If a mortgage company sells a mortgage to another is that breach of our contract?

Question

Being I did not agree to pay the new company or sign a contract with them am I obligated to do so.I do not like the way the new company does business and I dont want to refinance and pay closing cost and the such. what can I do

Answer 1

My mortgage has been sold 3 times over the past 20 years. It's a very common practice and is outlined in your mortgage documents.

Answer 2

The way mortgages work is that a company agrees to finance the buyout of a property (pay off the previous owner) in return for you paying them incrementally (monthly payment). When you signed you loan docs, one thing you signed was a statement acknowledging that the original financer of the purchase has the right to sell the servicing of your mortgage to someone else.

That's one reason the subprime mortgage business is in such a crisis.

Let's say Company A finances your purchase and wants to sell the servicing of your mortgage to Company B. Company B pays an agreed upon price to buy the mortgage servicing from Company A. And, that price is usually a bit higher than what Company A has invested in your mortgage, because Company B expects to make money from you via your mortgage payments. So, Company A has just turned a profit. Company B can then work the same kind of deal as Company A, by selling the servicing of the mortgage to Company C, and so on.

Now, let's say a subprime lender got a mortgage that they really couldn't afford. But, because the real estate market was booming, the original lender (say, Company A) figured it was worth the risk, because if the borrower defaults, Company A forecloses and sells the property at auction for a higher price than they financed. So, even if the property goes into foreclosure, Company A still turns a profit. And, Company B would still be interested in purchasing the servicing of the mortgage, because they feel it's worth the risk, too.

But, if the value of the property doesn't increase or stay the same, now the risk is greater that a foreclosure will cause Company A to take a loss. They have all their money tied up in the mortgage financing and expected to sell the servicing of the mortgage at a profit. But, now no other company will purchase the servicing of the loan for a price where Company A turns a profit and Company A is stuck with it. Because all of Company A's money is tied up in the financing of the property, they can't pay their bills or their employees. Company A then goes under.

So, does that mean if Company A owns your mortgage and goes bankrupt that you no longer owe the mortgage to Company A?

No.

At some point, Company A files for bankruptcy protection and has to liquidate all assets (your mortgage is an asset to them). So, Company B comes in and buys your mortgage servicing from Company A at a discount. You then make your payments - at the same terms you agreed to with Company A - to Company B. Company B is then free to continue servicing your mortgage or sell it to someone else.

Answer 3

More than likely, your original contract states that your original lender has the option to sell your loan. Most lenders do sell them. The Fed cut the rate today so it may be worth looking into a refinance depending on what your rate is now. With the housing market in a hole right now, there are several finance companies out there doing no cost re-fi's. I know Countrywide has them; I see them advertised all the time. Good Luck.

Answer 4

Mortgage brokering is a common practice and lots of people do it as their primary source of income. Typically, loans are sold in huge bundles and the broker earns a commission on the sale.
The transfer should really not affect you, since both you and the lender are bound by the original terms of the loan. It is against federal regulations to change any of those terms without notice and/or agreement of all parties.
Dont worry. Most people don't see any difference when a loan is sold. But, there's not much you can do about it, especially if you don't want to refi.

Answer 5

Actually, when you obtained your mortgage, you signed a blanket statement agreeing to potential sale of that lenders portfolio. Your rate/term cannot change nor can your pre-payment penalty change, if applicable. The only difference is that you send your payment to a different address. When a bank or lender purchases a portfolio of loans, which has been a typical practice for many years, they understand they are bound to the terms of the transaction as originally agreed upon at your mortgage closing. In fact, your title agent at that closing gave you a copy of EVERYTHING you signed so it's easy to go back and review your docs to verify what I've said here! Contact me with any additional questions!

Answer 6

It depends on the terms of your contract. Typically 99.9999% of the time, the original lender will have sold your mortgage to another lender at closing, and the mortgage may be subsequently sold over and over again.

The terms of your contract stay the same.

Answer 7

Heck no! That's how the business operates over 75% of the time. Read your contract. There's a clause on assignability that gives them the right to sell it to whomever they wish. You DID give them permission to do so!

Answer 8

In almost every state in the US, mortgages can be sold unless it explicitly states in the mortgage that it can not be sold.

Just send in your payments to the new address.

Answer 9

Read your contract, it most likely contains a clause saying they can do just that. Regardless, this is something that happens all the time.