Buying a home, whether for investment purposes or as a primary residence, typically involves a mortgage loan of some type – most likely, the 30 year, fixed-rate mortgage recommended by Jason Hartman’s investing strategies. And to get that loan, property buyers generally work with a bank, credit union or other financial entity. But when the time comes to refinance or take advantage of any of the array of homeowner assistance programs recently put into place for holders of certain kinds of loans, many mortgage holders find that their loan didn’t actually originate with the institution where they got it.
Tracking down the originator of a mortgage can make a significant difference in eligibility for refinancing and other breaks. Most prospective property owners who apply at a major bank such as Wells Fargo or Bank of America believe that their loan is actually owned by that institution. But over half the mortgage loans approved in the US originate with two government mortgage lenders – the Federal National Mortgage Association, affectionately known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, or Freddie Mac.
These loans are then “serviced” by a variety of lenders, typically major banks, that handle administrative work related to creating and managing the loan. Interestingly, loans offered through small local lenders are more likely to originate with that lender itself than those available through the larger institutions. Some loans are also offered and serviced through government programs such as the Federal Housing Authority (FHA) or the Veterans Administration.
Mortgage loans can also change hands several times, as loans are bought and sold by both government and commercial lenders due to a variety of circumstances. A loan that originated with one lender can end up owned by another, and only those who read a lot of fine print may be aware of the switch.
Why does it matter who owns your loan? In general, it doesn’t matter much at all. If a property owner holds a 30 year, fixed-rate mortgage, or even most other common loan products, as long as payments are made on time and no problems arise, it’s possible to continue for the life of the loan without knowing – or caring — where it really originated.
But if that same property owner decides to refinance the mortgage, or ends up needing help avoiding foreclosure, the origin of that loan can matter a great deal. Some refinancing programs such as HARP, (Home Affordable Refinance Program), which helps homeowners who are struggling to get traditional refinancing, are available only for mortgages owned by Freddie Mac or Fannie Mae – even if the loan is serviced by someone else. Likewise, various disaster assistance and payment suspension programs are offered only for certain kinds of loans.
Finding out who owns your mortgage can be relatively easy. Both Freddie Mac and Fannie Mae offer a loan tracker on their websites, which allows users to input the name of their financial institution and some other information to determine whether their loan is owned by either of these agencies. A direct inquiry to the lender can also reveal the loan’s owner.
Under most circumstances, discovering the entity that originated the loan won’t affect the payment schedule – or much of anything else. But in others, knowing who owns your mortgage can save you money. (Top image: Flickr | rubio1)
The Jason Hartman Team