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What can a borrower do if a lender goes bankrupt?
Q: I’m a real estate broker. A client is in a situation where her lender has gone bankrupt. She has called their contact number several times, but there has been no response, although – according to her – the recording says that “your call is very important to us.” One of her concerns is the preservation of her good credit standing. What can she do to protect herself?
A: A mortgage is a contract between a borrower and a lender. Each party has certain obligations, but the big obligation of the borrower is to make certain that monthly payments are made on time and in full. It may well be that your lender or your “servicer” – the company that collects monthly payments – has gone out of business. However, your loan remains in full force and effect. Your loan is actually an asset to whomever or whatever owns the loan. If the current mortgage owner has troubles the loan will be resold to someone else who also will expect full and timely payments.
In your situation there are several steps you need to take. First, your client must to make every payment, in full and on time. Given the condition of the lender or servicer it would be smart to make this payment as early as possible. Second, you want evidence that the payment was actually made, therefore pay by check so you have a canceled receipt proving the payment was made and also showing when. Third, you want to send your check in a way that shows the day it was received, perhaps by certified mail with a return receipt requested. Again, if you use certified mail, you want to mail early so that the check will unquestionably be delivered on time.
You’ve got to figure that the lender or servicer deals with a lot of borrowers in your state. If you’re having trouble you can pretty much bet that other borrowers are in the same situation. Call your state attorney general’s office and ask if they can provide any additional guidance or suggestions.
By any chance, does the lender have a Web site where payments can be tracked? If yes, see if your client can get information online that’s not available by phone.
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to firstname.lastname@example.org.View Foreclosure Article Archives
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