June 29, 2008

Your Mortgage Has been Sold: Who Do You Pay Now

When lenders make a mortgage loan they sometimes keep it " in house". But much of the time if they are doing a lot of this type of business they have to assign the loan to another to get back the cash so that they can do this again. This is known as the secondary mortgage market. Other banks, insurance companies, hedge funds, mutual funds and Fannie Mae and Freddie Mac all participate in buying mortgages from the original lender. This way the bank that made the original loan gets cash back to do it again. It works as long as there is faith in the ability of the borrower to pay it back.

What Happens to You When Your Lender has Sold Your Mortgage: Some Rules You Need to know

According to RESPA, the real estate settlement procedures act, the lender must disclose their policy on assigning loans. There should be no surprises

1. If an assignment takes place, your lender has to disclose the date of the transfer, and who they assigned the loan to. When you receive a letter indicating that your payments must now be made to a new company, you know your check is going to the new owner of your mortgage.

2. Your newly assigned loan cannot be changed. The terms of the mortgage cannot be changed

3. Because it can be confusing during the transfer, the law allows a 60 day grace period. if you fail to pay the correct lender and are therefore technically late, you have two payments or 60 days without late penalties to get it right.

4. If you are not sure make your payments to, pay the first lender and send both parties a letter indicating that. Not bad to send this certified so that you can be sure it ws received by both parties.

5. Your lender has 20 days to act on this notice to correct and make clear to you who now should be in receipt of your monthly payments. The have 60 days to resolve the confusion. If not you can sue for any damages incurred up to $1000 and court costs.

Watch Out for Scams

Dont pay a new lender before confirming with the original lender that they in fact have assigned the loan to them. Any one can send you a letter asking for your mortgage payment. Pay the original lender until its confirmed that the new owner of your mortgage is in fact the rightful owner to avoid paying your monthly payments to scam artists.

Howard Bell
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