THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Saturday, June 10, 1995 TAG: 9506090478
SECTION: REAL ESTATE WEEKLY PAGE: 04 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY JEANNE MOONEY, SPECIAL TO REAL ESTATE WEEKLY
LENGTH: Long : 106 lines
Ever so often, a homeowner will discover that his mortgage lender doesn't love him anymore. He may learn this at the mailbox and pull from the heap of daily bills a goodbye letter that reads something like:
``Dear Sir, We have sold your mortgage and the rights to collect your loan payments.''
Does he shed a tear? Hardly. One homeowner's mortgages and the rights to service them can switch hands more often than Zsa Zsa Gabor changes husbands.
No, the selling of mortgages isn't sexy stuff, most people probably would agree. The transactions occur in a complex world called the secondary mortgage market and without a homeowner knowing it. Even if he was aware, he probably wouldn't run to the neighbor's fence and yell, ``Hey, Mabel! Guess what?'
Most people have no clue,'' says Dick McGhee, area manager of AccuBanc Mortgage Corp. in Virginia Beach. ``It's like looking in the back of a TV set. They know there's a picture but they don't know how it got there.''
Lenders primarily sell mortgages to make money. And they can sell them several ways. For instance, Lender A can sell a pool of mortgages to Lender B. In turn, Lender B can sell them to Wall Street investors.
Fannie Mae, the government-sponsored Federal National Mortgage Association, gets involved by issuing securities backed by these mortgage pools and guaranteeing the payments investors receive. Lender B pays Fannie Mae a fee for that guarantee.
The whole process keeps money flowing from home buyers to investors and lenders, who can make more mortgage loans for home buyers.
Nothing relevant changes for a homeowner when his favorite lender sells his mortgage but continues to service it, which means collecting principal, interest and escrow payments. The loan's principal and interest are not affected by the transfers.
The monthly payment remains the same, other than occasional changes in the escrow account because of higher taxes or homeowners insurance premiums.
What really matters is when a lender sells the rights to service a loan.
That's when you get a kind of a realty Dear John. But don't pull out your hanky. You'll soon get a hello letter from the new servicer, a new address for mailing your mortgage payment and a toll-free phone number to call if something goes haywire.
``Ninety-nine percent of the time it's going to be a routine thing,'' McGhee says of the transfer of mortgage servicing.
There are horror stories, such as when a homeowner is assessed a late fee because he sent his loan payment to the old lender instead of the new servicer. But those instances are an exception, mortgagors such as McGhee say.
``Lenders will bend over backward to straighten out a problem,'' McGhee says. ``Nobody wants people saying, `Don't get your loan from them because you don't know what's going to happen after you get it.' ''
Actually, consumers are told what might happen to their mortgage loans. Federal law requires lenders to disclose the percentage of loan servicing they will sell or transfer annually. Consumers must read and sign this disclosure when they apply for a loan.
And so at AccuBanc, applicants know that servicing rights will be sold for as many as 25 percent of all loans it originates this year. At First Jefferson Mortgage Corp. in Norfolk, applicants are told that servicing rights will be sold for every loan.
That didn't bother Sandy M. Davis of Virginia Beach, who got her home loan there. ``It was uneventful,'' says Davis of the servicing switch to First Union Mortgage Corp.
Jack L. Whittaker of Virginia Beach has seen the servicing rights on his various mortgages change hands eight to 10 times - more than he can precisely remember. One of the changeovers hit a snag. Whittaker got a goodbye letter from his lender not long after he had made his mortgage payment. Then he was assessed a late fee by the new servicer.
``I didn't pay it,'' Whittaker says. Two and a half months later, his payment was properly credited and the demand for the late fee was dropped. ``They just said forget it, we straightened it out.''
``You don't have to be buffaloed by these people,'' Whittaker says.
Whittaker believes in taking a pro-active approach. He keeps good records of his mortgage payments. And if a new servicer seems slow to send him his payment coupons, he calls and tells them to hurry along.
``I don't want nobody telling me I didn't make my payment on time,'' he says.
Federal law affords borrowers some protections when the rights to service their loans are sold. For instance:
You must be told that the servicing rights to your loan are going to be sold at least 15 days before the effective date of the switch, and no more than 15 days after, or at settlement.
The notices must give the name, address and toll-free or collect call phone number of the new servicer as well as a toll-free number for the lender currently servicing your loan.
You cannot be charged a late fee for any timely mortgage payment you make to your old servicer within 60 days of the servicing switch. ILLUSTRATION: [Cover] PASSING THE MORTGAGTE BUCK
Illustration by ADRIANA LIBREROS/Staff
CONSUMER ALERT
When the rights to service your loan are sold. . .
. . . you must be told at least 15 days before the effective date
of the switch, and no more than 15 days after, or at settlement.
. . . the notices must give the name, address and phone number of
the new servicer as well as a number for the current lender.
. . . you cannot be charged a late fee for any timely mortgage
payment you make to your old servicer within 60 days of the
servicing switch.
by CNB