Nicki Long's questions were simple and straightforward:
"Who owns my loan?" the single woman asked. "Why is it such a big secret when you try to find out?"
Mortgage banking is no longer the simple business it was 20 years ago - even eight years ago. Your monthly mortgage payment could be going to a foreign investor, a huge pension fund or the local bank vault depending on whether the original lender has sold your mortgage.
To complicate matters, your loan has a servicing component - billing, preparation of coupon books, statements - that is often sold separately. There also are lenders who sell the loan and retain the servicing.
In Long's case, her loan was sold in the secondary mortgage market and its servicing rights were sold several times. Add in bank mergers and buyouts and her loan trail becomes a dizzying maze of new names and addresses.
Many of the agencies servicing her loan had no idea what institution, or fund, actually held the loan itself.
If you call your lender, don't be surprised to discover you've reached the company that only "services" your loan. Sometimes the servicer knows the holder of the loan and will not tell you. But the information is public record and should be recorded. Go to the tax assessor's website or visit the office at the county courthouse. Locate your home by its tax number and then check "Beneficiary" followed by "Assigned To."
The loan, or at least its servicing, will be listed under one of those headings.
Some lenders say they attempt to explain to the borrower at closing that the loan and servicing could be sold, but the message is not sinking in.
Borrowers still expect to deal with the lender whose name is at the top of their loan paperwork. Changing hands can create confusion and anxiety, especially when the servicing is sold separately.
The chief argument against allowing lenders to sell loan-servicing contracts is that some lenders would go broke without the servicing fees. If this is true, the mortgage banking industry should go out of its way to inform borrowers they could be dealing with an unfamiliar - and most likely out-of-state - lender when they sign for a loan.
What is this servicing worth to a lender? On a $100,000 loan, the servicing contract can be worth about $450. When a group of contracts is sold, large amounts of money can change hands.
Not all lenders sell their mortgage loans. Commercial banks, savings and loans, credit unions and other institutions that keep home loans are called "portfolio" lenders.
Most lenders are now non-portfolio lenders. They sell mortgages to the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). These agencies package mortgages and then sell shares in the packages (similar to mutual funds) to individual investors or big financial institutions. The pooling of these mortgages can be compared to a mutual fund with big and small players buying shares.
There is nothing wrong with selling home loans in the secondary market. It is a very efficient way of creating more mortgage money. But once individual loans reach these huge conduits, they are nearly impossible to find. And ultimately, it makes little difference to the borrower who owns the loan.
The one exception is if the borrower wants to refinance the loan, or modify the interest rate, which is a booming business at the moment.
Portfolio lenders are often able to change the terms of a loan at a reduced fee because it is still in their possession. But even this is not always the case because portfolio lenders might sell a particular loan into the secondary market to earn money for a special need.
When a loan is sold in the secondary market, the original lender releases control and usually any flexibility to change the terms of the loan.
So be prepared. If you are refinancing or buying a home, ask your lender if the loan and/or its servicing will be sold. The loan probably will be, but you should know if the servicing will change.
That way, you won't be surprised when you are asked to send your checks to a different place.
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