Financing in San Francisco>Question Details

Suzanne, Other/Just Looking in San Anselmo, CA

What happens to your mortgage if your mortgage company goes into bankruptcy?

Asked by Suzanne, San Anselmo, CA Thu Aug 16, 2007

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I'd like to comment on Robert Lusk's statement regarding banks' guideline changes. While it's true guidelines have been changing, (mostly shrinking), most lenders still communicate appropriately. At First Horizon, when there's a guideline change for a portfolio product, we're given time to react, usually as long as a week. If we lock the loan, with the program, it's being honored. On the other hand, I've seen recent cases where brokers are late to respond to changes in guidelines; because one way or another the communication wasn't there. I'm sure the experience mortgage brokers who are staying on top of things, aren't having to jump from one lender to the next to honor a program. Get the loan into underwriting, lock the rate, (very important right now), and communicate with the lender. It's the banks for the most part, that are still operating efficiently (although definitely operating with less revenue). The non-bank backed mortgage companies are the ones "imploding" and dropping programs left and right. So, without going on and on, great mortgage brokers are still great mortgage brokers, and great bankers are still great bankers. I'm confident that when dealing with one or the other, you'll be satisfied and well taken care of.
1 vote Thank Flag Link Fri Aug 17, 2007
Most mortgage companies do not keep loans in house. Loans are bough and sold daily. Unless you are with a very large company your loan is normal managed by someone other than them. And even if your mortgage company kept your loan, you are still responsible for payment. Although I am not a loan officer or a mortgage broker, I would suggest that you contact your mortgage company for more info. At the very least you should continue to pay your bill as agreed to within the terms of your loan agreement.
1 vote Thank Flag Link Thu Aug 16, 2007
I am a real estate broker and am hoping Brian Brady chimes in here with his words of wisdom.

Interesting article about Countrywide in LA Times
http://www.latimes.com/business/la-fi-countrywide16aug16,0,1…
1 vote Thank Flag Link Thu Aug 16, 2007
Deborah Madey, Real Estate Pro in Brick, NJ
MVP'08
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Suzanne,
Marie's response is correct, IF you are referring to a current mortgage on an existing home. If you are in contract negotiations to purchase a house; you would need to find a new lender. In this climate, your mortgage is not secure until it has been "funded" (paid at closing by the bank). Best of luck!
1 vote Thank Flag Link Thu Aug 16, 2007
In most cases the loan would be sold to another company that is still in business
Web Reference: http://www.mtils.com
1 vote Thank Flag Link Thu Aug 16, 2007
As long as it is funded, whoever owns the Note must abide by it's terms. The mortgage can be sold, bought, traded, bartered, auctioned, whatever. But as long as it is funded, you're covered. If you are in the process of getting a loan, get a very experienced Mortgage Broker. Not a Banker. Guidelines will be changing at a moments notice. If they change w/ a bank, you could get stuck. A good Mortgage Broker will be able to position you with a multitude of reputable banks.
0 votes Thank Flag Link Thu Aug 16, 2007
You may not be able to close. This can be a real challenge. You can consider using a mortgage broker who has their network working and can switch lenders quickly. You can also get prequalified with more than one lender. That might help, but the problem is if they go bankrupt a day or two before closing. Even if you can switch lenders they may not be able to close a loan in 2 days. If not that could put you in risk of contract default.
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Thu Aug 16, 2007
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
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Often times, mortgage companies that declare bankruptcy will still retain the servicing rights to the mortgages they currently hold. In one recent example, Homebanc Mortgage declared bankruptcy, retained their servicing rights so that they could still generate a little income, but then haulted all originations of new loans, (due to the inability to fund), and then they let go of all of their loan officers and other production oriented employees. So, to answer your question, it's likely your mortgage payments will continue to go to the same mortgage company; if that changes, then like Marie stated, it would be because they sold the mortgage to another lender. Below is an interesting website that lists the mortgage companies that have "imploded"...keep checking back, they update it daily.
Web Reference: http://www.ml-implode.com
0 votes Thank Flag Link Thu Aug 16, 2007
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