|Homebuyer Top Stories||Homebuying Q&A: Ask Our Expert|
Q: Dear Mr. Gumbinger: Who owns my mortgage and why does someone else service the loan?
I was told by Fannie Mae over the phone that they own my loan. When I went into the loan lookup it said Fannie Mae does not find a match, therefore, they do not own the loan. How can this be? This has happened many times over.
I have been told by my servicer that both Wells Fargo and Citibank own the loan. Something is wrong.
A: The owner of the loan is most often the "investor" -- the entity who put up the actual funds to make your mortgage happen. This may be the original party for your transaction, such as a bank, but loans (like other investments) are bought and sold between parties, so the owner can change from time to time and could be anyone from a pension fund to a real estate investment trust (REIT) or other entity (you might actually be a part owner of certain mortgage loans in any bond mutual funds investments you hold, for example).
That said, the servicer is usually a separate entity, whose responsibility is to collect the monthly payment from you, maintain escrow accounts, and distribute those funds to other parties (local tax authorities, insurers and to the owner of the loan). For many lenders, this is beyond their capabilities or business model, and so these "servicing rights" are actually sold to other entities that make a living providing these services to loan owners and homeowners.
Some large lenders do their own servicing for their own loans and since they have the capacity, may also do servicing for other investors, too. There are also specialty "subservicers" who may be contracted for specific tasks (loan workouts, modifications, etc.) on behalf of the actual servicer.
In many cases, a large lender may be the servicing entity for large investors or guarantors of loans, like Fannie Mae or Freddie Mac. They may have even originated your loan, and since your contact would be with this entity, and all your paperwork/statements/correspondence would come from them, you might come to believe that they actually own your loan, when in reality they may have long ago sold the actual mortgage to another party but retained the servicing rights.
If Fannie Mae or Freddie Mac owns or guarantees your loan, you should be able to determine this by using the loan lookup tool at www.makinghomeaffordable.gov. If you're not there, there is also a list of lender contacts, so that you can contact your mortgage holder directly.
If you have a specific complaint you are trying to resolve with your servicer, the Consumer Finance Protection Bureau welcomes and openly solicits for these kinds of queries and does follow up on them -- you can find a complaint form and learn more about your rights and obligations at http://www.consumerfinance.gov.
Are you ready to buy a home?
Chances are your home purchase will be the largest transaction you embark on over the course of your lifetime. That in itself is reason enough to make sure you’re not only prepared but well-educated when it comes time to buying your home. Shopping for your mortgage is at least as important as shopping for your home, because the right home loan can save you tens of thousands of dollars. Especially for first-time homebuyers, the more you understand about your mortgage and the homebuying process, the better off you’ll be and the more money you’ll save.
Before you begin shopping for a home loan, you need to ask yourself a few questions:
- How much home can I afford?
- How long do I plan on staying here?
- Am I ready?
Before you worry about Realtors, property listings or locking in a mortgage rate, you must first determine how much home you can afford. HSH.com offers homebuyers several home loan calculators that can help give you a sense of your level of affordability. Our How much house can I afford calculator is just the tool to get you started. Simply plug in a few sets of numbers (e.g., annual income, projected down payment, your monthly bills) and you’ll get a sense of your price range.
However, while affordability calculators can certainly give you a good starting point in terms of learning how much house you can afford, only you truly know how well a monthly mortgage payment, not to mention taxes and insurance, will fit into your budget and lifestyle.
On paper, you may qualify for a lot more or a lot less than you should spend. So when determining what you can afford, sketch out what you think your life may look like one, five or 10 years down the road. Look at your goals and what kind of money you need to meet them, and where it's going to come from. Decide what payment works for you, and then enter current mortgage rates into our home loan calculator to find a projected loan amount and maximum purchase price.
This brings us to the next big question: How long do you plan on living in the house you’re buying? Is this a starter home or a place you see yourself raising your family in? Understanding your life’s plans and future goals is not only crucial in deciding how big a home you should buy, but finding the right mortgage product to match.
Sure adjustable rate mortgages have gotten a bad reputation over the last few years, but if you aren’t planning to stay in your prospective home very long, these adjustable-rate products offer the opportunity to take advantage of even lower mortgage rates.
Yet remember, it’s hard enough to make plans for the upcoming weekend let alone five, 10 years down the road. This is why most homeowners prefer the stability that comes with a 30-year fixed rate mortgage. If mortgage rates do fall in the future, you can always crunch the numbers to determine if a refinance can save you cash each month.
Are you up for the task?
HSH.com visitor and recent first-time homebuyer Eric told us that when he and his wife went to look at houses with their real estate agent, they could tell a home “just wasn’t for them” before even stepping foot out of their car. Yet finding and maintaining your dream home has to do with a lot more than just aesthetics.
Owning a home is about a lot more than simply being able to afford your monthly mortgage payments. There are recurring maintenance costs to consider (you should budget saving at least 2 percent of your home’s value each year for repairs), property management costs to plan for (if the home you’re buying has a decent-sized property, you will have to dedicate a lot more time and money to your investment as opposed to someone who purchased a condo or townhome), and those unexpected emergencies (like your water heater bursting in the middle of the night) that you’ll surely have to deal with.
We asked first-time homebuyer Michael Herley from Coatesville, Pennsylvania what was the one thing he wished he knew before buying his home. “I wish I would have appreciated the gravity of purchasing a house,” he explained. “Don't get me wrong, our place is beautiful and I love it, but the work that goes into everything is much more than one could ever know. Do not think that your work is over once you have found your dream home -- rather it has just begun.”
Continue your education
As Mr. Herley mentioned, once you’ve found your dream home, the work has just begun. On a daily basis HSH.com publishes new information for not only homebuyers but for homeowners as well on a wide-range of topics. We cover everything from how to find the best real estate agent, to mortgage rate forecasts, to home equity loans, refinancing and home maintenance. Good Luck.