WHY DOESN’T MY MORTGAGE COMPANY HELP ME MORE?

A common statement that I hear is that mortgage companies do not try to help work out a viable repayment plan. The borrower is able to make a substantial portion or all of the regular monthly payment. For reasons unknown to persons who do not understand how financing of mortgages works, the actions of the lender seemed counterproductive. Why isn’t your lender trying harder when you are putting money in their pocket?

The first thing that you should understand is that the company you are calling your lender is not your lender. This is the situation whether you live in Charleston, South Carolina, Mt. Pleasant, Walterboro or Georgetown. When you borrow money to buy a home, this may be done through a mortgage broker, a Savings and Loan, a bank or a credit union. In almost all cases, what you call the lender is not the lender. Most people who have first mortgages on their homes have had the loan “transferred” at some time. The lender who handled the financing of the mortgage almost never actually lends the money nor does that company, in many cases, even take your payments after the closing.

According to a USA Today report from 2003, the best estimate for the amount of mortgages in effect at that time was approximately $6.3 trillion. Not even Bank of America has that kind of money on hand. American mortgages are sought after investments for a large part of the world. Even with our terrible economy, investment in the United States is still considered smarter than investment in many other parts of the world. The United States economy is still the strongest and safest.

When you borrow money to purchase your home or refinance it, your loan is usually sold before the closing to a mortgage-backed bond investor. These bonds are then resold as investments to the actual purchasers. Please understand, however, that this bond is likely in the amount of $100 million or more. Most individual investors do not have this much money lying around. Insurance companies, mutual funds and even countries buy some or all of the bond issue.

 So how do people and/or companies make money? This is not as difficult as it sounds. The lender who “lends” you the money has already arranged to sell your loan and be paid for doing so. The higher the interest rate, the more the what you call the lender is paid. For this reason, unscrupulous lenders also called “crooks” steered many borrowers into sub-prime loans or charged additional fees. As soon as the loan is transferred to the mortgage backed bond, the lender no longer owns the loan. Most of the bondholders are not able or willing to handle the monthly payments, escrow accounts and maintain the records payments that are required. For this reason, the lender must, as part of selling the mortgage, set up a system to collect and account for the payments.

One of the more famous companies was Countrywide and its subsidiaries. Countrywide made a lot loans, but, it never made its money from the interest charged on the loan. The money was made when it sold the loan to that bond holder who would usually hire Countrywide to take in the monthly payments, manage the escrow account and generally sound like your lender.

One day, things got tough and suddenly Countrywide could not handle all of its obligations. The people paying the monthly payments stopped paying. As part of originating the loans, Countrywide had promised the bondholders that a minimum amount of money would be paid to the bondholders. The bondholders demanded payment and Countrywide could not pay the money it promised to pay.

Why wouldn’t Countrywide or other companies help more?

 Countrywide was not allowed to help more by the bondholders. If Countrywide did certain things, then it would have to pay even more to the bondholders. Finally, Countrywide was forced out of business and taken over by Bank of America.

 If you want more information, you should contact someone such as Nathan Davis. There are lots of other persons other than the bondholders who drug their feet. Bondholders had even bought insurance to cover a good part of the risk of not being paid. When the call went out to insurance companies to pay, the amount owed was so large that the brilliant statisticians who had figured out how much to charge found out the amount they told AIG and others to charge was too little.

Workouts and loan modifications are happening now. If you have been turned down before, check with someone who does this type work. Do not hire a company that charges you up front. There are too many companies that will do the work and help you for no charge.

 Yes, I help people file bankruptcy, fight foreclosures and fight creditor abuse. If you can save your home by a loan modification or workout, do it. I can help you with some other legal issue.

 Call me, Nathan Davis 843-571-4042 to find out what you can or cannot do.

About Nathan Davis, Esquire

Born in Charleston, South Carolina, Nathan Davis has been practicing law for many years. Mr. Davis has a wide variety of experiences having practiced domestic relations, criminal law, social security law having also practiced collection law in the past. This knowledge is helpful when someone needs to restart their financial life. The practice is now primarily bankruptcy and debtor representation work, but, Mr. Davis continues to also practice real estate law, trusts and estates and a general litigation practice. I believe that the most important part of representation is trying to leave you better off when the case is finished than when you started. Although I will do as my client directs, I will always tell you if I think that you are making a mistake. Bankruptcy is about a "fresh start". If you do not make changes in what you are doing, you will be doing what you are doing now in the future. There is no shame in bankruptcy or other steps that you may take to start your life over. Too often, people worry more about things than about themselves, their family or their future.
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