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What to Do When Your Mortgage Lender No Longer Exists

So you’ve paid your mortgage on time every month and have always made sure that you review your yearly mortgage summary from your lender. You stay on top of things and have developed a good working relationship with your lender, even though they may be thousands of miles away. Then one day you wake up to find out that your mortgage lender has been bought or sold, or even worse they have went bankrupt and just closed up shop! Now what do you do and how does this affect your mortgage?

There is an old saying that nothing is as certain as change. It’s certainly true in modern markets where interest rates can change on a daily basis. When a mortgage lender goes out of business, for whatever reason, there are typically a lot of questions from those who are used to sending in their payments every month. The very first question is “How does this affect me?” – The good news is that in every case your mortgage rates, payments and other terms will not change. The only thing that is likely to change is the address to where you send the payments, and even then that might stay the same!

Mortgage lenders routinely buy and sell mortgage notes on the open market. In fact there are mortgage lenders out there who write mortgages for the sole purpose of selling them in the secondary mortgage market. In years gone by when you took out a mortgage from your local bank it stayed with the bank through the entire life of the mortgage. Today, typically a mortgage will be sold an average of 1.5 times and rarely does it stay with the original lender unless they were one of the larger mortgage underwriters.

When a mortgage company ceases operation that does not mean that the mortgages they wrote no longer exist. They are considered assets of the company and are sold on the open market typically to the highest bidder. No matter how much they pay for the mortgage your rates, terms and amount due each month does not change.

The general rule of thumb is to always mail your payments in to the same address you have been mailing them until you hear from the new mortgage servicer directly. If you have automatic withdrawals from your checking or savings account you may not have to worry about doing anything – the withdrawal may change automatically.

Above all, do not stop sending your payment in or “wait until you hear from the new company”. This will have a negative effect on your credit and you could find yourself heading down the road of foreclosure. Banks, lenders and other underwriters have well established procedures in place for buying and selling existing mortgage notes. In the end the only thing you have to worry about is making sure you continue to make your payments on time every month!

Whether you are ready to get your first mortgage, or you are a seasoned veteran of the mortgage game, there are a lot of tips you can use to help keep your mortgage rates low and your total costs associated with the mortgage note low. Many of these tips only take a few minutes and can help save you thousands of pounds over the life of the mortgage note!

First, like with any other purchase – shop around! Talk to several lenders and brokers about what they can offer you. You’ll find that you can often find a lot of competition amongst mortgage lenders even during tough economic times. If you have a stellar credit rating you will often find that the mortgage writers want your business no matter what the economy is doing and will fight for it – which is always an advantage for you! Some people chose to go to mortgage brokers to help them shop for a good deal. Brokers don’t loan you the money directly, but rather work with lenders to find you the best deal possible. It’s important, though, to ask them how they get paid and who they work with. You want to find a broker who can work with a wide variety of lending institutions and who isn’t paid by the lender (at least not totally). In this way it ensures they are looking out for your interests and not just their own financial gain.

Next, get a list of all the fees and other costs associated with the mortgage. Don’t be afraid to question fees or ask for them to be lowered. You typically won’t get every fee changed but you will be surprised how much can be changed by just asking. Be on the lookout for any extraordinarily high fees that seem out of place. Don’t let the money you save in interest be eaten through outrageous fees!

Watch out for PMI! PMI, or Private Mortgage Insurance, is typically required when you have less than 20% equity in your home. It’s an insurance policy that protects the lender from you not paying your note. It’s one of the many reasons why you should always strive to put down the largest down payment you can comfortably afford. If you can only afford to put down say 18% of the purchase price ask your lender about doing away with PMI. The 20% rule isn’t written in stone, and mortgage lenders will work with those who have good financial track records.

Once you find the rates you like on the terms you like it is important to lock in the mortgage. Always be sure to get everything in writing – verbal agreements just won’t do. Interest rates can change overnight and fees can mysteriously go up when it comes time to sign the final papers. Be locking in rates and other fees now you can avoid the hassle of having to go through it all again at closing time.

Imagine landing your dream home. Your credit is a bit shaky, but you manage to get a subprime loan with an adjustable rate mortgage. A few years later the interest rates jump and you can no longer afford to pay. You see an ad for a business thats willing to helpitll pay your mortgage for a modest monthly fee while you get back on your feet. But heres the heartbreak: its a scam. The con artists just take your money and run

Its just one of the latest schemes and frauds being seen these days across the financial services industry.

These scamswhich include plenty of shenanigans with mortgages and subprime loansare costing the nation tens of billions of pounds a year.

Millions of homeowners are caught up in this subprime mess. The Federal Reserve has gotten involved in an attempt to bail out the mortgage loan companies. Criminal charges may be filed against these companies for falsifying records, loaning money to under-qualified home buyers, and not reporting the truth to investors.

These are all good reasons why the US government is squarely focused on cracking down on the largest of these financial crimes, launching proactive initiatives and shifting resources as trends emerge, all the while working hand-in-hand with a host of government and private sector partners.

Currently, investigators are actively pursuing mortgage companies and investment irregularities.

The government is investigating 14 corporations involved in subprime lending as part of our Subprime Mortgage Industry Fraud Initiative launched last year.

