# Financial meltdown, mortgage question **URL:** \ **Category:** Factual Questions\ **Created:** [September 15, 2008, 4:29pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713 "2008-09-15T16:29:36Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Unintentionally\_Blank](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/unintentionally_blank/32/5418_2.png) [@Unintentionally\_Blank](https://boards.straightdope.com/u/Unintentionally_Blank)\ **Post date:** [September 15, 2008, 4:29pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/1 "2008-09-15T16:29:36Z")
So, lets just say you have a 30 year fixed loan, and the company you mail your check to explodes… What happens? Assuming you’re still able to make the payments, but your company files for bankruptcy and what? Ceases to exist? Doesn’t ask for money any more? You get the house for free? (unlikely) Just what happens with a mortage company goes insolvent? ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [September 15, 2008, 4:39pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/2 "2008-09-15T16:39:41Z")
> [@Unintentionally\_Blank](#): > > Just what happens with a mortage company goes insolvent? The mortgage issuer’s creditors take over its debts- meaning whoever the mortgage company owes money to now owns a portion of your outstanding mortgage. Usually, the liquidator (or court) will package up all the outstanding loans/mortgages and sell them to a new servicing agent- another bank, say. They’ll send you a letter saying “start sending the check here”. ---
**Author:** ![Unintentionally\_Blank](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/unintentionally_blank/32/5418_2.png) [@Unintentionally\_Blank](https://boards.straightdope.com/u/Unintentionally_Blank)\ **Post date:** [September 15, 2008, 4:49pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/3 "2008-09-15T16:49:17Z")
> [@Really\_Not\_All\_That\_Bright](#): > > The mortgage issuer’s creditors take over its debts- meaning whoever the mortgage company owes money to now owns a portion of your outstanding mortgage. > > Usually, the liquidator (or court) will package up all the outstanding loans/mortgages and sell them to a new servicing agent- another bank, say. > > They’ll send you a letter saying “start sending the check here”. Being a network security guy by trade, I hope folks will actually research who and where ‘here’ is. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [September 15, 2008, 5:02pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/4 "2008-09-15T17:02:28Z")
> [@Unintentionally\_Blank](#): > > Being a network security guy by trade, I hope folks will actually research who and where ‘here’ is. “Here” is wherever the company assuming your mortgage receives payments. If you’re trying to find out where your payment is going because your mortgage lender has just gone belly-up, you’ll need to be more specific. ETA: If you’re saying you hope people don’t just start sending checks to some company because they got a letter telling them to, a) me too, and b) most probably do. ---
**Author:** ![Unintentionally\_Blank](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/unintentionally_blank/32/5418_2.png) [@Unintentionally\_Blank](https://boards.straightdope.com/u/Unintentionally_Blank)\ **Post date:** [September 15, 2008, 5:21pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/5 "2008-09-15T17:21:25Z")
> [@Really\_Not\_All\_That\_Bright](#): > > “Here” is wherever the company assuming your mortgage receives payments. If you’re trying to find out where your payment is going because your mortgage lender has just gone belly-up, you’ll need to be more specific. > > ETA: If you’re saying you hope people don’t just start sending checks to some company because they got a letter telling them to, a) me too, and b) most probably do. Yeah, I’m saying I hope they trust-but-verify. My mortgage(s) are through Wells Fargo and Citibank…they’re not on the list yet. :dubious: yet. ---
**Author:** ![Quartz](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/quartz/32/267_2.png) [@Quartz](https://boards.straightdope.com/u/Quartz)\ **Post date:** [September 15, 2008, 6:00pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/6 "2008-09-15T18:00:59Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Usually, the liquidator (or court) will package up all the outstanding loans/mortgages and sell them to a new servicing agent- another bank, say. Is it possible to take advantage of the insolvency and buy your own loan? Let’s say you owe $100K on your mortgage and the bank goes bust. Will an offer to settle the loan for much less be seriously entertained? ---
**Author:** ![Hampshire](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hampshire/32/4887_2.png) [@Hampshire](https://boards.straightdope.com/u/Hampshire)\ **Post date:** [September 15, 2008, 6:11pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/7 "2008-09-15T18:11:51Z")
Banks and companies go belly up, merge, get bought out, etc. all the time. It doesn’t mean people that owe money to them are off the hook though. The debt just gets transfered to someone else. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [September 15, 2008, 6:12pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/8 "2008-09-15T18:12:56Z")
> [@Quartz](#): > > Is it possible to take advantage of the insolvency and buy your own loan? Let’s say you owe $100K on your mortgage and the bank goes bust. Will an offer to settle the loan for much less be seriously entertained? That’s a good question. I don’t know, but I suspect not. I would imagine that most, if not all, of the original mortgage company’s creditors are already in the business of servicing loans, so they’d be costing themselves profit. Plus, they’d have to vet each loan settlement individually, taking into account the debtor’s credit worthiness, present value of the collateral (house), etc. Much cheaper, and probably much safer, just to bundle them all up and sell them on to Nationwide or something. ---
