What Happens to the Borrower When You Sell a Mortgage Note?
Sellers often worry about the person paying the loan. In short, the loan does not change. Only the address the payment goes to does.
What happens to the borrower after I sell my note?
The borrower receives a written notice of the sale and of who to pay, and the new owner or its licensed servicer collects payments at the same rate, the same term and the same due date. The borrower's loan terms cannot change because of a note sale.
What Stays the Same
- The interest rate
- The remaining term and the payment amount
- The due date
- The lien on the property and the borrower’s rights under the loan
The buyer steps into the seller’s position. The loan is the same loan.
What Changes
- Who gets paid. Payments go to the new owner or its licensed servicer.
- Where to send it. The borrower is told the new payment address or portal in writing.
A borrower who gets a notice can check it is real by contacting the servicer named in it, or the previous holder, before changing where they pay.
What You Do as the Seller
- Hand over the payment records at closing so the new servicer starts with the right balance.
- Stop collecting payments after closing. Your purchase agreement will say what to do with any payment that still arrives at your address.
- Let the buyer or servicer handle borrower communications from then on.
If You Sell Only a Partial
In a partial sale, the borrower still makes the same payments. How they are split between you and the buyer is arranged behind the scenes, often through a servicer. Read full note sale vs. partial note sale.
Talk to a Direct Note Buyer
JKP Holdings has bought notes since 2010 and has transacted hundreds of them. We buy directly in 17 states and place notes in other states through our buyer network, so any state is considered. There are no upfront fees, and you get a free written offer within 24 hours.
Common Questions
Will the borrower's payment change when I sell the note?
No. The rate, term, payment amount and due date stay the same. Only the place the payment goes to changes.
Does the borrower have to be told?
Yes. The borrower receives written notice of the sale and of who to pay, as federal rules require.
Can the borrower refuse the sale?
In general the borrower's consent is not needed to sell a note, because the borrower's obligation follows the note. Check your own note and documents for any restriction.
Who does the borrower contact after the sale?
The new owner or its licensed servicer, named in the notice. Borrowers should not need to contact the seller.
What if the borrower keeps paying me after the sale?
Your purchase agreement covers this, usually by forwarding the payment to the new servicer. Ask how it works before you sign.
Who handles the borrower if payments are late?
The new owner or its servicer. That is part of what the buyer takes on when buying the note.
