What Happens If My Loan Sold?

A few days ago we covered, What Is The Difference Between A Loan Servicer, Investor and Lender?  today we’ll basically be doing a “part 2.”  Many time servicers will transfer or sell the rights to a loan.  So you might ask What Happens If My Loan Sold?   If you’re current on your loan then there’s no need to stress, nothing really happens.  However, if you are with Bank of America for instance and you are in a short sale process, then you should be aware.

From Bank Of America:

Bank of America services mortgage loans for hundreds of investors. As a part of normal servicing, investors may decide to release or transfer servicing from Bank of America to another company.

Servicing may be transferred on first, second or stand-alone liens. In most cases, once the servicing transfer occurs, the short sale process ends with Bank of America and the homeowner must contact the new servicer to determine what foreclosure alternatives may be available.

Keys to remember if you are doing a short sale.

Some key activities that may occur during servicing transfer:

All lenders should send a letter 15 days before the transfer date.

• If you are with Bank of America, then they may call the agent to advise of the impacts to the short sale.
• The new servicer will send a letter or statement advising the homeowner where to send payments.
• If an offer has already been accepted on your short sale, a closing has been set and an approval letter issued, the new servicer will determine if the short sale will continue. [In other words, you’ll be starting over, but hopefully “fast tracked.”

What Is The Difference Between A Loan Servicer, Investor, Lender and Bank?

What Is The Difference Between A Loan Servicer, Investor and Lender?

Loan Servicer

This entity is essentially like a “property manager.”  They simply collect the payment and process it.  They also act as a buffer between the home owner and the “investor.”  Most loans have “servicing rights” that can be sold.  So the owner of the loan can retain these rights, sell them or have companies sell and transfer these rights to one another.   This is why sometimes home owners will get a notice that they need to write payments to another “bank.”  Bank of America is the largest servicer of loans in the world.

Investor

This “entity” isn’t the same kind of investor that you are likely thinking of.  Fannie Mae, Freddie Mac, FHA, and Bank of New York are all “investors.”  Investors are sometimes lenders, sometimes banks but not always.  In a short sale, the investor is the one who “owns the paper” or owns the mortgage.

Lenders

This entity “lends” the money.  Most home buyers will confuse this one with “bank” and many times it is the bank but not always.  The lender then can keep the loan or sell the loan as a package.  When you hear mortgage professionals speak about “fannie mae guidelines” then you know they are doing a loan and it will be sold to fannie mae.  They may retain servicing rights or sell those as well.

Banks

This isn’t so much as an entity as it is often a misnomer to describe who you are dealing with.  A bank could be a lender or an investor or a loan servicer or all three.

Ever wonder why you keep getting different answers to your questions regarding short sales.  You read about low success rates, high success rates, how one bank absolutely “sucks” and then on another site they are being praised for being easy to work with.  If you dig deep enough you will even read that some “types” of loans are easy to do as a short sale, while others are “impossible.”

The truth is that each lender is different and each lender (most often they are actually servicers) answers to an investor.  On top of that there might be an insurance company involved. All of these companies have different guidelines.  For instance, a short sale negotiator from EMC might say that they approve short sales with sellers not currently defaulting (missing payments) on their loan.  Meanwhile his short sale investor (the company that holds the “paper”) says that they won’t accept any short sale offers unless the seller is in default.

This is just one of the many examples with this short sale industry.  As a buyer you need to be armed with the right information before making an offer.

Sign up for our 7.5 Questions That Every Buyer Should Know Before Making An Offer On A Short Sale.

Every now and then you’re reminded why short sales get a bad rap.  Actually, every day you are reminded.  I wanted to share this story that we had experienced with a Suntrust negotiator while working on a client’s short sale.  We did get it closed successfully by the way!

What Banks Do You Work With?

In short, all of them.

There are banks, like Suntrust that we prefer NOT to work with and others like Citi or EMC that we do enjoy working with.  However, in general, we won’t turn away helping a home owner due to their bank or servicer.