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Subject: Federal Regulation of buying mortgages
Posted by: Khahan
- [30223147] Tue, May 15, 2012, 17:18
I need some research help. I'm looking for federal regulation concerning banks buying mortgages and changing the terms.
Specifically I have customer who had a mortgage thru one lender. That lender required her to carry flood insurance (because literally 1 sq ft of her property was in a flood zone, not her house, just 1 corner of her property). They only required her to have flood insurance up to the limit of her loan or the rebuild cost of her house whichever was lower.
Another mortgage company bought, we'll call is Fells Wargo. They want her to add $50,000 to her flood insurance policy. I was under the impression a mortgage company cannot change the terms of the contract like this when they buy a mortgage. Doing a search I found many 'ehow' article and insurance sites stating this fact. But I cannot find any citation or an actual reference to the federal lending laws surrounding this.
Anybody have any help? |
| 1 | Mith
ID: 23217270
Tue, May 15, 2012, 18:06
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I dont have any help to offer except suggestion to hour client that the ever-benevolent "invisible hand" will l correct this issue through natural market forces.
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| 2 | Boldwin
ID: 3944693
Tue, May 15, 2012, 22:32
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Do nothing and see what legal lever they bring to bear. They can ask for the moon. It only matters if a judge agrees with them.
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| 3 | Perm Dude
ID: 3210201915
Tue, May 15, 2012, 23:08
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My understanding, Khahan, is that the new owner of the mortgage cannot change the terms of the mortgage contract.
Sounds like this is coming from their underwriter. Nevertheless, they cannot unilaterally cause changes in the contract.
A real estate lawyer should be able to send them a big fat warning to back off without your customers being out much.
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| 4 | Khahan
ID: 54138190
Wed, May 16, 2012, 00:02
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The problem with 'legal issues' is htis is not big enough for the customer at the moment. The mortgage companies know they can strong arm customers and most customers will roll over and not know anybody. Most customers don't have an insurance agent like me helping them, though. :)
I've dealt with mortgage underwriters plenty. They'll dig their heels in and just push, push push no matter until they get their way. They are bullies of the worst kind because they feel they have all the power.
I've asked the customer to get me t heir original mortgage agreement so I can look over the insurance requirements. Their old company caused a hassel because we originally had the flood for $125,000 and they insisted no settlement unless the flood policy was for $127,000 (the customer added $2k to the mortgage). But the original company did not require flood insurance to rebuild cost.
At this point, the customer has paid for 1 1/2 years. If they only have to insure to the lesser of the two amounts (which I believe they do) then technically they can actually reduce the amount of flood insurance.
Just really irks me. The mortgage company holds most of the power and their attitude is, "do it our way or we'll do it for you and force you to pay for our methods."
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| 5 | Perm Dude
ID: 3210201915
Wed, May 16, 2012, 00:22
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Underwriters are dicks. Plain and simple.
I don't suppose the customer can shop for a new mortgage? Loans are cheap these days.
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| 6 | Boldwin
ID: 3944693
Wed, May 16, 2012, 07:44
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Have them call Lennox Financial, have Lennox buy the mortgage back and finance it their way. They seem to be on the customers' side and have revolutionary programs.
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| 7 | Boldwin
ID: 3944693
Wed, May 16, 2012, 07:46
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The mortgage company holds most of the power.
How do they have the power when they are the ones who need you to alter a legal agreement?
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| 8 | Khahan
ID: 30223147
Wed, May 16, 2012, 08:41
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Boldwin, they have the power because they are the big corporation with unlimited resources and the deed to your house.
They say jump and if you ask why they threaten to drop the earth from underneath your and take your house if you don't comply. Even if they don't have the right to do so. It doesn't stop them.
Unfortunately the general public isn't educated on their rights in dealing with mortgage companies (or any corporation for that matter).
In this case the mortgage company is threatening to purchase insurance and add it to the cost of the customers mortgage if the customer doesn't comply. Hence they hold the power as long as the customer doesn't know the right avenues to explore to tell the mortgage company to shove it.
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| 9 | Boldwin
ID: 3944693
Wed, May 16, 2012, 08:47
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Again they need to have Lennox purchase the mortgage and refi the thing right. I guess the fine print tells the tale. Early out penalties and strong language favoring the original lender could make this a no win situation but if it can be repurchased your client is golden.
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