Profile picture for pjboy75

Question about the mortgage mess

I am certainly not an expert on the mortgage industry so all of the latest headlines have been really quite an education for me. Question for the seasoned homeowners and/or mortgage professionals here: Do I need to be concerned about the state of my mortgage and/or lender? I am not trying to sell, just bought the house last year, no problem with payments, I have a 30 year fixed 80% and 20% loan on the home, my lender is a credit union.

This may be a totally stupid question, just not sure if all of the troubles ahead apply to a situation like mine, or is it just for those that are in foreclosure or for those seeking a loan in the near future?

Thanks in advance for any assistance in helping me understand the current state of the mortgage world.

  • July 14 2008 - US
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Answers (12)

No.  There is no circumstance where your loan agreement or terms could change.  If your lender/servicer fails, the servicing rights will end up being owned by someone else.

 

One could argue that having a sound company servicing the loan might make it easier to do a streamline refinance in the future, but this is a small consideration and does not apply to your equity position.

  • July 14 2008
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PJ, no stupid questions here!   First off, you are with a CU, no worries there, and 2ndly, if you were with a national lender who had financial problems, the loan would just be sold to someone else.  I closed our personal residence in July 07, 1 week later, the lender went under, our loan was sold to someone else, we make our payments to them, all is kosher.  The only thing that changes when you mortgage changes hands, is who you make the payment to. 

 

What's happening now affects everyone, you - if you want to refinance later, your friend who wants to buy a house now, the foreclosure down the road.  All that is happening is tighter restrictions and more money down for a loan.  It will smooth itself out in the coming year or two.

  • July 14 2008
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If you can make the payments, you are good.  Understand that mortgage loans, and the collateral that backs them(your house for example) are simply assets on a balance sheet.  No matter what happens to the owner the asset still exists. Its value may go down, but your terms will never change.

Consider a jewlery shop.  Owner of the jewlery shop has cash flow problems, files bankruptcy, and closes the shop down.  All his diamonds and merchandise etc are sold to pay creditors.  The jewlery store is no more, but the jewels still exist: they just have new owners. Your loan is like that.

This a simple explanation for where your loan fits into the scheme.  If you aren't looking to refinance or purchase a new home, current events will not affect you directly.

  • July 14 2008
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Profile picture for ELender

Current events will not affect you directly????  I don't know if I agree with that.  It doesn't necessarily have an immediate impact maybe...with the current market most values are being brought down by the foreclosures and short sales, and other people are just having to keep pace to move to a new home.  Odds are you probably owe more than your home is worth unless you bought right. 

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Don't worry as long as you continue to make your payments on time.  If your loan gets sold or is transferred to a new lender, the terms remain the same.  The only difference is who you send your check to each month.  Now, should you want to refinance anytime soon, you may run into some trouble.  The reason I say that, is yes, it's a great time to purchase a house because prices are so low, but that in turn hurts those who want to refinance.  Why?  Because the comps (homes like yours that have sold in the last 6 months) are now lower which means that your home will appraise lower.  So, when you're at the gym in the locker room and you over hear someone bragging how they just bought a house $60,000 under the original listed price, punch him as hard as you can in the face because that only means your house is now worth less. (obviously, I'm just kidding and adding a little humor about hitting the guy, but you do you get the point?)  Don't worry, we've been through this before and prices will rebound as they always did throughout history.  In fact, some Chicago suburbs have been taken off the "declining market" category by some lenders....times are starting to look up already in some areas.

  • July 14 2008
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Being on a 30 year fixed loan, you're in a better situation than a lot of people right now that are trying to get out of their ARM loans to a fixed one.  You also have a loan with a Credit Union so it's less likely to be sold in the secondary market than if you were to get a loan with a mortgage lender.  Think of your property as a long term investment so just hold on to it, make your timely payments, and ride out the mortgage mess storm....it will pass

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If you are planning on staying in your home you will have no problems.  The only concern with not knowing the rates on your mortgages would be what is the rate on your second mortgage and is it adjustable with prime?  Prime rate will be going up.  You have two options:  Pay down your second mortgage as you can or refinance if you have the equity into a 30 year fixed loan with one fixed payment.  You need to look at what your long term goals are.  Let me know if you have any other questions.

  • July 14 2008
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Who wins the Chad Posting Pool?

  • July 14 2008
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Someone wants their blue ribbon

  • July 14 2008
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Me me me me.......

  • July 14 2008
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doesn't it bring up red flags?  I mean really, not one single posting since he has been on zillow, now 7 today.  Makes you wonder about everything else!

  • July 14 2008
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Thank you ALL very much for your swift replies and friendly advice, I really appreciate it! :)

  • July 15 2008
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