You Donâ€™t Know Who Owns Your Mortgage â€“ Itâ€™s Impact on You
A friendly wager.Â I bet you donâ€™t know who owns your mortgage.Â An additional wager.Â Bet you canâ€™t find out.Â Give up?Â What impact does this have on you?
Lance knew he knew.Â He took the bets â€“ both of them.Â Iâ€™m Slick Willie and I love people like Lance.Â They help supplement my meager social security pension.Â Lance pulled out his mortgage statement as proof of who owned his mortgage.Â Sorry Lance.
FACT â€“ Mortgages divided at closing
A small piece goes to the servicer.Â The servicer collects your payments, manages your escrow and deals with whatever situations occur. Â They usually own nothing.Â A portion of mortgage income is theirs as a fee.Â Their name is on the mortgage statement â€“ not the ownerâ€™s.
FACT â€“ Mortgages are sold
Minus what goes to the servicer, the mortgage gets sold by your lender.Â The lender uses proceeds to fund another mortgage.Â This allows more people to get home loans and itâ€™s considered a good thing.
FACT â€“ Mortgages are sold again
Mortgages get grouped into ever larger bundles and sold again.Â Most end up in the hands of investment bankers like Goldman Sachs, Fannie Mae or Freddie Mac.
Mortgages may get divided at this point.Â Ownership of the principal (payments paying back the loan) separated from ownership of the interest payments.Â Mortgages get re-bundled into mortgage backed securities and sold again, usually on stock exchanges.
FACT â€“ Mortgages get divided into shares
Investors from all over the world buy shares in these mortgage backed securities.Â Some investors are individuals.Â Most are bought as investments by corporations like insurance companies, pension funds and mutual funds.Â Beneficiaries of pension funds and owners of mutual funds may own a very small piece of your mortgage.Â Yes, that could be Roy down the street or your father-in-law.Â Might even be you.
IMPACT â€“ You benefit and you lose too
I mentioned earlier how you benefit.Â System replenishes money lenders need to make more loans.Â This allows more people to own homes.Â Investors hate to lose money and there have been loses the past few years.Â To avoid loses, investors keep making new demands.Â Lender must meet these demands in order to sell the mortgage and replenish his funds.Â
IMPACT â€“ Demands complicate loan-approvals
Investor demands change borrowersâ€™ burden of proof when attempting to qualify for a mortgage.Â A good credit score may get borrower in the game, but thatâ€™s just the beginning.Â More and more proof (documentation) that borrower is credit worthy gets demanded.Â Even loan approvals come with conditions that must be met.
System described (over-simplified) here helps make mortgages available.Â This will help housing market stabilize and recover.Â Avoid much heartburn by preparing yourself emotionally for what seems like an endless series of requests for documentation.Â You can manage your expectations by knowing whatâ€™s coming.
Godin, Award-Winning Loan Officer and Branch
Prime Mortgage Lending, Inc.
Where people, not computer robots, answer the phone.
Proudly Serving All of North Carolina