Just months after refinancing their home of 20 years, Tempe homeowner Kathy Gram and her husband found themselves in a state of confusion when they stopped receiving mortgage payment coupons from their out-of-state lender.
They started to worry.
The Grams’ local mortgage broker told the couple that the Illinois-based mortgage company had abruptly closed its doors — leaving the couple wondering where to send payments on the more-than-$300,000 loan.
“It’s been a hassle,” she said. “I mean, I want to give them my money.”
Industry observers say the rising number of mortgage companies shutting down is likely to leave some borrowers disconcerted and unaware of who now servic- es their loans.
Across the country, at least 50 mortgage companies with 50 employees or more have closed in 2007 alone, according to MortgageDaily.com, which tracks the industry.
With default and foreclosure rates climbing, Wall Street investors are forcing lenders to buy back hundreds of millions of dollars worth of loans — sending some firms into a financial tailspin.
“These people probably tried to carry the business to the very last penny. Then it completely collapses, and there’s nothing left to do but walk away,” MortgageDaily.com publisher Sam Garcia said.
But even if a lender files bankruptcy, that doesn’t mean loans are lost, Garcia said. Experts say whether it’s a trustee appointed by a court, a federal agency, an investment group or a new lender, someone will take over servicing of loans from a defunct company. Mail is often forwarded, or a lock box is set up to collect payments, Garcia said.
When one company closes, another will purchase its portfolio of loans, said Greg Geenen, a vice president with the Arizona Mortgage Lenders Association. Somebody is owed that money, so borrowers need to start making calls immediately to find out where their payments should go if they haven’t been notified already, Geenen said.
If they don’t, they risk entering default and taking a major hit to their credit.The majority of borrowers should receive notices about a transfer from both the old and new lenders, Geenen said.Many mortgages are given an identification number and entered into a tracking system called the Mortgage Electronic Registration System, or MERS, which mortgage professionals can use to find a loan, Geenen said. Borrowers can also pull their credit reports, which should show who is servicing a loan, he said.
It’s also a good idea to send a letter asking for direction on where to send payments via certified mail and to keep copies of all documents, Phoenix attorney Diane Drain said. Also keep a diary of phone calls to the company, and send a confirmation letter or fax after talking with someone in person, she said. “This is a delicate time,” she said. “A lot of people are going to be facing this problem.”