‘Investors’ and Short Sales: Who Owns the Note?
When we hear the word investor in a conversation about short sales, we often think of an investor who is purchasing a short sale either to retain as in investment or to use for immediate resale and profit. However, if you are working as a short sale listing agent and you are negotiating short sales, there is another "investor" involved. That investor is the individual or company who owns the note on the property.
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When a borrower purchases a home and obtains a mortgage loan, s/he receives a monthly statement from the mortgage company. Often, however, the mortgage company may be a servicing company.
A servicing company services the ‘note’ for the investor who owns it. For example, Countrywide (now Bank of America) may service a loan that doesn't actually belong to them. The loan could belong to Deutsche Bank or Wells Fargo among others. Additionally, there are some mortgage lenders who actually own the notes that they service.
It may not always be important to determine the note holder on a specific loan. However, with all of the new short sale incentive programs available, it may be a benefit to determine the note holder. For example, if Fannie Mae is the investor on a note, the agent commission on the short sale will never be reduced below 6 percent.
Loans may be owned by all sorts of banks and private investors, including Fannie Mae or Freddie Mac. Both Fannie Mae and Freddie Mac have a loan lookup tool on their websites.
Finding out whether federally-owned mortgage giants Fannie Mae or Freddie Mac own a mortgage has become more important lately because loans owned by these companies may be eligible for the Making Home Affordable Program or some of the other government programs.
When processing a short sale, servicing companies follow the guidelines set up by the investors who own the mortgages. Fannie Mae and Freddie Mac programs have specific guidelines just as loans owned by private investors have their own sets of guidelines. Surprisingly, two short sales serviced at the same bank may not be handled in the same way because different investors may own the notes.
So, the next time you hear the phrase, “Who is the investor on the mortgage?” understand that obtaining the answer to this question may have an impact on the borrower’s future loss mitigation plans.
Photo: flickr creative commons by Manu-H