Q: What is the difference between a Mortgage Broker and a Mortgage Lender?
A: Mortgage Equity Partners (MEP) is licensed as both a Mortgage Broker and a Mortgage Lender. This allows us tremendous versatility when providing financing options for borrowers. MEP is a licensed lender, which means we originate, underwrite, and close your loan. Everything is done locally at our office, and lending decisions are made directly by us. A Mortgage Broker will arrange financing for a borrower by working with many different Banks. The Broker will place the loan before it closes, and the borrower will close in the name of the Bank to which the Broker placed the loan. A Mortgage Lender will close the loan in its name and either sell the loan at closing, or sell the loan sometime after closing. If the Mortgage Lender uses its own funds to close the loan then once the Lender sells the loan it frees up more money for the Mortgage Lender to make new loans. This helps promote the free flow of mortgage funds in our marketplace.
Q: Mortgage Equity Partners helped me get my loan and I closed so what happens next?
A: Once Mortgage Equity Partners makes the loan it will be sold. MEP either sold the loan before it closed, sold the loan at closing, or will sell the loan after closing. Which one depends on whether MEP was a Mortgage Broker or a Mortgage Lender for your transaction. In either case, MEP does not keep any loans it makes. Mortgage Equity Partners sells both the loan and the servicing. The new servicer of the loan will manage the collection and billing for your loan payments.
Q: When am I notified of the transfer of my loan?
A: This would also depend on whether Mortgage Equity Partners acted as a Mortgage Broker or Mortgage Lender. In the case of a Broker, you would have known whom the loan was sold to prior to closing. In the case of a Lender you will be notified at closing or shortly thereafter. As a result of recent mortgage reform whenever your loan is transferred you are required to be notified within 15 days. Additionally you cannot be reported late for any misapplied payments during the 60 day period surrounding any transfer.
Q: Am I negatively impacted when my loan is sold or transferred?
A: No. Most loans are transferred so it is very common. The servicer is the institution managing customer service and billing for your loan. The terms of your loan that you closed under as indicated in your promissory note and mortgage cannot change. You are simply making your payment to a new institution. However, MEP believes that the true value of our organization is in our experienced Loan Consultants. Once you become a client of our firm we are your link to the mortgage market. You will receive our quarterly newsletter, optional email notifications, and the ability to contact your Loan Consultant at any time about refinancing or any other options that effect your personal loan situation. We feel we are one of the premiere Mortgage Brokers and Mortgage Lenders in the marketplace and staying in contact with our borrowers is very important to us.
Q: What does it really mean to say a loan is “transferred?”
A: This is one of the most misunderstood concepts in mortgage banking. There is a distinction between who owns your loan and who services your loan. The loan servicer is the institution that is responsible for sending out your mortgage statement, managing your escrow accounts, and otherwise providing customer service for loan related billing questions. The owner of your loan is the institution that advanced the funds or made the loan. It is important to understand that both ownership and servicing can be transferred. For example, Mortgage Equity Partners may make the loan by advancing funds at closing to the borrower. In order to recapture those funds Mortgage Equity Partners will sell the loan and another institution will pay for the loan allowing Mortgage Equity Partners to re-use those funds to make more loans. Additionally the institution that purchased the loan may not be in the business of servicing the loan and that component is sold to an institution experienced with billing, etc.
Q: All of this could be confusing so how much of it do I need to involve myself with?
A: Transfers of ownership and servicing can happen many times over the life of a loan. It all happens electronically and very quickly. It is likely this has happened on previous loans and you were unaware of the occurrence. Loans are sold many times and because the borrower is unaffected by the sale, typically they are not concerned about the transfer. Sometimes servicing changes, too. You, the borrower, are always notified of servicing changes. It is important to remember the terms of your loan can never change. The program you selected and the documents you executed at closing represent the terms of your loan and ultimately it does not matter who owns your loan or who services your loan. Your role as a borrower is to make payments on time to the institution who is servicing your loan. Consider Mortgage Equity Partners your local lending partner and your Loan Consultant as someone who understands your specific needs and someone with whom your relationship will continue after your loan closes.
