These days, it is not uncommon for mortgages to be sold or transferred. Many mortgages start out with one company and are almost immediately transferred to a different bank or loan servicing agency. In fact, most homeowners who finance through a mortgage, are probably not paying the same company who originally provided the loan. You may be asking yourself, why does this happen, and how does it affect the average homeowner?
Anyone who has applied for a mortgage can attest to the fact there is no shortage of paperwork to fill out during the process. Very few people actually take the time to read the fine print. In fact, most simply verify the important terms then sign and initial as applicable. However, in most, if not all mortgage contracts, there is a clause stating whether or not their mortgage will be sold or transferred. This language is required by Title 12 Chapter 27 § 2605 of the U.S. Code.
Generally speaking, there are two parts of a mortgage that can be transferred or sold. The two components do not even have to be owned by the same company. However, to most homeowners the distinction is non-existent except in name. The first component is the actual mortgage, also called the note. The note is what sets forth the terms of loan, including the amount owed and when. The note is almost always secured by a deed of trust on the physical property. In Arizona, this is what allows banks to foreclose on homeowners who fail to pay their mortgages. This is what’s known as a non-judicial foreclosure.