Banking Law

Who Owns Your Loan

These days, many people are thinking about their mortgages. Whether they're concerned about keeping up with mortgage payments or considering refinancing, most consumers are stunned by the maze of documents. One critical question to ask is: who owns your mortgage?

Key Documents

Homebuyers are often puzzled and overwhelmed at the sheer number of documents involved in a house purchase. The two most critical documents involved in almost every house purchase are 1.) the note and 2.) the mortgage.

A note is a written promise to pay someone. It states the amount borrowed, the name and signature of the borrowers and the name of the lender. The note also says when and how the monthly payments are made, interest rate, the amount and what happens if payments are missed or are late.

The mortgage is a document signed by the borrowers, and is the written agreement that gives the bank a "security interest" in the house, or collateral, in exchange for the loan. The mortgage gives the bank the right to foreclose on the house if the loan isn't paid back according to the requirements in the note.

Keep Important Documents Safe

In these days of ever-changing bank names, there is a real possibility that the bank you borrow from won't be in existence in the same form a few years later. Banks often assign their rights over to other entities, especially if there is a takeover or buy-out of the bank. Or, a lender might simply sell the mortgage as a part of managing its investments. Sometimes it's sold as soon as the closing papers are signed.

Most likely, the mortgage itself says you're agreeing to give the interest in your home to the bank and the bank's "successors and assigns." This means that even if the bank changes names, goes out of business, or is bought by another bank, some entity somewhere can take over its rights to your home if you don't pay your loan back on time.

Keep at least two copies of all of the documents from the purchase of your home: One copy in a safe deposit box and another in a safe place in your home or office. Your attorney should keep a copy, too. Be sure to tell your family members where those documents and other important papers are located.

Don't be intimidated to ask customer service for an answer as to who owns your mortgage. The owner might be different from the company that collects and processes your payments and provides other customer service for your account. Lenders often sell off the servicing rights, too. If you have an issue concerning the terms of your note and mortgage, from seeking modification to taking care of payoff tasks, you may need to contact the owner, and not the servicer.

Caution: Read Before Signing!

Most reputable lenders will have the note and mortgage documents prepared on standard forms that are widely used in the state where the property is located. Even so, the "legalese" on the documents is intimidating to most people.

Use caution before signing a note or mortgage. It's critical to have an attorney assist you with the purchase of a house. Many important details must be carefully reviewed, and even a small typographical error, or one "non-standard" paragraph, could mean a nightmare down the road.

Remember if you're buying a house the attorney for the seller of the house is looking out for the seller's interest, not yours. You'll need an attorney to look out for your interests. Don't rely on someone else's lawyer or real estate broker to understand the legal risks involved and to protect your rights.

Questions for Your Attorney

  • I lost my copy of my mortgage. Where can I get a new copy?
  • My bank went out of business. Do I still have to keep paying my mortgage?
  • I got a letter from a new bank saying my old bank assigned my mortgage to them. Do I have to pay the new bank or the old bank?
  • I refinanced, but it's been months since the closing, and the release for the old loan hasn't been recorded with the county. I didn't get my original note back showing it's cancelled. Can you help me get these details cleaned up?
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