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Reselling the mortgage is getting ridiculous!


jq26
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To Charles or anyone who knows,

My question is about reselling mortgages. We purchased a home in June 2005. We did a 80-15-5, 5 being cash. Both loans were direct with a large east coast bank.

Commitment papers in May

Bank A: 80% loan

Bank A: 15% loan

Before we got to closing, Bank A sold 80% loan to Mortgage Co. B. The title company said that was rare, but went with it. we now had two different adresses to send checks to.

Mortgage Co. B: 80% loan

Bank A: 15% loan

Three months later, they resold the same loan again.

Mortgage Co. C: 80% loan

Bank A: 15% loan

Today (~6 months later), we receive a letter telling us that Mortgage Company C has now resold our loan as of January 1 to Mortgage Company D:

Mortgage Company D: 80% loan

Bank A: 15% loan

That is three transfers of the loan in 6 months, and not one of them so far has gone smoothly. At one point, we had two companies both demanding payment for the same month's mortgage payment. Both companies asserted ownership, and said they "had papers to prove it". Talk about incompetence...

My question is, is this normal? And is there anything we can do about this? It is just a major hassle- and no one seems to ever know what is going on when I call to straighten out the transfer. Quite honestly, I am sick of it.

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No, it isn't a conspiracy...

I used to work for one of the largest mortgage bankers in the country.

When you buy a house, what you are dealing with are the originators. They are the ones who are doing the hustling and getting the money for the mortgage.

After it is all said and done, the outfit who fronted the cash doesn't want to service the loan for the next 20 years. That's a lot of work for a very low margin. And you have to have a BIG computer with BIG software (like COBOL) to be efficient at it.

That is where the servicer steps in (like my former employer).

They did very little originating because their biggest strength is being able to service the loan for the next twenty years. They were constantly looking for mortgages to service and they always found plenty of originators who were willing to unload it off.

Back in the old days, most mortgage companies and banks serviced their mortgages. It was time consuming and very inefficient. But as mainframes became more affordable, the servicers emerged who were willing just to do solely that. Now with really big computers and the economies of scale, there are really like about ten of them in the entire country.

My former employer started off as a tiny savings and loan in a small town. They eventually spread across south Texas and into San Antonio. And then went under. But their software and process was still very efficient, better than the big boys so that was spun off and allowed to grow until it was better at it than the big boys... Until Washington Mutual bought it out and closed it down...

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Thanks guys. I am aware thta most of these loans are bundles and sold to investors. I'm just more annoyed by the speed at which these things have changed hands. And the incompetence of the phone jockeys I have to deal with to straighten out their mess. If you are going to sell the loan, fine. But let's get the paperwork straight people!

I'll be in Santa Monica for the last 10 days of the year playing golf. I don't even know where to send my mortgage payment before I leave (it is due Jan 1st).

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You should send it to the most current information you have. Keep all copies of payment changes, where the new servicing company sends you the notification of where to now send your payments.

In theory, when the system works properly, you will not have any "dings" to your credit during 60 days from the time of the notification for what look like late payments.

If you are worried and want to be super careful, find out where you can wire the payment, and then when you get home, but prior to the 10th of January, wire the funds.

One "minor" concern with sending the payment in before the 1st of Jan is that the investor may say something to the effect "we did not know that they wanted to apply the payment to their Jan payment, just thought that the borrower wanted to apply extra to the principal."

Charles

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Thanks again guys. The coupon book has been coming about 2-3 weeks after the first notification of transfer. I'll probably get it in early January.

We always do automatic withdrawal anyway (at least once the paperwork gets settled we do). So, now I have to cancel the automatic withdrawal for the last servicer and resign a new one with the new servicer. I guess it is minor, but I really hope this hot potato doesn't continue among servicers of our loan.

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It varies. Some people I've known had their mortgage sold every month. Others had it sold once and that was it.

Shameless plug here - just from a happy customer so far of their savings account and Visa card - from what I've read so far State Farm Bank writes mortgages and generally they don't sell them. Makes sense - SFB is likely using the interest earned on the mortgage products to help leverage their financial position in the underwriting part of the business.

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Thanks,

but we'd be a fool to remortgage. The biggie loan that is being sold and resold was locked in May 05 at 4.875% 5yr ARM. We'd be looking at maybe 150 basis point increase if we refi'ed.

The other loan (15%) is a bit higher rate (maybe 7%) on a 15yr fixed, due to the risk premium of avoiding PMI. Of course, Bank A didn't even think of reselling this loan since it is much more profitable.

Next time around, in 5 years when we trade up, I'll look for lenders that don't resell their paper. This sucks.

Just got off the phone with our newest lender, who of course, knows nothing about this. She actually told me to call back on January 5th, because "it should be in their computer by then". What fun.

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jq,

I would suggest you pen a write to your Attorney General's office and make them aware of your situation. Normally the state AG and or Sec. of State will regulate the mortgage licensing and adherence to the law. This is purely a cover your a$$ manuever to ensure that you will not be penalized if one of the lenders decided to put a late payment on CR.

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