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How Did Our Loan Get There?

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Posted On: 01/04/2012

QUESTION:

We are being foreclosed but wonder how this is possible. Our mortgage was with Lender A, then with Lender B and then onto Lenders C and D. We have no agreement with Lender D, so how they can they foreclose? Isn’t this an example of robo-signing, and if so what we can we do about it?

ANSWER:

To homeowners a mortgage is a debt, but to lenders a mortgage is an asset that can be bought and sold. In your case the loan was originated by the first lender – A – and then sold to Lender B. Lender B sold it to Lender C. Lender C itself was sold to Lender D, and along with branches and vaults Lender D then obtained your mortgage – and many others – when it bought Lender C.

Robo-signing is different. In a foreclosure, where court approval is required, a representative of the lender signs an affidavit swearing to the court that the lender owns the loan and that the borrower has not made payments. With robo-signing, the affidavit is signed by someone who does not actually know anything about loan ownership or repayments – they are simply clerks signing documents, sometimes hundreds or even thousands per day.

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When you obtained your mortgage you agreed that it could be sold and re-sold – that was part of the vast pile of paperwork you found at closing. There are, however, rules that impact mortgage sales and protect borrowers. For instance, the new lender cannot change the terms of your loan and if the payment address is moved you must receive notice and adequate time to make the change so your credit standing is not unfairly damaged.

If you believe the foreclosure claim is wrong then you must get a local attorney to fight the lender in court. An attorney will look into the issue of whether the lender has its paperwork right and also if there’s an alternative available, such as a loan modification.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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