Who Owns Your Mortgage and Why Care?

Who owns your mortgage?  What a dumb question – the bank owns my loan and their contact information is at the top of the bill I get each month!  Sorry, wrong answer and one of the many reasons why the Foreclosure Process is so confusing.  Read on and we’ll try to make it less confusing.  Learn About all Your Foreclosure Options to Beat the Bank.

Initially, there’s an important distinction between loan servicing companies (the company that sends your monthly bill) and the company that actually owns your mortgage. Loan servicing companies are hired by the true owners of the loan to handle everything from billing and collecting monthly payments to filing foreclosure lawsuits when needed. What makes things even more complicated is that most loan servicing companies are owned by large banks and financial institutions which means you might get a letter from a division of Chase Bank as the servicing company for a loan owned by IndyMac, Deutsche Bank or others but not Chase!  Is Your Mortgage Underwater?

Although usually owned by banks, these companies only make money if your foreclosure remains active so they generally have little or no incentive to settle your case.  If the case is resolved and the foreclosure process ends, the loan servicing company loses out on the extra fees for handling collection matters on your account which makes finding the real owners even more essential.  Given the huge numbers of mortgages in default, the actual owner of your loan likely has little or no information about your situation until you let them know directly.

Use our Sample Documents and Letters to Explain Your Situation to the Bank.

Once you figure out who services your loan, the next issue is confirming who truly owns your note and mortgage and who has the right to sue you as a result of that ownership.

Learn about the Difference Between Your Note and Mortgage.

The easiest way to find out who owns your note and mortgage is asking the loan servicing company in writing for ownership documentation. Although you’re legally entitled to it, you may need to ask for it several times as they’re often unwilling to provide the information.  If a Foreclosure Lawsuit has already started, make sure the banks produce paperwork confirming that they owned the note and mortgage at the time the lawsuit was filed and don’t just rely on what they’ve said in the lawsuit which may be entirely wrong.  See our discussion on Foreclosure Defenses as well as our Sample Foreclosure Answer for help in getting this information from the bank and why they had to own the mortgage before the lawsuit was ever filed.

Surprisingly to many homeowners the current owner of your mortgage is almost never the original lender from your initial loan closing or the lender from your mortgage refinancing or home equity line of credit. Instead, after your loan closing most if not all of the original lenders sold your loan documents to Fannie Mae, Freddie Mac and others who then resold the mortgages to financial institutions on Wall Street.  See How Mortgage Insurance Can Help Stop Foreclosure.

Bundles of thousands or more of these mortgages were then sold as shares of stock or bond offerings known as mortgage backed securities on the financial markets meaning your loan documents may have been sold several times and the ownership issue is muddled at best. Although many legal scholars disagree as to whether the stock or bond fund owns each underlying mortgage or whether the shareholders each own fractional interests of each mortgage, the prevailing notion is that the trustee for the bond or stock fund is the actual owner and therefore the only party who can legally make ownership decisions regarding your mortgage.  Learn How Strategic Default Works.

What the confusion over who owns your mortgage means is twofold-the first is that figuring out who really owns your loan may be difficult and in some cases impossible. Secondly, ownership issues and who has the right to sue you may be a life saver or more accurately a home saver.  As you’ll see from our discussion of Foreclosure Defenses, the failure to own the note and mortgage at the time the foreclosure lawsuit was filed or not providing the proper documentation to show how they actually became the owners of your mortgage and the right to sue you can result in dismissal of the foreclosure lawsuit and Saving Your Cave.  Read More on How SavetheCave.com Can Help You Stop Foreclosure.

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Photo by Photo by Graur Codrin

Tips For Short Short Sale Approval



There are many things you can do to improve the chances of  short sale approval. In fact, by doing a little basic research about your home’s current value and learning all you can about the Foreclosure Process you’ll make a proposal that will be hard to refuse.

Full Coverage of Foreclosure Short Sales

The biggest hurdle in getting short sale approval is convincing the lender that its the best outcome for both sides. By confirming that your mortgage is underwater and that you can’t afford the monthly payments, the lender will quickly realize that there are few options and a short sale is much cheaper and easier for them than a protracted Foreclosure Lawsuit.  Further, as the inventory of bank owned properties continues to grow they are less interested in adding your home to that inventory and much more inclined to work with you.

To confirm to the bank that your mortgage is underwater, you’ll need to document how much your home is worth based on comparable sales in the area. You can get this information from a local realtor you trust, an appraisal company or one of the many online websites that provide price estimates like zillow.com and other sites. How Do You Know if You Have an Underwater Mortgage?

