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What Happens If Your Mortgage Lender Goes Bankrupt

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What happens if the bank that has my mortgage goes under?

In short… nothing (except the sender’s address on your payment) New Century Financial, subprime lender to the stars, just filed Chapter 11 bankruptcy and so everyone who normally makes payments to them must now mail their payments to whoever buys up all those loans from New Century Financial. For the borrower, what happens next will be no different than if your lender sold your loan to another bank – you just make payments to a new lender. See, a lot of “lenders” make their money by setting up the loan (originating it) and then selling it to another bank so that they can free up that cash and originate more loans. The big banks are willing to sit on the loan and collect the interest payments because they have tons of money, the smaller lenders rely on originating loans to make their money.

In the end, your home is already paid off. As long as you continue to make payments, you live in that house. If by some weird reason the company that owns the loan just disappears (and you are able to recover the title, which they will hold), you still own the home (of course, this will never happen). So, if your lender does go bankrupt, keep an eye out for who is now going to be doing the collecting and make sure to keep current.

This is just my opinion and I’m a novice at this, probably just like you, please consult a professional before doing anything (and please correct me if you know for sure).

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19 Responses to “What Happens If Your Mortgage Lender Goes Bankrupt”

  1. wanzman says:

    You are correct. Since the mortgages are mainly the only asset that the lender has, they will be the very first thing to be sold when the financial institution enters bankruptcy. It would be just like getting a mortgage from a large bank. One of these days you will get a letter in the mail telling you that your loan has been sold and here is the new address that you should send your payment to.

    As far as your loan getting lost in the shuffle and you getting your house basically free our of the deal…..not bloody likely. ha

  2. Maria says:

    Hey there! I just read about you in a New York Times article. It was written back in 2005 so I was curious about how you and the other bloggers are doing now. Unsurprisingly, both you and Neville seem to have doubled your net worth during that time. I’ve got similar goals and have been trying to blog about it, but simply haven’t had the time. Keep up the good work! – Maria

  3. Miller says:

    I was wondering this the other day too.

    I guess I was hoping that if your lender went bankrupt, you’d just own the house out right. But like wanzman said… fat chance!

    So your mortgage is just sold off like any other commodity the bankrupt company owns? I guess that does make sense…

    Do mortgages ever make their way into bonds? I’m not sure exactly how those all connect…

  4. Joy Beth says:

    My mortgage broker called me and told me I’d be doing another loan process. It all seems rather strange, it would be logical that New Century would sell my loan but for me to have to refinance again just seems a little off. They said I won’t have to pay any re-finance fees, just my usual mortgage and then I’ll have a new loan. It just sounds rather strange to me…….

  5. Amy says:

    People’s Choice has just filed Chapter 11 and wants to auction off their existing mortgages, one of which is mine!

    Why can’t I bid on my own mortgage?

    I know I can’t so, when it gets sold to another lender, can I maybe renegotiate the terms of the loan? It is currently an ARM and we were in the process of looking for another lender anyway.

    We would love to get a call from our broker telling us we get to re-fi for free!

    • lvent says:

      Don’t renegotiate with a pretender lender, check your public recordings and do a title search before you renegotiate or send them another dime.40 million homes in America are not legally forecloseable. see the website, 4closurefraud.org

  6. Mercades willis says:

    I just wonder why banks giive out money to people iif they know they can’t pay it back.

    They shouldnt give out loans to anybody

    • lvent says:

      They never lent any money. They were sponsors. They bundled and sold the loans to depositors who sold the income stream MANY TIMES OVER, not the mortgage to trusts. That is a nullity of the mortgage and also securities fraud because they never perfected the collateral lien at ORIGINATION.That is why they destroyed the notes. To cover up the ORIGINATION FRAUD.THEY BIFURCATED THE MORTGAGE AND THE NOTE, A NULLITY. YOU CANT FORECLOSE AND TAKE SOMEONES HOME WITHOUT OWNING THE MORTGAGE.

    • lvent says:

      THEY GAVE BAD LOANS TO BUNDLE THEM UP WITH GOOD LOANS SO WE WOULD ALL FAIL.IT WAS A PONZI SCHEME, LIKE ENRON AND BERNIE MADOFF ON STEROIDS. THEY SOLD UNSECURED NOTES AS AAA AGENCY PAPER WHEN THEY WERE NOT ONLY UNSECURED NOTES, WORTHLESS, BUT ALSO LOADED WITH HIDDEN RISKS TO THE INVESTORS..ALL THEY NEEDED WAS A SIGNATURE FROM US AS COLLATERAL, THAT IS WHAT THEY SOLD, A PROMISE TO PAY WHICH GENERATED AN INCOME STREAM. THAT IS WHAT THE INVESTORS INVESTED IN, NOT A MORTGAGE. THEY CREATED A BUBBLE OUT OF SPECULATION AND RISK KNOWING IT WOULD ALL FAIL. SEE YOU TUBE VIDEO, CNBC ILLUMINATI CRASHES STOCK MARKET. WE WERE SET UP TO FAIL AND ROBBED IN THE BIGGEST TRANSFER OF WEALTH FROM MAINSTREET TO WALL STREET TO THE FOREIGN RULING ELITE IN HISTORY.

