If you have problems communicating with, getting an answer, or dealing with your mortgage company, read on.
Most people need to borrow money, that is, take out a mortgage, when buying a home. Typically, a realtor or acquaintance will recommend a loan company, you might use your bank, or you might do an internet search. When your application is approved, you will be given a sheaf of documents, 30 to 60 pages of small type is common, where you are required to initial or sign in dozens of places.
Who reads all this? Other than the amount borrowed, the interest rate, and monthly payments, who understands what they have committed to? This blog deals with, who owns the loan, and who are you dealing with when you are making payments or having to deal with issues during the life of the loan.
The mortgage, also known as Deed of Trust, sets forth the terms and conditions of the loan, describes the property (your home), that is security for your loan, your obligations under the loan (example; maintain insurance, pay taxes), and what happens if you do not comply with your obligations (example; taking out single-interest insurance coverage if you do not maintain insurance coverage, holding up payment of insurance settlements, increasing the principal owed on the loan, accelerate the loan, or foreclosure). The loan is a long-term relationship, that will run for 15, 20 or 30 years. During this period, issues will arise that need to be resolved or administered. Typical events are; if there is a flood or fire where repairs are needed, refinancing, insurance coverage issues. During the life of loan, who are you going to be dealing with? Most likely you will NOT be dealing with the company you took the loan out with. Typically, within days, the majority of the original lenders will sell the loan. Why? Because instead of waiting 15, 20 or 30 years, to get their money in monthly dribs and drabs, they want to cash out NOW!
Where has your loan gone? A loan is like real cash money that we used to keep in our wallet. It gets passed along from one company to another like a daisy chain, with each owner taking out a little bite to keep in their pocket, before passing it on. In Texas, there is no requirement that the homeowner be informed of when the ownership of the loan changes. Chances are you will never know who the real owner is.
Who are you paying your monthly payment to? What happens when you have an insurance loss, and the mortgage company is a payee on the claim and you need the money to make repairs. Who do you deal with when you have to re-finance? The answer is the “loan servicing company”. That is the “straw man” who, for a small fee, takes your money and passes it on to the real owner(s). The loan servicing company also sets up your escrow account to pay taxes and insurance. If you have any problems, have any questions in administering the mortgage, you deal with the loan servicing company, not the owners of the mortgage. Just like the loan owners change, the loan servicing company’s change. You will receive a letter saying that, from now on, instead of making your payments to Company A, you are to send your payments to Company B. This can happen, three, five, ten times in the life of a loan.
Not all loan servicers are created equal. Some are good, some are OK, and some are downright terrible. What is at stake to you is the integrity of your home. It is important that you have a reliable loan servicer to deal with. However, you have no choice which company you will be assigned to. This becomes an issue when you have to negotiate an insurance claim, where the loan processor will not cooperate in releasing insurance funds for you to complete repairs, be uncooperative, or refuse to re-finance the loan (Remember the home mortgage crisis of 2008? Oh, how we forget!), or today, trying to arrange loan forbearance under the Covid-19 pandemic.
There are too many horror stories of the injustices people have suffered at the hands of recalcitrant loan servicing companies, with too many people having to pay thousands of additional dollars on their loans, or losing their homes because of such misconduct. If you are losing sleep dealing with your mortgage company (i.e. loan servicing company), or are in danger of losing your home, please seek legal help immediately, and contact the Law Office of Elliott Klein.