I’m posting this because when I announced that EMC was defunct several
months ago one reader began futilely scurrying around in hopes that this
meant their home would suddenly become theirs without any further payments.
An incredible but true story.
To the contrary since EMC went under the king of Gestapo hard ball collection
tactics, Bear Stearns took over and EMC customers who thought it couldn’t get
any worse found out different in a hurry.
Let me emphasize that there are things in Pamela Yip’s Dallas Morning News
article that I certainly do not agree with. I’m posting it because it’s from my local
newspaper, not as a guide or roadmap as to what to do as more and more
lenders and servicers go out of business. Also the article was on topic for MSF.
Ed Cage | 1804 Cross Bend, Plano TX 75023 | firstname.lastname@example.org | 972-596-4363
If your mortgage lender goes bankrupt,
The law protects you, but you must keep making payments
07:24 AM CST on Monday, January 28, 2008
With all the turmoil that's going on in the mortgage markets these days, there's one question that homeowners don't want to ponder but need to:
What happens if your mortgage lender or mortgage-servicing company files for bankruptcy or goes out of business?
The subprime mortgage implosion has taken down several lenders. Of the top 40 mortgage lenders in 2006, eight went bankrupt or closed in 2007, according to Inside Mortgage Finance, a mortgage-industry publication.
If that happens with your lender or mortgage servicer, don't panic. You have protection under federal law, but you must continue to fulfill your obligations under the loan contract.
Contact your mortgage loan servicer about troubles
"One should first contact the lender and find out if the loan is going to be sold or if they are going to continue to service the loan," said Scott A. Satine, partner at The Loan Shrink in Flower Mound, home loan consultants.
A mortgage-servicing company collects, processes and credits your mortgage payment, and handles your escrow account, if you have one. The servicer can be your original lender, but many times it isn't because loans and the rights to service them often are bought and sold.
If your mortgage servicer is different from your original lender and your original lender goes out of business, continue to make your payments to the mortgage servicer by the due date.
"Even though the company [the original lender] is broke, the payments are still due and still being collected in trust, and the loan is payable," said Craig Jarrell, president of the Dallas Region of Pulaski Mortgage Co. "The old lender will contact you as well to let you know where to start sending the payments."
Your mortgage payment won't increase because of the change.
"If you do receive a transfer letter, your loan number, payment amount, and rate should be disclosed," Mr. Satine said. "These [original] terms will never change."
You also shouldn't have trouble with your mortgage payment being properly credited to your account.
"The processing of the payment is automated, so the lender's status should not affect your payment being credited properly," Mr. Jarrell said.
If your mortgage servicer files for bankruptcy or goes out of business, it's very likely it will sell its assets under the supervision of the bankruptcy court to another financial institution and transfer the servicing of your loan to another company, according to the Federal Trade Commission, the nation's consumer-protection agency.
During this transition, be aware of scams.
Read your mail and your e-mail, and pay attention to phone calls and messages that deal with a change of lender, a late payment or a payment that wasn't received.
Call to confirm the new loan servicer before you send a payment.
If your loan is transferred to another servicer, you should get two notices: one from your current servicer and one from the new servicer.
"It takes two contacts to make it official," Mr. Jarrell said. "Anyone can send a letter saying they bought your loan. You need the companion and authenticating letter from the lender who sold the loan to make sure all the loan numbers and information match up."
The current servicer must notify you at least 15 days before the effective date of the transfer unless you got a written notice at your settlement.
The effective date is when the first mortgage payment is due at the new servicer's address. The new servicer also must notify you within 15 days of the transfer.
By law, the notices must include:
•The name and address of the new servicer.
•The date your current servicer will stop accepting your payments.
•The date the new servicer will begin accepting your payments.
•Telephone numbers for both the current and the new servicer that you can call toll-free or collect for more information.
•Information on whether you can continue any optional insurance, such as life or disability insurance, whether you need to do anything to maintain coverage, and whether the insurance terms will change.
The notices also must include a statement that the transfer won't affect any terms or conditions of your mortgage contract, except those directly related to the servicing of your loan.
For example, if your mortgage contract has an escrow account to pay property taxes and insurance premiums, the new servicer can't close the escrow account.
In addition, you have a 60-day grace period after a transfer to a new servicer. That means you can't be charged a late fee if you send your mortgage payment to the old servicer by mistake, and your new servicer can't report that payment as late to a credit bureau.
"The FTC advises all mortgage holders to read their monthly statements," the agency said. "If your statement is late – even by just a few days – call the mortgage company to track it down."
Keep records of your payments, including billing statements, canceled checks, bank account statements, or online account histories, if appropriate.
If you have a dispute, continue to make your mortgage payments, but challenge the servicing in writing and keep a copy of your letter and any enclosures for your records.
Send your letter by certified mail, and request a return receipt, or send it via fax, and keep the transmittal confirmation.
An escrow account is a fund held by your servicer. You pay into the fund to cover charges like property taxes and homeowners insurance.
Typically, your payments are included as part of your monthly mortgage payment, and the servicer pays your taxes and insurance from this fund as they come due.
Even if your servicer files for bankruptcy or goes out of business, it's responsible for making the escrow payments in a timely way.
If your mortgage servicer administers an escrow account for you, it's required to make escrow payments for taxes, insurance, and any other charges when they're due.
The mortgage servicer also is required to give you a free statement every year that details the activity of your escrow account.
"This statement should show your account balance and reflect payments for your property taxes, homeowners insurance, and other charges," the FTC said. "But it is your responsibility to review the statement to make sure the appropriate entities and payments are made."
If one recipient of escrow funds lets you know that a payment is overdue, call the others that are supposed to be paid from your escrow account – for example, state or county governments for property taxes, insurance companies, or homeowners associations – to make sure the funds are being transferred in a timely way.
If you've been pre-approved for a mortgage and learn that the lender has filed for bankruptcy, call to find out if or when the company intends to make good on your loan.
"If the lender can't or has gone out of business altogether, start shopping around for another mortgage immediately," the FTC said.”
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