**Author:** ![wmfellows](https://avatars.discourse-cdn.com/v4/letter/w/c2a13f/32.png) [@wmfellows](https://boards.straightdope.com/u/wmfellows)\ **Post date:** [September 15, 2008, 6:16pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/9 "2008-09-15T18:16:30Z")
> [@Quartz](#): > > Is it possible to take advantage of the insolvency and buy your own loan? Let’s say you owe $100K on your mortgage and the bank goes bust. Will an offer to settle the loan for much less be seriously entertained? Not bloody likely. Quite the contrary modifications are likely to become more difficult, although in the US you have prepayment rights, based on the contract. As you’re in the US of A, your bank probably sold off your loan as part of a pool, and the owners of those securities have no interest in seeing a reduction in capital on an otherwise perfectly fine loan. Loan workouts and modifications are for distressed borrowers. ---
**Author:** ![Unintentionally\_Blank](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/unintentionally_blank/32/5418_2.png) [@Unintentionally\_Blank](https://boards.straightdope.com/u/Unintentionally_Blank)\ **Post date:** [September 15, 2008, 6:17pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/10 "2008-09-15T18:17:43Z")
> [@Really\_Not\_All\_That\_Bright](#): > > That’s a good question. I don’t know, but I suspect not. > > I would imagine that most, if not all, of the original mortgage company’s creditors are already in the business of servicing loans, so they’d be costing themselves profit. Plus, they’d have to vet each loan settlement individually, taking into account the debtor’s credit worthiness, present value of the collateral (house), etc. > > Much cheaper, and probably much safer, just to bundle them all up and sell them on to Nationwide or something. That’s assuming there’s somebody left to sell them to, are we nearing that point? (sheesh, I know about as much about this as the LHC) I don’t suppose the folks responsible for the subprime implosion will be held accountable. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [September 15, 2008, 6:27pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/11 "2008-09-15T18:27:57Z")
> [@wmfellows](#): > > Not bloody likely. Quite the contrary modifications are likely to become more difficult, although in the US you have prepayment rights, based on the contract. As you’re in the US of A, your bank probably sold off your loan as part of a pool, and the owners of those securities have no interest in seeing a reduction in capital on an otherwise perfectly fine loan. Loan workouts and modifications are for distressed borrowers. **Quartz** is in Britain. > [@](#): > > That’s assuming there’s somebody left to sell them to, are we nearing that point? (sheesh, I know about as much about this as the LHC) > > I don’t suppose the folks responsible for the subprime implosion will be held accountable. There is _always_ someone left to sell them to. The question is whether selling them is profitable or not. The folks responsible for the subprime implosion will not be held accountable. The government will continue to bail out banks and other loan servicing entities because if they don’t the whole economy will collapse, and millions of people will lose their shirts because notes are called early and so on. [possibly not appropriate for GQ] That’s one of the problems with a semipure market economy- people (especially businesspeople) expect the government to fix things when things go badly, but get pissy when the government expects business to put money in the kitty for next time things need fixing. So, all the people who made tons of money while the housing bubble was growing won’t lose nearly as much as they should now that it has burst, because the Feds have to step in to keep things relatively stable. [/pnafGQ] ---
**Author:** ![spinky](https://avatars.discourse-cdn.com/v4/letter/s/59ef9b/32.png) [@spinky](https://boards.straightdope.com/u/spinky)\ **Post date:** [September 15, 2008, 8:02pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/12 "2008-09-15T20:02:05Z")
> [@Really\_Not\_All\_That\_Bright](#): > > “Here” is wherever the company assuming your mortgage receives payments. So let’s imagine I have a contract for my mortgage, and the lender go belly up. When I receive this letter from whoever buys the loan, how exactly do I know it’s legit? Does the original lender have to send me a letter telling me they’ve sold the loan and to whom? ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [September 15, 2008, 8:23pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/13 "2008-09-15T20:23:16Z")
> [@ntucker](#): > > So let’s imagine I have a contract for my mortgage, and the lender go belly up. When I receive this letter from whoever buys the loan, how exactly do I know it’s legit? Does the original lender have to send me a letter telling me they’ve sold the loan and to whom? The new business should have all the proper background information on your loan from the old holder. That will include the mortgage i.d. number, the amount paid, the monthly payments, amounts of interest paid, escrow values, etc. In short, they’ll have at least as much information on the loan as you do. Phonies won’t have access to the real information and so anything they send out will be suspiciously short of facts. Since real-world mortgages are sold from company to company all the time, there are procedures in place that every legitimate new holder will follow. The amount of paperwork you’ll receive should make it obvious, plus there will be plenty of information on how to contact them to ensure their legitimacy. ---
