Skipping the Service

QUESTION:

I am underwater on my mortgage but do have income. Can I contract my mortgage investor directly – bypassing the mortgage servicer – to get a loan modification? My servicer says I must go directly through them.

ANSWER:

A “servicer” is someone who collects monthly payments for a mortgage owner and administers the loan, including modifications and foreclosures. The loan owner – the investor – could be the lender who originated the mortgage and is keeping it (a “portfolio” lender). However, it’s most likely your loan has been sold on Wall Street and bundled together with other loans to create a mortgage-backed security. Pieces of the mortgage-back security are then owned by investors, such as insurance companies, pension funds and foreign organizations.

The servicer works under the authority of an agreement with the mortgage-back security trustee. That contract – called a “pooling and servicing agreement” – likely limits the ability of the servicer to modify loans and in some cases may actually prohibit modifications.

Since you can afford smaller payments you should consider the government’s Making Home Affordable plan (www.MakingHomeAffordable.gov). Contact a HUD counselor (http://www.hud.gov/offices/hsg/sfh/hcc/fc/) for additional information. They may be able to follow up with the servicer to assure you’re not excluded from required modification opportunities. Both the FHA and VA also have extensive programs to help borrowers.

To go further, you might call your state’s attorney general because they often have good contacts with lenders and servicers. As well, contact your senators and representative. All Capitol Hill offices provide extensive “constituent services” and may be able to help. If you have private mortgage insurance, call the insurance company and ask about a “claim advance.” In some cases they may be able to pay down the interest rate, bring the loan current, or both.