Wednesday, January 8, 2014

Who owns my loan? The difference between Investor and Servicer (part 1)

When you take out a mortgage from “Quick Mortgage Bank” (for example), it is common practice for that Mortgage Lender to sell your mortgage/note on the secondary mortgage market. This allows the original lender, “Quick Mortgage Bank” the financial ability to make more loans. The new owner, generally referred to as the Investor (or Mortgagee), may be Fannie Mae or Freddie Mac, another big name bank, or a REMIC trust. A mortgage/note may be sold several times during its existence. (Under RESPA & Dodd-Frank, you should receive a notice each time your loan is sold and to whom it has been sold.)

You may continue to send payments to “Quick Mortgage Bank” or another big name bank who acts as a middle man between you, the Borrower (aka Mortgagor) and the Investor. This bank is called the Mortgage Servicer.

Q. How does the sale of my mortgage/note affect my loan modification application?

A. The investor provides guidelines and restrictions to the way a mortgage can be modified. When a new investor comes into play, your loan may be eligible for additional modification options

For Example: We have seen cases where an investor does not allow modifications in certain situations but when the loan is sold to another investor who does not have that restriction; the borrower’s loan is no longer ineligible and he or she may qualify for a modification.

or your loan may now be restricted from certain changes.

For Example: Some investors restrict changes to length of the mortgage term. There may be a guideline that whereby you cannot extend the existing term of the mortgage. Under the government program HAMP, there are provisions to accommodate such restrictions without disqualifying the borrower from a HAMP modification.

But generally, the sale of your mortgage/note will go unnoticed and will not affect your modification application.

Q. Can I force the Investor to sell my mortgage/note to an Investor who allows modifications?

A. The Borrower has very limited rights regarding the mortgage/note and has no say in the sale of the mortgage/note is sold. However, in a rare circumstance, a Borrower may have defenses in the foreclosure law suit which can be used to encourage the sale of a mortgage/note to a more lenient Investor, if such an Investor is a willing participant. 

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