**Author:** ![control-z](https://avatars.discourse-cdn.com/v4/letter/c/eada6e/32.png) [@control-z](https://boards.straightdope.com/u/control-z)\ **Post date:** [September 15, 2008, 8:24pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/14 "2008-09-15T20:24:56Z")
> [@Unintentionally\_Blank](#): > > So, lets just say you have a 30 year fixed loan, and the company you mail your check to explodes… Tell me more of your exploding check technology. Is the check standard thickness or is it like 1 inch thick? 😃 ---
**Author:** ![spinky](https://avatars.discourse-cdn.com/v4/letter/s/59ef9b/32.png) [@spinky](https://boards.straightdope.com/u/spinky)\ **Post date:** [September 15, 2008, 8:56pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/15 "2008-09-15T20:56:45Z")
> [@Exapno\_Mapcase](#): > > The amount of paperwork [and information contained in it] you’ll receive should make it obvious Of course, it’s going to be fairly obvious that they’re legit. But this still falls short of standards of authentication I’m used to dealing with in, say, computer security where lots less is at stake. Someone knowing all the right details doesn’t convince me I owe them a couple hundred grand, it just convinces me that at one time or another they had access to my file. > [@](#): > > plus there will be plenty of information on how to contact them to ensure their legitimacy. Right, this is what I’m asking about; assuming you want to be a stickler and prove it, what exactly are the nuts and bolts of that (I’m sure it varies, but for example…)? Calling them at the number they provided and asking them is obviously not going to fly, as the first thing they’d be likely to do is start asking you security questions which, if you aren’t sure of the veracity of the number, you shouldn’t answer. ---
**Author:** ![LurkMeister](https://avatars.discourse-cdn.com/v4/letter/l/3da27b/32.png) [@LurkMeister](https://boards.straightdope.com/u/LurkMeister)\ **Post date:** [September 15, 2008, 9:12pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/16 "2008-09-15T21:12:26Z")
I don’t know how it works when the institution currently holding your mortgage goes bankrupt, but I remember what happened when the bank that originally financed my first mortgage sold the loan to another bank. I got a letter from the original lender informing me that the mortgage had been sold, with specifics as to the name of the new mortgage holder and what I should do about any payments that were currently due, or that I might have made recently. Then I received a matching letter from the new lender with the same information. I would assume that in the case referred to in the OP either the former lender or the court would issue a similar notice of transfer. ---
**Author:** ![Tastes\_of\_Chocolate](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tastes_of_chocolate/32/3232_2.png) [@Tastes\_of\_Chocolate](https://boards.straightdope.com/u/Tastes_of_Chocolate)\ **Post date:** [September 16, 2008, 5:27pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/17 "2008-09-16T17:27:08Z")
Does anyone know what kind of return rates banks get when they sell off bundled mortgages? If the Twenty Seventh National Bank of Hooterville packages up mortages covering $1,000,000 in loans @ 5%, how much are they getting from the buyers? I assume that there is some value to having cash in hand instead of future payments + interests. If good old 27th is going under, I’d guess that their million dollars in loans will bring in even less, due to a glut of such packages right now, and the 27th’s need to sell off. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [September 16, 2008, 8:30pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/18 "2008-09-16T20:30:23Z")
> [@ntucker](#): > > Of course, it’s going to be fairly obvious that they’re legit. But this still falls short of standards of authentication I’m used to dealing with in, say, computer security where lots less is at stake. Someone knowing all the right details doesn’t convince me I owe them a couple hundred grand, it just convinces me that at one time or another they had access to my file. Loans get sold without anyone going bankrupt. Every mortgage I’ve had has moved at one point or another. You’d get a letter from your mortgage company telling you, and then something from the new lender. And I don’t see how more is at stake. You’re not sending the new company the balance of your loan, you’re sending them one payment. If it is a scam, you’d still get a statement from the real lender, which would prove something is going on. Plus, I suspect that anyone with that much access to your account and information would have more efficient electronic means for ripping you off, not involving the US Mail. ---
**Author:** ![wmfellows](https://avatars.discourse-cdn.com/v4/letter/w/c2a13f/32.png) [@wmfellows](https://boards.straightdope.com/u/wmfellows)\ **Post date:** [September 16, 2008, 10:44pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/19 "2008-09-16T22:44:19Z")
> [@Really\_Not\_All\_That\_Bright](#): > > **Quartz** is in Britain. Well the answer remains effectively the same, contracts are contracts. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [September 16, 2008, 10:46pm UTC](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713/20 "2008-09-16T22:46:29Z")
> [@wmfellows](#): > > Well the answer remains effectively the same, contracts are contracts. Sure, but you were telling him he has prepayment rights because he was here. [Next page](https://boards.straightdope.com/t/financial-meltdown-mortgage-question/463713.md?page=2)