Once you can show the lender that your mortgage is underwater and by how much, the next step is submitting a package with all of your supporting materials.  To help you contact the bank to both explain your financial condition and request your specific Foreclosure Option, we’ve prepared several different Sample Documents including cover letters and financial hardship letters for each foreclosure option.

 Sample Foreclosure Documents

As for supporting information, banks typically require a hardship letter that explains the nature and cause of your financial problems together with tax returns and recent pay stubs to make sure they’re not getting ripped off by people who don’t really have financial problems. By using our Sample Documents to guide you, the bank will recognize they’re dealing with an educated borrower and be much less inclined to take advantage of you.

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Deed in Lieu of Foreclosure Hardship Letter

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Your Second Mortgage in Foreclosure

What happens to your Second Mortgage in foreclosure is a rarely discussed topic but an important one nonetheless, especially for your post-foreclosure plans. Although many homeowners have second mortgages, which include lines of credit and home equity loans, very few understand the important distinction between the first and second mortgage.

By just looking at the actual documents there is very little difference between the first and second mortgage. Each consists of a “promissory note”, which includes the actual terms of the loan, and a “security agreement” which is called a mortgage or deed of trust and protects the bank by allowing them to sell your property to recover its losses.  Learn More About the Difference Between A Promissory Note and Mortgage.

The primary difference between the first and second mortgage is the priority of who gets paid first. Assuming that your primary mortgage was properly recorded by the bank, that loan will always be paid first and in full before the second mortgage can collect a dime.

Since the second mortgage actually uses your property to secure repayment just like your first mortgage, if your primary lender doesn’t get paid in full the second lender loses the right to collect on the property. Although the loan doesn’t go away, the second mortgage loses its “secured” status and becomes “unsecured” and much less likely to be repaid.  See How SaveTheCave Can Help You Stop Foreclosure and Avoid Foreclosure Sales.

What to do About Your Second Mortgage

Ignore is too of a strong word, but for now your focus should be squarely on your primary loan as it controls if and when a foreclosure lawsuit is filed. Since many homeowners have underwater mortgages, the likelihood of the second mortgage getting paid through a short sale or foreclosure is nearly nonexistent. Therefore what happens to your second mortgage in foreclosure is of secondary concern for now.

Once the property is sold, the second mortgage literally disappears unless your home sells for more than the first mortgage. Although the mortgage goes away, the promissory note remains in place.

Banks can then try to collect on promissory notes without the benefit of a mortgage, but most such efforts would be futile when people can’t even pay their first mortgages. Futile, but not impossible because when there’s money around greedy players can’t be far behind.

What will likely happen once the foreclosure crisis settles down is that banks and collection companies will try collecting unsecured second mortgages and deficiency judgments remaining after foreclosure. While many of these claims could be settled for pennies on the dollar, if collection efforts become too aggressive it may be time to meet with an experienced bankruptcy attorney in your area to help reduce or eliminate the remaining unsecured debts.

However, one step at a time as the future will take care of itself so deal with the present and the issues directly in front of you which is developing your foreclosure plans to avoid foreclosure by dealing with your primary mortgage.

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Avoiding Deficiency Judgments

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Strange But True Foreclosure Stories

The recent foreclosure crisis has resulted in numerous disclosures of illegal and unethical actions by banks, loan servicing companies and many lawyers representing these companies that would have been hard to believe years ago but now seems to be more the rule than the exception.  Read About the Recent Nationwide Foreclosure Settlement.

As a result of these practices Strange But True Foreclosure Stories continue to pop up.  In the most common example, how would you feel if your bank’s mistake resulted in the loss of your home and then a second bank  sues you after your lost your home??  In an all too common foreclosure story you’d think there was protection from the second foreclosure lawsuit but you may be wrong! Be sure to read our discussion on Who Owns Your Mortgage and Why Care.

In many other cases former owners have been sued more than 15 years after selling their homes and paying off the mortgage.  Elizabeth Bolinger, who currently lives in a retirement home in Port St. Lucie, Florida was shocked and traumatized when she was served with a foreclosure lawsuit for property she sold in 1996.  The bank’s only explanation was that mistakes were made by the law firm handling the case but no apology was forthcoming.  Defending Foreclosure Lawsuits.

In a similar case, Cathy Hammers was abruptly awakened on the Saturday night following Thanksgiving when she was served with a foreclosure lawsuit for a home she sold in 1994.  When Hammers tried to contact the law firm handling the case she was rudely told to hire a lawyer and then disconnected.

