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Getting Mortgage Help: The Role of Loan Servicing Companies

[Jul 20, 2009.]


As millions of Americans continue to struggle with mortgage payments they can't afford, or having mortgages in excess of what their homes are worth, mortgage loan servicing companies are also struggling. The volume of requests for assistance with mortgage loans is causing long delays in approvals and implementation of relief efforts.

Mortgage Lenders: Who Owns My Mortgage, Anyway?

 Another factor potentially affecting turn-around time for approval of mortgage assistance programs is the disconnect between mortgage servicers and the company that owns your mortgage loan. In many cases, mortgage lenders immediately sell completed loans to other companies to raise cash for making future mortgage loans. The companies who invest in mortgages typically engage a mortgage loan servicing company for handling day-to-day admnistration and customer care. The company that accepts your mortgage payment is your loan servicing company. You should contact them to learn more about loss mitigation and foreclosure prevention programs. For information on government approved loan modification programs, please click here.

How  Home Loan Modification Can Help

If you're facing changing mortgage rates, and are struggling with higher mortgage payments, you may benefit from a modification that changes your mortgage features to reduce payments. Here are a few ways a modification can help:

  • Reduce interest rate: If your mortgage loan has a higher interest rate, or is about to reset to a higher rate, you my qualify for a modification to reduce your interest rate. Lowering mortgage rates reduces monthly payment and can facilitate paying off mortgage loans faster.

  • Reset due date and extend mortgage repayment term: If you've missed several payments and cannot get caught up, your lender may agree to add unpaid interest to your mortgage balance and adjust your payment due date.

  • Eliminate Exotic Mortgage Features:Some mortgage loans allow for very low payments during an initial period, usually the first few years of your mortgage term. If the amount you're paying isn't enough to cover your full principle and interest payment (P & I), unpaid interest may be added to your mortgage balance. If you're making interest only payments, your mortgage balance doesnt decrease. Either of these situations can be risky if your home value declines. Changing your loan type to a fixed rate mortgage (FRM) eliminates risky mortgage features.

  • Reduce mortgage balance: This is not likely unless other types of modification don't work. In certain cases, government sponsored programs may provide for reducing a mortgage balance if home values have decreases significantly, or the monthly payments are not affordable due to rapidly resetting  mortgage rates or other exotic mortgage features.

 The majority of residential mortgage loans are sold to government sponsored entities Fannie Mae and Freddie Mac. These companies are cooperating with government initiatives to modify mortgage loans for eligible homeowners.


About Author:

Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.

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