Many years ago Bud Abbott of Abbott and Costello fame confused Lou Costello when explaining the name of his baseball team’s basemen:
Who’s on first, What’s on second, I Don’t Know’s on third.
Increasingly defunct mortgage lenders are leaving homeowners looking at the same starting line up for their mortgages. Take for example the Grams:
Just months after refinancing their home of 20 years, Tempe homeowner Kathy Gram and her husband found themselves in a state of confusion when they stopped receiving mortgage payment coupons from their out-of-state lender.
They started to worry.
The Grams’ local mortgage broker told the couple that the Illinois-based mortgage company had abruptly closed its doors — leaving the couple wondering where to send payments on the more-than-$300,000 loan.
“It’s been a hassle,” she said. “I mean, I want to give them my money.”
Industry observers say the rising number of mortgage companies shutting down is likely to leave some borrowers disconcerted and unaware of who now services their loans.
While the Grams may be perplexed, other homeowners have benefitted from the confusion:
In 2006 Michelle Tucker, a 35-year-old UPS package processor and mother of two, was hit by a one-two punch. Her husband had surgery on his shoulder and was forced to stop taking construction jobs around town that helped pay the bills. Worse, the adjustable mortgage with the low teaser rate she took out on her three-bedroom home in Jacksonville, Fla. adjusted, now to 10%, nearly double her old rate. She defaulted. Soon after, the lender filed suit to foreclose.
Then a stroke of luck: A Legal Aid lawyer, April Charney, got the foreclosure withdrawn after discovering that the company that filed to foreclose didn’t own the Tuckers’ loan. The owner was actually a securitized pool of loans overseen by Deutsche Bank (NYSE:DB – News). And Charney has documents showing the pool bought the loan after the Tuckers defaulted–an illegal purchase for most pools, including this one. That means a court might refuse to recognize it owns the loan. Charney is arguing it should do just that.
"I buy time, then get lenders to cut interest rates and fees," says Charney, who claims she’s stopped dozens of foreclosures over ownership issues.
And the confusion can take awhile to sort out:
This sloppiness offers glorious reprieves for some defaulted homeowners but just headaches for lenders. One Maryland man, holding documents suggesting his loan was held simultaneously by a pool of loans and a bank, is still in his home–five years after foreclosure was filed.
This does not, however, mean that if you see your lender listed over at Implode-o-meter, that you can stop mailing in the payments. According to the East Valley Tribune:
When one company closes, another will purchase its portfolio of loans, said Greg Geenen, a vice president with the Arizona Mortgage Lenders Association. Somebody is owed that money, so borrowers need to start making calls immediately to find out where their payments should go if they haven’t been notified already, Geenen said.
If they don’t, they risk entering default and taking a major hit to their credit.
And as more families like the Grams become frustrated trying to run down their new lenders, expect them to be as confused as poor Lou Costello:
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