Don’t Let Foreclosure Stress Control Your Life

In yet another twist resulting from the broad scope of foreclosure mistakes, one home was sold twice in one week.  Real estate investor Marjorie Oster was driving by the home she had just purchased in a short sale when she saw someone cleaning the pool, a lawn service cutting the grass and a pest company setting up a tent for termites none of which she had asked for or authorized.  Turns out that the work was done by the “other new owner” who bought the property a week earlier.  Once again the bank blamed the law firm but did nothing to fix the problem.  Tips to Get Your Short Sale Approved.

Finally, in the most bizarre story to date, a homeowner who bought his home for cash and never had a mortgage on the property was sued in foreclosure for a mortgage that didn’t exist.  Jason Grodensky didn’t receive an explanation or an apology, but how could the bank ever explain or justify suing someone who wasn’t even in their records!?  Blame the Banks – Foreclosure is Not Your Fault.

All true, all strange and unfortunately much more to follow.  Stay tuned and we’ll have lots more stories for our blog followers.

Do You Have Your Own Foreclosure Horror Story? Share your story with our readers by offering your own post and you”ll probably find  that other homeowners have the same or similar experiences!

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Nationwide Foreclosure Settlement Insults Homeowners and American Values

All your problems are over as a result of the recent Nationwide Foreclosure Settlement.  Not.  Anticipated for months and widely heralded by banks, government officials and many media outlets as a landmark settlement agreement that will help end the foreclosure crisis, the sad reality is that once again the large financial institutions win and homeowners get screwed.  As discussed below, the amount of money involved barely moves the needle past empty and the complete lack of operating rules, enforcement measures or deadlines makes the agreement nothing more than false hopes and empty promises.  Once again the good old middle class American family is at the losing end of a battle with multinational banking interests who have lost touch with people and local communities.

Let’s discuss the specific provisions of the settlement itself.  Initially, the total value of the deal is $25 billion dollars which pales in comparison to the overall size and scope of current underwater mortgages and basically ignores the damage done by banks and servicing companies in causing the mortgage meltdown.  Knowing with complete certainty that they’d be held accountable for their illegal actions at some point, banks simply put the money in reserve long ago and then decided to raise nearly every imaginable banking fee to cover any losses while continuing to increase profits and year end bonuses.

The majority of the money – $17 billion of the $25 billion dollar total – is supposed to fund principal reductions and loan modifications to make monthly payments more affordable.  Right concept but no planning and nowhere near enough funding to make it work.  With roughly 11 million underwater mortgages totaling $700 billion dollars, $17 billion in reduced principal would be just 2.4% of the total percentage of upside down loans and leaves more than 97% of the problem untouched!  Learn More About Underwater Mortgages

What this means for individual homeowners is unclear but can’t be good.  In the best case scenario, one million loans will be reduced by $17,000 (or less) and the remaining ten million homeowners will get nothing.  Given that the average underwater mortgage is $50-60,000 in the hole, even the few homeowners who actually qualify won’t get much help with payments that will only be lower by $200-300/month.  Anything helps but let’s get real.  As gas and food prices continue to go up, any savings in that range are quickly swallowed by increased costs for everything else.  More on Foreclosure Loan Modification

As pathetic as the numbers look, it doesn’t get any better.  Incredibly, there are no rules or operating procedures  to figure out who actually gets help and who gets nothing at all.  Although one million homeowners may get a little relief, ten million others get nothing and guess who decides who gets what?  That’s right, the same bankers who caused the foreclosure crisis and have no interest in helping anyone but themselves will be working together with government bureaucracy to make it all work! Could be worse, we could live in Russia! Blame the Bankers for the Foreclosure Crisis

By the way, who decides if your home is actually underwater and what if the bank disagrees with your online research or a professional appraiser’s findings? Who pays for the appraisal and if there’s a dispute, who pays for a third appraisal and what assurance do you have that the bank will actually accept and agree with your appraiser? None is the only conclusion and you may actually spend a lot of money at the bank’s direction to end up worse off. Ten Ways to Beat the Bank and Stop Foreclosure

In addition to all this good stuff,  there will also be numerous court challenges by  banks and mortgage servicers once the efficient federal government actually writes the rules on how the process is supposed to work.  You didn’t think the banks would agree to part with their money that easily did you?  Factor in the mountain of paperwork that accompanies 11 million new applications for relief and the pathetic history of banks not complying with previous settlement agreements and the whole process seems destined to fall far short of the needs of America at a critical time in our history.

