Tuesday, July 17, 2007

Secondary Mortgage Market

I've often read stories that banks sell their mortgages on the secondary market but not appreciated the magnitude of this. Recently I have been dealing with a seller in foreclosure and been trying to do a short sale with his loans. He had two loans on the property and when I first talked to him he told me he didn't know who the banks were.

Initially I wrote this off to his disorganization and drinking but now I appreciate that he was telling me the truth. I have been talking to the banks in order to find out where to send a short sale package and I'll be darned if I can figure out who owns what loan. Each of the original loans has been sold multiple times. Sometimes the originator of the loan has sold and re-bought the same loan! So far I have found 3 changes on the first loan and 4 on the HELOC.

I'm not sure what the game is for these banks but it sure gets confusing since they change loan numbers each time the loan is sold. It's also costing these banks money since this seller has been in foreclosure since May of 2006 and there still is no auction date set on his house.

For all of the criticism that banks get for pushing loans on people that can't afford it (as if the banks were some all powerful oppressor), the truth is that banks (and big corporations in general) are not all that organized. The paranoid that attribute all sorts of evil intentions to big business overestimate the reality of how companies operate.

2 comments:

Diane Cipa, The Closing Specialists® said...

Got a chuckle out of this post, but it's a shame. As someone who has worked in the environ for quite some time, I do feel sorry for consumers who get lost in a string of secondary market transactions where nobody follows the rules.

There really are strict requirements for disclosures from each lender, the loan buyer and the loan seller. We always called them hello and goodbye letters. Maybe this paper is just moving faster than the disclosures.

Paul said...

maybe these lenders were passing the mortgages back and forth like a hot potato!