Loan Modification: Who Ya Gonna Call? Part I

Remember when you knew who held your mortgage, it was Bob at the local Savings and Loan. I remember going to the bank with my mom as a kid. She would chit chat with the teller after making a deposit, and I would get my savings account book stamped with this month’s interest, and then she would go to the other side of the bank, where the desks were, to discuss business. Everything was on a first name basis, and there were no annoying phone games with people from India who didn’t know anything about you. If you had a problem, it was taken care of immediately. Well, those days are over. The purpose of this post is to try and explain what is really going on with your mortgage loan.

When you applied for your loan, did you know that your loan would be immediately packaged and sold in the open market as an asset-backed security? No, but what’s the difference, you got the house you wanted and life was good. Well, while you were sleeping, the note and mortgage on your home were packaged and sold off to a securitized trust. In other words, we don’t know who really owns your loan anymore. It could be the same guy who answers your phone call in India who invested in the trust that owns the note and mortgage on your home. I’m not kidding it could be him or an insurance company, a pension plan, a government, or a billionaire in Japan. We just don’t know.

So, the question is: When you are having problems paying your loan, who do you call? I’m sure that neither the guy in India nor the billionaire in Japan will take the call. They hired a mortgage servicer to handle those problems, and they have given specific authority to those mortgage servicing companies to handle these problems. The authority of the mortgage servicing company is set forth in an agreement (contract) called the pooling and servicing agreement. This agreement is very specific and details exactly what can and can’t be done when a loan goes into default. Unfortunately for you, you do not know what terms are contained in that pooling and servicing agreement. So, you are at an immediate disadvantage in the negotiating process.

But wait, the government says that mortgage companies should be willing to modify mortgage loans. The government has passed legislation, haven’t they? See Part II for the rest of the story.