What to do if your mortgage company goes bankrupt

Mortgage News from Quicken Loans

There have been a lot of rumblings lately about mortgage companies going bankrupt. This leaves consumers on edge about the status of their homes should their mortgage company go bankrupt.

What should a person do if they learn their mortgage company is no longer in business? The short answer is nothing. And no, you won't be able to live in your house for free now that your mortgage provider is out of business. You still owe exactly what you owed before and, rest assured, someone will be expecting you to send in a mortgage payment each month.

What happens when a mortgage company goes bankrupt is simply that the mortgages they own are sold to another mortgage company. Nothing else changes. The terms, rates and conditions of the mortgage stay the same. The only difference for a homeowner is they will be contacted by, and begin sending their payment to, whichever lender purchased their loan.

The buying and selling of loans is commonplace - even healthy mortgage companies will often buy and sell mortgages from one another over the typical life of a mortgage. Finding yourself writing checks to a new lender is neither unusual or anything to fret about.

There are a few things homeowners should keep track of if their mortgage changes hands:

  • Escrow accounts - make sure all money held in escrow transfers correctly and keep track of all tax and insurance payments made from that escrow account. This information is easy to get from your new mortgage company and knowing this can help you avoid any late fees on taxes or having an insurance policy cancelled.
  • ARMs - if you have an adjustable rate mortgage, make sure the terms and conditions of rate adjustment are followed according to your original mortgage. Know when your rate is supposed to adjust and if something seems incorrect, contact your new mortgage company immediately.
  • All other terms and conditions of your mortgage - check your mortgage closely to make sure no errors occurred during the transfer. Make sure payments on principle and interest are all credited to your account. Also, you should receive a statement around tax time from both your former and current lender documenting the interest you paid during the year. Again, if you notice a problem. Don't wait. The sooner you report inaccuracies the better.

Homeowners need not worry if their mortgage company files bankruptcy or goes out of business.

It's really just business as usual.

This article is reprinted by permission from Quicken Loans © 2007 Quicken Loans Inc. All rights reserved.

 

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