie Mac purchased your mortgage.
Does Freddie Mac Owning My Loan Affect Me?
The short answer is no. Here are the key points on how Freddie Mac buying your mortgage impacts you:
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No change in loan terms: Freddie Mac owning your loan doesn’t alter the loan amount, interest rate, monthly payment, or payoff date.
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Keep paying your servicer: You’ll continue making mortgage payments to your loan servicer, the company you made payments to previously.
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No contact with Freddie Mac needed: You don’t need to contact Freddie Mac about your loan. Handle any mortgage issues with your servicer.
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No action required: The notification letter is informational. You don’t have to do anything when you receive it.
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Protections stay: If Freddie Mac owns your loan, any consumer protections, help programs, or forbearance options you had before will still apply.
Freddie Mac Notification Letter Explained
When Freddie Mac buys your mortgage, you’ll get a “Borrower Notification” letter for informational purposes. Here are key details about this letter:
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The letter tells you about the change in ownership because Freddie Mac is required by law to do so.
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Review and file it: Look over the letter, note your loan and servicer details, and file it with your mortgage documents.
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Outdated balance info: The balance listed may not reflect recent payments. Check statements from your servicer for the most updated amount.
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No action needed: The letter is FYI only. You don’t have to take any steps when you receive it.
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Contact servicer with questions: If you have concerns about your mortgage, contact your loan servicer directly using the info on your statements.
Alternatives If You Don’t Meet Conforming Standards
If your finances don’t align with Freddie Mac’s conforming loan criteria, you still have options:
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FHA loans have flexible credit and down payment requirements.
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VA loans help veterans and military members buy with no down payment.
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USDA loans offer low rates and down payments in rural areas.
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Portfolio loans are non-conforming mortgages some lenders offer. They have customized terms.
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Freddie Mac’s Home Possible program features low down payments and expanded requirements.
Discuss these alternatives with loan officers to find the right mortgage solution for your needs.
Key Takeaways
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Freddie Mac buying your loan is common practice and has no impact on your mortgage terms or homeownership experience.
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Lenders sell loans to replenish their funds so they can provide mortgages to more homebuyers.
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You’ll get an informational notification letter from Freddie Mac when they purchase your mortgage.
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Keep making payments to your loan servicer as normal. You don’t need to take any action when you receive the letter.
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If Freddie Mac’s conforming loan standards don’t fit your situation, many flexible mortgage programs are available.
Why You Received the Borrower Notification Letter
By law, Freddie Mac is required to notify you that your mortgage was sold to us.
The borrower notification letter includes additional information about your mortgage as part of our continued efforts to promote long-term, successful homeownership.
If the balance in the letter is different than the balance on your mortgage statement, the letter may not reflect recent payments youve made. For information about your principal balance or mortgage, contact your servicer, which is the company you make your mortgage payments to, using the contact information on your mortgage statement. Do not contact Freddie Mac. Did you know?
The sale of your mortgage to Freddie Mac does not affect any term, payment or condition of your mortgage. Learn more in the borrower notification letter FAQs.
Why Your Lender Sold Your Loan
Its common for lenders to sell home loans to another company, including Freddie Mac, sometimes soon after youve closed on your home.
By selling mortgages to companies such as Freddie Mac, lenders have the ability to continue making more home loans.
Freddie Mac supports the secondary mortgage market by helping keep money flowing through the mortgage system, regardless of whether economic times are good or bad.
Learn about the role Freddie Mac plays with your mortgage.
Simple Explanation of Fannie Mae, Freddie Mac and FHA!
FAQ
What does Freddie Mac do with my mortgage?
When lenders sell mortgages to Freddie Mac, they have the ability to continue making more home loans. Freddie Mac supports the secondary mortgage market by helping keep money flowing through the mortgage system, regardless of whether economic times are good or bad. Learn about the role Freddie Mac plays with your mortgage.
What happens if I Sell my Mortgage to Freddie Mac?
There is no change in how you make your mortgage payment if Freddie Mac buys your loan. You must continue to send your payments to the company listed on your mortgage statement. Your mortgage terms and conditions, and your payment obligations, remain the same.
Is Freddie Mac a secondary mortgage lender?
If you think of America’s mortgage lenders as retail stores where people go to get mortgages, the secondary mortgage market is their supplier. Freddie Mac, one of the biggest buyers of home mortgages in the United States, is considered a secondary market conduit between mortgage lenders and investors.
What is Freddie Mac & Fannie Mae?
Freddie Mac — officially the Federal Home Loan Mortgage Corporation (FHLMC) — is one of two major players in the secondary mortgage market. The other is Fannie Mae. In essence, Fannie and Freddie buy mortgages from lenders. In turn, those lenders have more money available to finance home purchases.
What happens if you default on a Freddie Mac mortgage?
Freddie Mac typically hires third parties to “service” its mortgages, which means keeping track of payments, handling escrow for insurance and taxes, and processing the paperwork when you want to sell your home and pay off the loan. If you default on the mortgage, though, it will be Freddie Mac coming to foreclose, not the original lender.
Is Freddie Mac a good investment?
In fact, it’s kind of a vote of confidence in you. Freddie Mac only buys mortgages that meet its underwriting criteria, meaning that it considers you a good credit risk and your home a worthy investment. Freddie Mac and Fannie Mae sell securities — bonds, essentially — backed by the cash flows from millions of homeowners’ mortgage payments.
Why would my loan be sold to Freddie Mac?
Fannie Mae and Freddie Mac buy mortgages for a number of important reasons. Liquidity: Lenders can quickly turn their mortgage loans into cash by selling mortgages to these government-sponsored enterprises (GSEs). This liquidity allows lenders to fund more loans and manage their risk more effectively.
Why does Freddie Mac buy loans?
The primary business of Freddie Mac is to purchase loans from lenders to replenish their supply of funds so they can make more mortgage loans to other bor- rowers. Freddie Mac then issues securities backed by pools of these mortgages that it sells to the capital markets.
What does it mean when your mortgage loan is sold?
When your mortgage is sold, you will send your payment to a new servicer. The loan terms and payment amount will stay the same when your loan is sold.
Is it a good thing when Fannie Mae buys your mortgage?
Here’s what you need to know Fannie Mae buys loans from lenders, replenishing the lenders’ funds so they can provide new mortgages for more homebuyers. Your mortgage servicer — the company that you send your monthly payments to — and your loan terms remain the same when we purchase your loan.