After Your Loan Closes

The question often comes up, “What happens to my loan after it closes? “Independent mortgage banks” almost always sell the loan into the secondary markets. Think of Sovereign Lending Group (SLG) as a toy manufacturer: factories produce toys, sell them to stores, and then take the money and produce more toys, sell them, and on and on. SLG manufactures quality loans, sells them into the secondary markets, and then takes the money and makes more loans.

We mention this because much of our product is sold, either directly or eventually, to Freddie Mac and Fannie Mae. These two Agencies often do an “end-run” around the large aggregators, marketing directly to the small and mid-sized lenders, and their efforts are well known in the industry. But smaller lenders may not have the expertise or experience, like Sovereign does, in analyzing some basic decisions between selling loans directly to Freddie and Fannie (through the cash window) or securitizing loans themselves. Fortunately, SLG has the expertise and financial wherewithal to analyze multiple executions every day, whether or not those include Fannie or Freddie.

To dive into the weeds here a little, Sovereign could sell your loan via the “cash window,” in which case Fannie and Freddie aggregate your loan with the loans from a large pool of lenders and securitized them as a mortgage-backed security (“MBS”). Why would Sovereign choose to sell in this fashion rather than create our own security? Simple: speed and efficiency. The agency cash window typically alleviates warehouse line concerns, a problem which plagues many originators, by way of faster fundings.

Also, borrower retention is maintained as well, allowing us to continue to service our borrowers by handling your monthly payments. Some lenders selling their loans to larger lender aggregators sell servicing rights as well. Sovereign may or may not do this. The cash window allows lenders to retain their customer base, while allowing them to continue to originate new loans.

Sovereign will continue to sell to Fannie or Freddie cash window desks, or to aggregators, or create our own MBS if that gives us the best execution. Most lenders don’t have the diversity and options in selling loans. Having options in the secondary markets helps our borrower’s rates, just as a toy manufacturer selling its products to the best outlets can benefit the consumer! Put another way, we are going to sell loans to the highest bidder, and pass those prices on to our borrowers every day.