If you were asked who your lender is—who actually owns your
mortgage, what would your answer be? Your mortgage statement may come
from Wells Fargo, Aurora Loan Services, Select Portfolio Servicing, or
some other lender, so they must own the loan, right? It’s easy to
assume that the company listed on your mortgage statement is the owner
of your loan, but it’s usually not.
The Loan Servicer / Investor Relationship
- The company listed on your mortgage statement is the loan servicer. The loan servicer doesn’t
own the loan. They are paid to collect, monitor, and report the loan
payments, handle property tax and insurance payments, collect late
fees, and foreclose on defaulted loans.
- The entity that actually owns the loan is the investor. The investor pays the loan servicer a fee to service the loan for them.
Why Is This Important In Short Sale Situations?
On a short sale, the investor takes a loss, not the loan servicer. However, a short sale must be “negotiated” with the loan servicer,
and the person or entity handling the short sale for the seller is
typically not allowed to communicate directly with the investor. Also, loan servicers are typically paid more to foreclose than to facilitate a short sale. So, if this is the case, you’re probably wondering why a loan servicer would ever consider a short sale over foreclosure.
The contract between a loan servicer and the investor requires the loan
servicer to act in the best interest of the investor. Since a short
sale will usually net the investor more money (a smaller loss) than
foreclosing and selling the property as a bank-owned property, the loan
servicer will usually entertain a short sale as part of their
contractual requirement with the investor. However, because loan
servicers typically get paid more to foreclose, they will often make
the short sale process difficult, sometimes even trying to find small
technicalities to kill the short sale deal.
First and Second Mortgages With the Same Bank
If you have a first and second mortgage with the same bank, they are
probably owned by different investors. This generally means that each
loan is negotiated separately (
with different short sale negotiators at the bank), and there may be
different short sale requirements and timelines
for each loan. Even the information contained in the short sale
package that is sent to the bank could be different on a first and
second mortgage serviced by the same bank.
If a short sale is
necessary to sell your home, it’s important to make sure you’re working
with someone who has short sale experience. Someone who has experience
dealing with difficult lenders will typically have more success and be
able to prevent unnecessary delays better than someone who doesn’t
specialize in short sales.