“I have a quick question for you. What do you think of the sale of mortgages when consumers have no say over who the ultimate buyer of their mortgage will be? Say, you have a problem with one of the banks caught up in the sub-prime lending issues and your new mortgage with one of the companies that stayed above the fray is sold off to that other institution soon after you get the mortgage. What do you think the issues, if any, there are here?”

Jeffrey,

Interesting question.

If anyone else has a question you can send it to me right now, right here.

This is another collision of ethics and reality. From a consumer point of view it is wrong and I think a consumer could demonstrate that they have been harmed to be sold to a lower quality and less performing lender. But I think that consumer would have to fight this battle in a costly legal battle where they will be out gunned. AKA, consumer screwed.

According to the terms of the original mortgage the note can be sold on but I don’t think I’ve ever seen a statement about the quality of the lender that it can be sold to.

From the bank POV they are not going to want to hem themselves in to any particular lender and will deny any obligation to screen purchasers for suitability or fitness, however, there’s an argument. Maybe a point could be made that an inferior lender is not suitable under the Uniform Commercial Code? Doubtful but worth exploring with a lawyer friend if you’ve got one.

Steve

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Read the full article at GetOutOfDebt.org, click here: Jeffrey Writes in About Mortgage Company Ethics

Hollis

“Dear Steve,

I am severly under water financially having lost a second income. Now my house is upside-down by probably $80K, both my credit cards are topped out and I owe $40K on those and I have been advised to declare chapter 7 bankruptcy. My retirement savings have plummetted because of the volitility in the market, so there is not enough there to borrow temporarily to repay the credit cards. Even if I declare bankruptcy, there is still the mortgage payment that I can no longer afford.

Is there any system in place whereby one could go to a lender and ask to move to one of their smaller houses in foreclosure, pay a mortgage there that they could afford, and then short-sell the main house?

Hollis”

The Answer:

Dear Hollis,

You would think a logical solution like that would exist, but I can understand why it does not.

Between the duty to the bank investors, the pool of people owning a piece of your original mortgage and the legal and tax issues in trading down, what seems like a totally reasonable and logical solution to a difficult mortgage situation, just isn’t practical from the banks point of view.

Banks do a great job of rolling out policies for the masses and a horrible job at treating people as individuals. Just look at the mess that still exists in just trying to get current lenders to agree to rewrite or modify current loans of homeowners to avoid foreclosure. The banks swear they are doing this and it is an easy process but the word on the street is that is simply not true.

It certainly does not hurt to call up your lender with your logical suggestion but don’t get discouraged if they have no good response for you or just flat out say no.

You might just be left with letting the bank take your house back, rolling the deficiency that you will owe into your bankruptcy and let’s move on. Talk to your bankruptcy attorney about the best way to handle this. If you don’t have a current bankruptcy attorney, click here to file bankruptcy or get a free bankruptcy consultation.

As I’ve always said, logic and creditors don’t mix.

Big Hug!

@GetOutOfDebtGuy

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• We Are Trying to Buy a House With a Short Sale But It’s Going Nowhere. – Joy

Read the full article at GetOutOfDebt.org, click here: Can I Trade My House In For a Smaller One Instead of Losing it in Foreclosure? – Hollis