"If My Mortgage Lender Goes Out of Business, Do I Still Have to Make My Payments?"

I got a classic call today from one of my clients.  We did a loan for him last year and it ended up at American Home Mortgage.

"Hey, Aaron, since these guys are going out of business, do I still have to make my mortgage payments?"

I laughed at first and thought he was joking.  He wasn't.

"YES!  You have to keep making your payments and make them on time!!"

Your mortgage note, the payments you make, and the payments you have promised to make, are an asset to the company that made your loan. 

If for some reason your lender goes into bankruptcy, that asset will likely be sold off to some other mortgage company or probably Fannie Mae.  And they are just as serious about you being on-time as the previous lender was.

But don't worry.  The rates and terms of your mortgage loan will not change.   You will get a letter from the new company announcing the change and then everything will return to the way it was before. 

You may even get a nice, lengthy grace period for the adjustment but don't plan on it.   If you care about your credit, make the payment on the timeline the new lender requests it.

Sure, it will be a little inconvienent.  If you are on direct deposit or utilize other online marketing services, you will need to change those to the new lender.    And you have to replace all of those coupons you stored in the nice safe place.

However, a change in lenders due to a BK is no different than having your loan sold time and again to different servicing companies and we have all been through that.