Lenders are known to sell loans they hold to other secondary mortgage lenders in the market. The secondary lenders buy loans at a discount and that money is used by the original lender to provide more loans. There are many lenders who did not use selling this option for a long period, instead keeping the mortgage in their portfolio. However, when it comes to your mortgage, by now many mortgage lenders are selling the loans to the third parties. At a certain level, the sale of mortgages has added problems to the mortgage meltdown countries have faced, but that doesn’t mean it has to be a direct problem for you.
There are problems that have appeared with sold mortgages. For example, there have been some individuals who obtain the addresses and names of the homeowners and then send a fraudulent the letter to the borrower telling them that there has been a sale of their loan and that they should start to pay the money to such-and-such lender. It is unfortunately easy to get the names and addresses of homeowners, as they can be accessed by your County Recorder or Assessor, often online with no login information necessary.
Many people will not take time to verify these letters and they will just follow the instructions they get from the new lender without even doing a quick investigation. To curb this fraud, new rules have been developed when it comes to the assignment, transfer, or sale of loans. The law may look complex, but it can be simplified and there is protection for the borrowers who have loans that may be assigned, transferred, or sold to another lender. When the lender does one of these on a loan, there are some disclosures provided to the borrower that include when this transfer will be effective and the telephone number and address of the new loan servicer. This gives the chance to a borrower to ask the questions and to confirm a transfer. The new mortgage payment may be paid to the original lender or the new transferee lender depending on their agreement. Basic terms of a note or the deed of trust should not change. They will remain effective and full force regardless if the lender still has the papers or it is the third party that has the documents.
Congress also made a complaint resolution mechanism in 1990. With this, when the borrower has any complaint or a question when it comes to the transfer of the loan, he or she will have the right of sending a written request to the first lender. The lender will have to respond or to take the action to the letter within 20 business days after receiving the letter. There are incentives to ensure that lenders do comply with the new law, and to help borrowers understand their loans.
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