Q: Who do Mortgage Brokers and Mortgage Lenders sell loans to?
A: Loans are initially sold to a Bank. However a Bank will then do one of two things. In almost every case if your loan is a conventional fixed rate loan then the Bank will re-sell the loan to either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (commonly known as Fannie Mae and Freddie Mac, respectively). In the case of an Adjustable Rate Mortgage (ARM), the Bank will either do the same thing or, occasionally, the Bank will keep the loan in its portfolio. The reason is because ARMs do not carry as much interest rate risk for a Bank so there is less reason to sell the loan. Ultimately though most fixed rate loans are owned by Fannie or Freddie and serviced by another institution who is experienced in billing, etc.
Q: I have heard of Fannie Mae and Freddie Mac but what role do they really play with my loan?
A: Recently both institutions were taken over by the Government. They are basically clearing houses for all Banks. Banks work essentially the same way as Mortgage Lenders but on a larger scale. Banks do not have endless supplies of money so once they purchase the loan from a Mortgage Broker or Mortgage Lender or whether the Bank makes the loan itself, it eventually needs to sell that loan so it gets its money back to make more loans. Fannie and Freddie are simply repositories for Banks where they can sell loans and as a result recapitalize themselves. In doing this, the Government provides a free flow of mortgage money in our banking system and ensures credit for homes is readily available for qualified buyers and thus home ownership is therefore more attainable.
Q: So if Fannie or Freddie has my loan why don’t I get a mortgage statement from them?
A: Fannie and Freddie own more loans than any other institution in the world, however they do not service loans. That is, they do not send out monthly statements, handle tax escrows, or have a customer service department for borrowers to call. While Fannie and Freddie own the loan they leave the managing of the mortgage to loan servicers. Loan Servicers send out bills, collect the payment, answer borrower inquiries via a customer service department and then remit the payments over to Fannie or Freddie. Loan Servicers get paid a fee by Fannie and Freddie and tend to be the Banks themselves. It is a common misconception to think a Bank “has” your loan. The Bank simply services the loan and the fees generated are just another business line for the Bank. As long as the Bank keeps servicing your loan, the Bank will continue to generate fees from Fannie and Freddie.
Q: If my loan is ultimately sold, does it matter where I get my loan from?
A: Mortgage Brokers, Mortgage Lenders, and Banks all compete for the consumer business. Given conventional fixed rate loans and many ARM loans are sold (or re-sold) and ultimately end up with Fannie or Freddie, choosing the right place to get your loan from initially is critical. Mortgage Equity Partners believes the Mortgage Brokers and Mortgage Lenders are better suited to handle the loan process for a borrower. Banks only have one set of products and rates; their own. Mortgage Brokers and Mortgage Lenders deal with multiple banks (sometimes the very same bank a consumer is considering anyway) so there is more exposure the best rates and best programs across a wider spectrum. Additionally, Banking Loan Consultants tend to focus on other products aside from mortgages and as a result are not as specialized. Mortgage Equity Partners Loan Consultants are subject matter experts and the management team has over 100 years of collective experience in over 20,000 transactions. We believe this expertise places our firm at a significant competitive advantage in the marketplace.
Q: Do I continue to deal with Mortgage Equity Partners after my loan closes?
A: For questions relating to your loan you should always call your loan servicer first. However your loan servicer is an expert at servicing loans and your Mortgage Equity Partners Loan Consultant is an expert in mortgage banking. Our average employee has over 15+ years of mortgage banking experience. We want you to utilize that experience. You are our client for life. We believe in establishing a relationship with our clients and continuing to serve them after the closing as well. We recognize your financial life is not stagnant and it can be, at times, very complex. Our value is to provide a long lasting partnership with our clients. We are local and our business is only focused on our local markets. We believe this allows us to understand our client better and as a result, offer better service than any of our competitors. So whether you have questions about re-financing, purchasing a new home, planning, or general financing questions we encourage you to contact you personal Loan Consultant at anytime.