  7. char says:

    I’m interested in a forclosure property that has listed New Century Mortgage Corp for the bank, how can I get a hold of this bank to make an offer or buy it from the bank??? I have tried everything. Thanks

  8. Remi Stevens says:

    Ah but if the entire industry wasn’t backed by a corrupt central bank it would be a different story.

    If the lender went under, its probably because they originated many bad mortgages. In a true ‘free market’ no one would want to buy your bad mortgage from the bankrupt lender and you would end up with the property.

    That’s if banks weren’t running the government of course. Unfortunately they are and we will continue paying our mortgages or be evicted.

  9. lvent says:

    No, a new lender cannot just ASSUME a loan unless they are as the mortgage states successor and assign to the mortgage. In other words they have to prove they OWN THE LOAN BY a release of mortgage to the homeowner with a cancelled note and mortgage from the previous lender to the homeowner and an assignment recorded at the recorder of deeds with a new mortgage with their name inserted in it establishing the new lien. They cannot just buy a note either, that is a nullity and proves no interest in the property…And then their is the not so little matter of the ORIGINATION FRAUD and the fact they sold UNSECURE NOTES TO MULTIPLE TRUSTS WITHOUT PROPER SECURING OF THE COLLATERAL LIEN AT THE RECORDER OF DEEDS OR DELIVERY OF NOTES TO THE TRUSTS AS THE PSA REQUIRES. A/K/A SECURITIES FRAUD. THEY COULDN’T DELIVER THE NOTES TO THE TRUSTS BECAUSE THE NOTES WERE NOT SECURITY INSTRUMENTS BECAUSE OF LACK TO PERFECT THE COLLATERAL LIEN. THAT IS WHY THEY DESTROYED THE NOTES. IN THAT CASE THE PRETENDER LENDER MUST RESCIND BECAUSE THEY DONT OWN THE MORTGAGE. 40 MILLION HOMES ARE NOT LEGALLY FORECLOSABLE BECAUSE OF MASSIVE MORTGAGE FRAUD AND TITLE SLANDER WHICH MEANS TITLE FRAUD.

  10. lvent says:

    CLOUD ON TITLE MEANS SOMEONE COMMITTED FRAUD IN YOUR NAME. AND SLANDERED YOUR TITLE TO YOUR PROPERTY AND YOUR GOOD NAME. UCC CODE ALLOWS A BORROWER TO STOP MAKING PAYMENTS WITHOUT DISHONOR UNTIL THE LENDER CAN PROVE THEY OWN THE MORTGAGE AND THE NOTE. GUESS WHAT? THEY CANNOT BECAUSE THEY ARE A GIANT CABAL CRIMINALS AND CHASE BANK IS PUBLIC ENEMY #1. THEY ARE A ROGUE REGIME, A GIANT MONOPOLY THAT OWNS AND CONTROLS EVERYTHING UNDER ASSUMED NAMES FROM THE TITLE CO.S, TO THE TRUSTS, TO THE REAL ESTATES, THE MORTGAGE LENDERS, THE SERVICERS, THE BANKS WHO CALL THEMSELVES OTHER NAMES BUT REALLY ARE ALL OWNED BY CHASE. CHASE AND BOFA ARE FOREIGN MULTINATIONAL NEW WORLD ORDER OWNED AND CONTROLLED SCUM. THEY ARE DESTROYING THE FREE WILL OF THE PEOPLE, GLOBALLY.

  11. Anonymous says:

    hey i am in forecloser and my morgage company just went bankruptcy what will happen now if any ones knows please comment

  12. Ansel says:

    Yes, I would like to render a reply. General Motors Acceptance Corporation, my current mortgage “lender” has done the dirty deed of ripping off the American populace yet again. (Didn’t they get money from Obama? … to “restructure”?) Well, they took the money, moved to Redondo Beach, (i wish) and after I refinanced my piece of shit property in Motown (Modesto-CA) they inform me that they are filing chapter 11 and I must file my claim by November 9th. How ironic, do they want to wait to see who wins, like that really matters? They all inherit the shit from Bush, who drug us into that dirty oil war that we did not need to fight when the Baby Boomers needed the money to finance thier medicaid insurance in the retirement years, right? Well, guess what- big asses? there is one thing that you did not bet on in your lies and fraud: My Mother is an attorney. And so it goes, I will continue to stand strong, and Mitt looks just a little bit less scummmmmmmy than Obama, but man, those shifty eyes. So I have no children there is no reason to vote for Mitt. If you do, he will make us pay back that war debt by taking it out of our hides… Anyway, have i said enough? We are all so sick of their shit… None of us will win with these losers. They are both out of touch, and someone needs to start to try to compromise a bit more.

    Whew!


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