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What happens when my lender goes out of business?
I had a call late last night from a client that I had put into an IndyMac loan about 2 years ago. We have been talking about getting them into a decent FHA loan, but they have income problems that are being resolved. Anyway, Mike's concern was what was going to happen with his loan-would he be forced into quickly refinancing etc. Here is what I explained to him.
There are two portions of a loan. One is the investor side. That is the organization that initially funds the loan and then another organization (or group) buys the loan to get rich off of the interest.
The other portion is the servicing side. These companies get 25-35.00 per month from the investors to take payments from the borrowers and keep the escrow accounts and pay the taxes & insurance and then send the funds to the investors. These operations are very profitable as you can imagine. When IndyMac went under one of their options was to keep the servicing as a seperate company or sell the servicing portion of the business. Hard to tell at this point what is going to happen, but the terms of the loans will not change, only-possibly-where the checks from the borrowers go may change.
Charles
A side note. People wonder why BofA bought Countrywide. Basically they bought it so cheaply that they paid for the servicing side of their business, their credit reporting agency, and the rest was "free".
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