The companies come from across the financial services industry, from mortgage lenders to investment banks that bundle loans into securities sold to investors. Theyre also looking at insider trading by some executives.

Traditional mortgage fraud:

In one state alone, more than 1,200 cases open today (up about 40 percent from last year), mostly involving fraud for profit, where groups of straw buyers, realtors, etc. rig schemes to buy properties that are flipped or allowed to go into foreclosure.
Hotspots include California, Texas, Arizona, Florida, Ohio, Michigan, and Utah.

Suspicious activity reports that we review for potential mortgage fraud have grown from 3,000 in fiscal year 2003 to 48,000 in fiscal year 2007. This year, theyre on pace to receive more than 60,000 such reports.

A recent case: In November, the owners of a long-time Minnesota homebuilder called Parish Marketingalong with a bank officer, a closing agent, and otherspled guilty to a 100 million mortgage scheme involving some 200 homes.

If you are a victim of the subprime mortgage madness, contact your bank and see if there are any programs in place to alleviate the pain.

When it comes to searching for the right kind of mortgage to meet your needs, you will probably come across a decision about who you should borrow from: Do mortgage brokers or banks make better lenders?

A mortgage broker is a mediator that facilitates the process of acquiring a mortgage for individuals as well as businesses. Essentially, they are like home loan supermarkets. Their broad access to lenders as well as their wide offering of various programs makes them a convenient source of help for many borrowers. If you have less-than-perfect credit or are in unusual circumstances, mortgage brokers can still find you the type of funding you need. Mortgage brokers will charge a brokers fee, which you should ask about and take into account when calculating your initial payments.

Mortgage brokers will typically originate, process, and pass the loan on to a lender who will subsequently sell it to an investor. They take commission and will have higher closing fees. Beware of gouging, as brokers have full discretion on how much they want to charge the borrower for processing the documents necessary for the loan.

Today, about 20,000 mortgage brokerage operations account for more than 80% of mortgages are issued by mortgage brokers in the U.S. The convenience and resources they offer to borrowers is the key to their popularity.

The term mortgage banker refers either to an individual loan officer who works at a bank or to the bank itself. They specialize in originating mortgages and selling them to investors and continue to service them. Both the origination and servicing processes require fees, which are the two primary sources of income for mortgage banks.

A key difference between mortgage banks and mortgage brokers is that banks have more of a standardized and set approach to setting fees. Bankers are told what fees to charge and are told not to stray away from them. This allows for more stability and prevents the borrower from being surprised when it comes to discovering what the fees for the home loan will be.

Now the question is which is the better option? The answer is quite simple: Whoever gets you the better deal. It should be noted that while some borrowers enjoy the comfort and help of having a mortgage banker see them through the life of their loan (though not all do), while others do not mind either way. This discernment, along with a thorough comparison of deals that you can get from mortgage brokers and bankers, should give you a fairly clear idea of which path to take.

For more in depth coverage on various mortgage and real estate related topics, please visit www.allmortgagenews.comMortgage

The dream of owning a home is something that is on just about everyone’s lifetime goal list. It’s one of the things that in some ways signals that we have made it in life and can bring great pride and a sense of accomplishment to many. For many who pursue that dream it can be a confusing undertaking if they are not prepared for the home buying experience. Without a doubt one of the most confusing and often misunderstood parts of the home buying experience is the mortgage process. Sadly, most of us do not have the money to just buy a home outright, so we turn to mortgage lenders to help us finance the home of our dreams.

One of the first things anyone who is interested in owning their own home should understand is the role credit plays in the mortgage process. You are getting ready to ask a lender to make a sizeable loan to you for an extended period of time – often upwards of 30 years. For them to take on this risk, they need to evaluate your creditworthiness – or your ability to pay the money back. They typically look at items such as your credit report which lists how you have dealt with other creditors in the past, your total household income and the price of the home you are willing to buy and where it is located. Based on this information they then decide on whether to extend you the loan and at how much interest.

Interest is an important concept to understand because over the lifetime of the loan you can expect to pay back double the amount of the loan value based on the interest rate – that 150,000 house has suddenly cost you 300,000. Your goal in the mortgage process is to get the absolute lowest interest rate you can.

You also need to know how much house you can afford. Most mortgage lenders typically look for you to spend no more than 30% of your monthly income on house payments. Of course, the longer the mortgage term and the lower your interest the more house you can afford to buy. It is important to buy something you can easily and comfortable afford – the last thing you want to do is find yourself in a crisis situation unable to pay your monthly mortgage payment!

Next, be sure you have saved up a sizeable cash reserve before jumping into the home buying process. You are going to have to pay things such as closing costs (which can be upwards of 5% or more) and pay as much of a down payment as you can to reduce your loan amount as much as possible. You then will want to have a little reserve left over to furnish your new home and take care of any needed repairs – remember, you own it now and it is up to you to repair it if something breaks!

If you are confused about the mortgage and home buying process, don’t feel as if you are alone. Many people share the same concerns and fears as you do. Often times in your community there are local first time home buyer groups that meet with experts from the banking and real estate industry there to answer your questions. Ask your realtor about whether such a group exists and when the next meeting is. The home buying process doesn’t have to be a terrifying experience, and if you come prepared you can win big by getting the best deal possible on your mortgage while getting the house of your dreams.