Who really owns your mortgage?
Q.: Who owns my mortgage?
A.: Probably not the lender who funded it when it closed.
This is a common question from many borrowers over the years and more so lately as we work with some clients for the “Making Home Affordable” refinances through Fannie Mae or Freddie Mac. Who owns your mortgage? Let’s take a look.
Ancient History
If you have a loan that funded before 2008 and was a non-conforming mortgage, either a “jumbo” or “sub-prime” or “portfolio” mortgage your loan ended up either with a brokerage house like Lehman Brothers or with the lender. Most of the latter, loans that remained with the lender and were referred to as portfolio mortgages, were the Option ARM products with very low entry rates and potential negative amortization.
Almost all of those loans are out of the market, with a few exceptions for very high-balance products or other unique, or niche, mortgages offered by some credit unions or individual banks.
Current History
With the collapse of the non-conforming mortgage markets that began in early 2007 almost all mortgage lending has become either Fannie Mae, Freddie Mac (i.e. conforming) or government (FHA or VA). There are exceptions for those looking for mortgages over the conforming loan limits up to $729,750; which is the maximum loan limit for some areas of the country. But the exceptions are more restrictive than Fannie/Freddie and generally higher rates.
Taking out the exceptions, the overwhelming majority of mortgages being funded across the country are either Fannie Mae, Freddie Mac or FHA loans following the guidelines set forth by one of those three agencies. So who owns your mortgage? Fannie Mae, Freddie Mac or Ginnie Mae most likely-these are known as GSEs or Government Sponsored Entities.
Government mortgages, FHA or VA, are not owned by the government, nor by the lender. They are insured through the Federal Housing Administration or Veteran’s Administration, but almost all end up being owned by Ginnie Mae, Fannie and Freddie’s public servant sister. Ginnie Mae operates almost identically to Fannie and Freddie. It purchases large blocks of loans from lenders and then offers securities, bonds if you will, to the market. Investors buy the bonds, known as Mortgage Backed Securities (or MBS). For their investment they receive returns of principal and interest as mortgage payments are made and mortgages pay-off.
For Fannie and Freddie the same process takes place. They purchase mortgages in bulk from lenders, package them into lots and sell MBS in the market on those lots. As mortgages pay, or default, the investors are compensated, or lose money if defaults, for their investment. Money goes from investors to the GSE for the MBS, from the GSE to the lender to purchase the mortgages, from the lender to you the borrower to fund your home loan.
You make your payment to your lender, or a servicer if they sold the servicing rights, the lender/servicer retains a portion and sends the payment to the GSE, the GSE retains a portions and sends what is left onto the investor.
If you have a non-government mortgage funded in the past three years it most likely owned by Fannie Mae or Freddie Mac. You may be paying the original lender or a new servicer every month, but your mortgage is owned by one of the conforming GSEs.
At the end of the day it does not matter who owns your mortgage. Once you sign the note and it funds the terms are locked unless you and the owner of the note agree to modify the terms. If you make your payments on time and as agreed your loan could be owned by Fannie Mae, BofA, Charles A, or Uruguay-you are still only obligated to make payments per the terms of the note you signed.
To find out if your mortgage is owned by Fannie Mae or Freddie Mac check out the links below.
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