Many mortgage lenders, big and small, have been experiencing trouble…a good number of them have had to pull the plug. American Home Mortgage Investment Corporation has now been forced to pull the plug amid the worsening housing slump.
So, if you are a borrower of one of these corporations that are filing bankruptcy, what happens to your loan?
Q: If the company goes bankrupt, can I stop repaying?
A: No. As agreed on the contract, you agreed to repay the loan over the signed period. You must honor the contract.
Q: What happens to my mortgage?
A: When a lenders goes under, the courts will instruct under their supervision to sell off the assets to repay their creditors. Thus, your loan will be end up with a different financial institution. Other than who you write your check to, nothing else will change.
Q: Will you have to pay back the loan early?
A: No, your mortgage contract stays as is. If you are to pay over 30 years, then you owe over a 30 year period. If your loan plans to readjust next year, it will readjust as planned.
Q: What if you pay a different company than the one you borrowed with?
A: If the company that sends your statement is different than the one that originated the loan (ex: Ameriquest is a loan originator but AMC services, sends/collects the statement/money), you are dealing with a loan servicer. If the servicer stays afloat but the originator goes under, then you may not even notice.