Mortgage Nightmare: Who Owns My Loan?

Fayette Vaughn-Lee thought she finally caught a break from her financial woes when her mortgage company agreed to temporarily cut her monthly payments.

The six-month reprieve would give her time to move into her basement, rent out the rest of her house and possibly have enough income to resume making full mortgage payments.

Then last week the phone rang: a new company is now handling her mortgage and they didn't know about the forbearance deal.

"I was speechless," Vaughn-Lee recalls. "I finally got to a point where I could breathe."

What made it more frustrating is that this was the third company that she has dealt with in the five years of her loan.

"My house doesn't mean anything to anybody but me," she said, recapping her experience.

It's a frustration shared by millions of Americans. Countless millions of mortgages once serviced by one company are routinely handed over to another. The only notice that homeowners get is a new name or address on their bill. The mortgage lender doesn't need your permission to do this -- somewhere in all those documents you signed is language that allows such transfers.

It's a problem that's not on the radar screen of Congress, though there has been plenty of talk about more help for homeowners and new financial oversight. But as of now, no major proposal has emerged to make it easier for borrowers to understand and deal with the companies that service their loans, and the firms that actually made the loans.

Even homeowners who are keeping up with their payments may be plagued by foul-ups when their mortgage is transferred to another servicer. Checks may be misplaced and escrow and insurance payments might go unpaid. Click here to find out the Federal Trade Commission's rules governing mortgage servicers and transfers.

But for Vaughn-Lee, who has owned her house in Southeast Washington, D.C., for about 10 years, the servicer switchover may be impossible to recover from.

When she remarried five years ago, she refinanced the mortgage and used some of the extra cash to make renovations. That $419,000 loan was with Lime Financial. Then it got taken over by SPS Select Portfolio Servicing and now the torch has been handed to Wealthbridge Mortgage.

After a divorce, her income fell by half and "that's when the bottom fell out of my world."

With the help of the Neighborhood Assistance Corporation of America, a non-profit community advocacy and homeownership organization, Vaughn-Lee was able to get SPS to reduce her monthly payments from $3,200 to $1,285 a month, for six months. Now, with Wealthbridge she is back to square one.

"I want to pay my bills. I really do," Vaughn-Lee said. "When you tell somebody you'll pay them, you're obligated to pay them."

Bruce Marks is CEO of the non-profit that helped Vaughn-Lee. He said her case is very common.

While a new company handling your payments can be frustrating, it can also have dire consequences.

Generally, Marks said, the contract between the actual owner of a mortgage and the company hired to collect payments is the same from servicer to servicer.

But, he noted, "servicers with the same exact wording in the contract with the investors will do very different things."

Some companies are more likely to restructure a loan while others prefer to let a home fall into foreclosure. Generally, such companies are paid a quarter of a percentage point by the investors to collect payments. In the past, that left them a healthy profit margin, Marks said.

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