I bought a rental house a few years ago, and I just found out that the lender I have been making my payments to has gone bankrupt! Do I keep making my mortgage payments? Should I refinance? I just moved into the house and don't want to lose it or have any problems.
Jessica, Los Angeles
The terms of your mortgage don't change no matter who owns it.
In the event of a bankruptcy, your bank may be taken over by a new one, or your loan could be sold to another institution to satisfy creditors. In any event, your payment and interest rate stay the same and your obligation to repay the loan does not go away.
You do want to be aware of a few things, however.
Keep an eye out for news about your lender--if any scammers try to take advantage of the bankruptcy and defraud customers, you want to know sooner rather than later. A quick news search of your lender's name online each day should take care of that.
In addition, you might want to call the lender's servicing department or check its website. Continue to pay your mortgage and send your payment to the same location until you are notified of any change.
When another lender takes over, you should verify that your payments are being credited to your account correctly, especially if you have an impound account for your taxes and insurance. When a new company begins servicing your home loan, the transition doesn't always go smoothly and mistakes can happen. You want to make sure that your taxes and insurance are being paid by your lender on time.
This is important!
Keep sending your payments to the same address until you get TWO notices called transfer letters. The first is from your bankrupt lender and the next is from the one taking over your mortgage. Don't send your payment to a new address without both of these, and contact your servicer if necessary. You get 60 days grace to sort out the address before the new lender can report your payment as late.
Finally, look into refinancing.
I'm only saying that because if you bought the property as a rental or investment, and now it's a primary residence, you may have access to the best mortgage rates. California lenders are still lending if you have home equity, and if you made the larger down payment required for investment property, you probably have enough to get approved. It can't hurt to get some mortgage quotes in any event.