So you’ve paid your mortgage on time every month and have always made sure that you review your yearly mortgage summary from your lender. You stay on top of things and have developed a good working relationship with your lender, even though they may be thousands of miles away. Then one day you wake up to find out that your mortgage lender has been bought or sold, or even worse, they have gone bankrupt and just closed up shop!
Now what do you do when your mortgage lender no longer exists, and how does this affect your mortgage?
There is an old saying that nothing is as certain as change. It’s certainly true in modern markets where interest rates can change on a daily basis. When a mortgage lender goes out of business for whatever reason, there are typically a lot of questions from those who are used to sending in their payments every month.
The very first question is “How does this affect me?” – The good news is that in every case, even if your original mortgage lender no longer exists, your mortgage rate, payments and other terms will not change. The only thing that is likely to change is the address to where you send the payments, and even that might stay the same!
Mortgage lenders routinely buy and sell mortgage notes on the open market. In fact there are mortgage lenders out there who write mortgages for the sole purpose of selling them in the secondary mortgage market.
In years gone by when you took out a mortgage from your local bank it stayed with the bank through the entire life of the mortgage. Today, typically a mortgage will be sold an average of 1.5 times and rarely does it stay with the original lender unless they were one of the larger mortgage underwriters.
When a mortgage company ceases operation and no longer exists, that does not mean that the mortgages they wrote no longer exist. They are considered assets of the company, and are sold on the open market typically to the highest bidder. No matter how much they pay for the mortgage your rate, terms and amount due each month does not change.
The general rule of thumb, is to always mail your payments to the same address you have been mailing them until you hear from the new mortgage servicer directly. If you have automatic withdrawals from your checking or savings account, you may not have to worry about doing anything – the withdrawal may change automatically.
Above all, do not stop sending your payment in or “wait until you hear from the new company”. This will have a negative effect on your credit, and you could find yourself heading down the road to foreclosure. Banks, lenders and other underwriters have well established procedures in place for buying and selling existing mortgage notes. In the end, the only thing you have to worry about is making sure you continue to make your payments on time every month.