Q: My niece and nephew closed on a home in Georgia during the last week in October. The first mortgage payment was due on December 1.
The mortgage has already been sold and we don’t know to whom. The lender that gave them the loan is out of business and the phone number on the temporary coupons they received at the closing are full and cannot take anymore messages.
On the website, the company left a message that they are no longer servicing loans. I want to make sure my niece’s credit is intact. I’m not sure what we should do next.
A: The housing and credit crises have wreaked havoc on the mortgage industry and as a result, many lenders have gone out of business quite suddenly. Some leave forwarding information. Others do not.
Although your niece’s original lender seems to be out of business, it may have simply closed its public face – but people are still working there, behind the scenes, to get loans parceled out to other lenders and to finish tying up loose ends.
While it may seem counterintuitive to send loan payments to a company that appears to be out of business, your niece and nephew may still have to follow the instructions on your loan documents. If your loan documents require you to make payments to a specific address, you probably still need to make those payments.
You might have some luck finding the new company that is servicing your loan by contacting your settlement agent or the title company that processed the paperwork for your loan. It’s possible that the loan was sold off at the closing and that the settlement company has the paperwork for the new lender servicing your loan.
Usually, however, when you go to loan settlement, the lender that gave you the loan will also give you paperwork indicating that your loan has been sold off. In that paperwork, you should receive the new lender’s name and contact information.
Frequently, loans are sold off shortly after loan settlement. In these cases, the existing lender will send you a notice that the loan has been sold off and the new lender will send you notice that they have purchased the loan and to send payments to them. If you failed to get any notice from your existing lender and did not get a legitimate notice from a new lender, you might have to continue making payments as required under the loan documents.
As I mentioned above, when a loan transfers from one lender to another, the existing lender needs to assign your loan to the new lender. Usually, the old lender will need to record or file an official document against the title to your niece’s home to give notice to everyone that the old lender sold of the loan to the new lender.
This is where your settlement company can come in handy. In states where property records are not online, you might be able to call the settlement company and ask if someone there can determine if an assignment of your mortgage has been recorded on the title to your property. If it has, you can give that new lender a call to determine where you should send your loan payments.
You might also want to call the state agency that regulates mortgage lenders. When a mortgage lender goes out of business, the state regulator will step in to make sure the transition goes smoothly. Some regulators have an ombudsman, who may be helpful.
Finally, make sure you keep good records of any calls you make to determine who the new lender is and make sure that your niece makes copies of any checks she sends out to the lender for your mortgage payments.
You might find out that the lender has ceased doing business, but they are still be receiving payments on the loans they hold. If your niece has not made her December loan payment, she should know that most loans give borrowers a grace period until the 15th of the month to get that payment to the lender.