Can banks swap loans in secret?

Asked by Land Seller, Tahoe City, CA Sun Mar 17, 2013

My loan went from PNC to Wells Fargo with no recorded assignment at county recorder. Wells did not take over PNC and MERS was never involved in my loan. Yet somehow, PNC now tells me WF is owner. Can they do that?

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Craig Cooper, Agent, Tahoe City, CA
Mon Mar 18, 2013
Dear Land Seller:
some excerpts from the answer you are looking for are from the following:…

To answer this question, it is necessary to distinguish between two types of lenders.
Mortgage Banks

Mortgage banks are state-chartered temporary lenders who must sell the loans they originate because they do not have the long-term funding needed to hold them permanently.

Mortgage banks borrow large amounts but only for the short periods they must hold mortgages prior to their sale. The unsold mortgages serve as collateral for these loans. As the mortgages are sold, the loans are repaid.

To hold mortgages permanently would require long-term funding sources, which in turn would require much more capital. That is a different business.

While mortgage banks always sell the mortgages they originate, they may retain the servicing under contract with the buyer. Where servicing is retained, borrowers continues to deal with the same firms that loaned them the money in the first place.

The second type of mortgage lender are the depository institutions: commercial banks, savings and loan associations, savings banks and credit unions.

These institutions are chartered by both the Federal and state governments to provide a wide variety of financial instruments to consumers and businesses, including deposits or deposit-type instruments, and many types of loans including home mortgages.

Among these groups, only savings and loan associations have viewed themselves historically as being primarily home mortgage lenders, and since being badly burned in this market in the 1980s, their commitment today is not nearly as strong as it used to be.

Depository institutions have the capacity to hold mortgages permanently in their portfolios, if they want to, and some do. They have more capital than mortgage banks, and deposits typically provide a more-or-less stable funding source. But depositories can also sell mortgages in the secondary market, the same way that mortgage banks do, if the mortgages they write don’t fit into their portfolio strategies.

Many depositories have a general policy of holding any adjustable rate mortgages (ARMs) that they write, but selling fixed-rate mortgages (FRMs) in the secondary market. This policy evolved after the interest rate explosion of the early 1980s, which bankrupted many savings and loans holding FRMs. In a rising rate environment, a depository’s cost of funds will rise much more rapidly than the income it earns on a portfolio of FRMs.

Borrowers were never consulted about the changes in industry practice that resulted in their being thrust into long-term business relationships with firms they did not select. There were side benefits to these changes, of course, including much greater competition for loans and easier lending terms. Still, it would be good if borrowers could choose a lender for life, even at a slightly higher price, and even if they have to take an ARM. Right now, they have no such choice.
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Lee Roessler, , Tahoe City, CA
Sun Mar 17, 2013
Going a bit further; Many lenders originate a loan then sell the loan (investment instrument) but keep a small percentage of the loan just to service the borrower. The original lender then has no risk but collects the payments and does the bookkeeping. It is just business and there is no need to worry.
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Lee Roessler, , Tahoe City, CA
Sun Mar 17, 2013
Yes they can. However, it is not a secret conspiracy. Your loan is, for somebody, an investment of their money. In this case it happens to be a loan on your house. Be it Wells Fargo or B of A that originated the loan, it is still an investment that that can be bought or sold.
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