The refusal of the government, wealthy individuals and corporations to help homeowners is despicable and unacceptable but also misses the basic point.  Homeowners are America and Americans, not corporations and banks owned by multinational interests and the rich one-percent. Like any other retail business they’re here to serve us and the weak effort to help the struggling core of America is just another example of how far our country has strayed from its essential values of life, liberty and the pursuit of happiness.  I don’t see the words foreclosure or greed anywhere in the Constitution but pursuing life, liberty and happiness sure seems to be at odds with these concepts.  Don’t Let Foreclosure Stress Control Your Life

The second portion of the settlement funds are somehow supposed to compensate homeowners who were subject to wrongful and often illegal foreclosures by giving these poor folks a whopping $2000 check for their troubles.  Physical and emotional stress, the shame and embarrassment of  losing their homes and the significant costs of moving and establishing a new place to live apparently means nothing more to the banks and politicians than a token payment that’s less than one month’s typical mortgage or rental payment.  Renting Your Home To Avoid Foreclosure

Even more insulting,  to qualify for this measly reward homeowners were literally forced to waive their constitutional right to sue banks for damages and agree to a complete release of civil liability without any input in the process.  Are you kidding me?  Intentional fraud documented in every state in America and a blanket waiver for every one of the perpetrators? Where the heck did they find a “Get Out Of Jail Free” card? Advance to Go for sure, but a remarkable perversion of the justice system and a mockery of the political system that allowed this agreement to pass.

Not only is a $2000 payment insulting and insufficient for everyone involved except the banks, but like the rest of the agreement there are no guidelines to decide who qualifies.  In essence, we have the bankers themselves in charge of deciding if their own illegal actions warrant a $2000 payment but no enforcement measures if they’re wrong or simply ignore you.  Given that 8 million homes have already been subject to foreclosure, helping just 750,000 of those homeowners with barely enough to survive one month is further proof of how worthless the agreement is and how little chance it has in succeeding to end the foreclosure crisis.

Not surprisingly, banks can barely contain their enthusiasm for this part of the deal and you’d be pretty happy too if the total risk for repeatedly lying to courts, willfully  ignoring laws and creating reams of phony and fraudulent documents was just $2000 per loan particularly when closing costs were often 3-5 times that amount.  Don’t think the banks will do this again do ya?

The third prong of the fatally flawed  mortgage settlement and the one that seems to get the most media attention involves banks finally agreeing to a single contact person to work with homeowners.  Thus rather than dealing with a different person for each phone call and letter, banks have agreed to a process already used by nearly every successful company worldwide-namely having someone familiar with you and your account actually handle your account! Who Owns Your Mortgage and Why Care

What’s mind boggling is why this common sense process was not in place from the start and why it took so long and so much pressure to change.  We’re talking about people’s homes and the single most important asset in nearly everyone’s life.  With dollar amounts in the hundreds of thousands and long and often complicated loan documents, we’re not dealing with refunds from Amazon for $24.99.  Unfortunately, now that banks have joined the 21st century even more questions remain than answers.

Are banks planning on hiring thousands of individuals trained in the financial and legal complexities of loan transactions or are they more likely transferring existing staff from one call center to another?  How many of the 11 million files will each individual contact person be assigned to handle and will the decisions be reviewed by supervisors or more fully trained professional lawyers and accountants? With no deadlines or enforcement measures what protections are in place to be sure your file is fully and fairly evaluated?  If you have one point of contact, what do you if the person refuses to return letters or calls in a timely and professional manner?  What to do With Your Second Mortgage in Foreclosure

Its hard to fathom that banks have once again escaped unscathed despite blatant and obvious violations of law that were clearly planned and part of a long term pattern where greed trumps morality, ethics and the law.  How is it that banks repeatedly get away with this when the average citizen and homeowner would be locked up for committing similar acts?

Quite simply, they know they can get away with it and have for as long as our country has existed.  Despite the unmitigated pursuit of profits at all costs, the banks know that the worst case scenario would be yet another government bailout so there’s no risk for them.  Pillage and plunder, make enough money to run small countries then get rewarded when their dirty paws are discovered in the cookie jar.  If you were rewarded for stealing food from your local grocer, what stops you from stealing again and taking more each time?  If you understand why that’s the wrong way to live, you’re way ahead of the bankers and their single minded pursuit of wealth at the expense of the rest of us.

We’ll have much more on the Nationwide Foreclosure Settlement as matters continue to unfold so stay tuned. Meanwhile, spend time reviewing your foreclosure options and the rest of SavetheCave.com  so you’ll be prepared to protect your foreclosure rights and move forward regardless of what happens with the success or failure of the worthless settlement.

How SavetheCave.com Can Help Stop Foreclosure

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Photo by Beit Weizmann




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