Right now the mortgage industry is in a state of flux. With mortgage companies going bankrupt, merging, or tightening their belts, buyers can easily become confused on who to contact in connection with their mortgage. Here are some key watch-outs if a mortgage company goes bankrupt or if a mortgage company merges.
Keep Paying the Mortgage
Most importantly, do not under any circumstances stop paying the mortgage because the company has gone out of business or has merged with another company. Like any asset, even if a bank goes out of business, a mortgage can be sold to another bank. In the hundreds of documents received during closing, one specifically gives the bank the right to sell a mortgage. This applies to a bankruptcy sale or a merger.
If homeowners stops paying their mortgages because their bank has gone under, they could/would face foreclosure. Whatever bank or entity purchases that mortgage has the right to pursue payment in full. During the transition process, mortgage holders may or may not be notified of a change in the ownership of their mortgage. Typically, banks have a central repository for checks, which make it easy to route payments. Most of the time, the homeowner may not even notice the change because banks rarely require homeowners to change the mailing address of their payments. Remember, getting behind on a mortgage has a direct effect on a future borrower’s credit rating.
Call More Often
Take a more active approach to a mortgage owned by a bank in foreclosure or merging. At worse a buyer will be more informed about what is going on, but it may also be possible for the buyer to get a better rate. Banks that go out of business have often been charging more fees and been less willing to refinance than banks with more secured financing. Keeping in touch might reward a buyer with a discount in their mortgage payments. Calling every four to six months to simply check the rate and verify ownership of the loan should be a common policy. This applies to credit cards as well.
Do not look at a mortgage holder’s bankruptcy as a lottery win because it could result in the lost of a house and a nasty scar to a credit rating. On the other hand, be sure to stay informed when a notice is received in the mail or if there is any news. Active borrowers save money and keep their credit score intact.