Who Owns Your Mortgage?

Dec. 18, 2007 — -- Public officials, consumer groups, the mortgage industry and the media have all urged homeowners to renegotiate their mortgages at affordable terms to avoid the risk of foreclosure. But what should homeowners do if they can't figure out who exactly owns the loan?

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Denise Carruth said she didn't wait for disaster to strike. As soon as she realized the mortgage payments on her Sacramento, Calif., home would increase from $2,100 to almost $2,900 a month in October of this year, she said she got in touch with the mortgage service company that handled her monthly payments.

When the company didn't help, she said she wrote to her lender, BNC Mortgage, in August, before her payments would increase.

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"We don't make enough to survive an increase," she explained in an e-mail to BNC, requesting that her loan be modified.

BNC replied that it "no longer owns this loan" and told Carruth: "We have contacted the company currently in possession of your loan, Aurora Loan Services, and have asked them to contact you as soon as they possibly can in order to assist you with your situation."

Carruth wrote to Aurora in September, and she received a similar response: "Aurora Loan Services … is unable to locate an account number under the name and address in the e-mailed correspondence."

Aurora referred her back to the company that processed her monthly payments.

"Honestly, I couldn't tell you who has my loan. At this point in time, I have no idea," Carruth said.

The world of mortgage lending is unrecognizable from the days when community banks arranged mortgages and held them until they were repaid 30 years later.

According to Inside Mortgage Finance, today three out of four mortgages are packaged together and then sold to another lender, which often repackages and resells these mortgages to a variety of investors that include Wall Street banks, mutual funds, pension funds, even foreign investors.

This means that for millions of homeowners like Carruth, the company they mail their monthly payments to is not their original lender but merely a business that services and processes their loan. Sometimes that service company is authorized to modify the loan, and sometimes it's not. For homeowners, it can be a terrible maze.

Allen Fishbein of the Consumer Federation of America said that the complexities of the mortgage market "are compounding the problem that is resulting in many people losing their homes."

"Borrowers -- who are having trouble making their payments -- are finding that often they can't get the answers they need to restructure their loans and make them affordable so they can stay in their homes," he said.

Carruth said she never did figure out who owned her loan and now it's a moot point. To avoid foreclosure, she's trying to sell her house for $100,000 less than what she paid for it, but she still has no offers.

"It is frustrating. You try to go off the advice that you're given, and it gets you nowhere," Carruth said.

The mortgage industry said it is doing its best to keep up with the growing volume of problem loans .

The company that handled Carruth's loan told ABC News that it tried to work something out with her but said Carruth told them she wanted to sell her house. Carruth told ABC News she would prefer to keep the house but had no other options but to sell.

And who does own her loan? We found out that Carruth's loan is owned by a Wall Street investment trust called SAIL 2005-11. It does not deal directly with homeowners. It leaves that job to the mortgage service company, which Carruth said couldn't help her either.