Carson Valley Short Sales 101: Who is my Servicer? Who is my Investor? What is the Difference? Does it Matter?
When you make the decision to short sale your home, you are going to enter a financial world that may look a lot like Alice in Wonderland… There is so much jargon in the industry, sometimes it’s hard for sellers and buyers alike to understand what is happening and who is involved in the transaction.
First, we defined a Carson Valley short sale. Briefly, a short sale is a real estate transaction where the proceeds of the sale do not cover the balance owed on the mortgage(s) and closing costs. A short sale occurs when the lender(s) agrees to accept less than what they are owed and allows the property to transfer ownership. In some cases, the lender(s) will accept this short payoff as full satisfaction of the debt (also known as waiver of deficiency).
When we say ‘lender’, however, that is sometimes misleading. Who is my lender? Well, this question is similar to a two headed dragon, and frankly, they may feel like that to you if you are suffering and behind in your payments on your mortgage. We answer that question with another question: Is your lender the servicer, or are they the investor?
You see, sometimes your ‘lender’ does not actually own your loan anymore. After they gave you the loan to buy your house, they sold your loan behind the scenes to an investor. And the investor then retained your ‘lender’ to service the loan. Servicing a loan usually includes sending you a statement every month, collecting the payment, paying the property taxes and homeowner’s insurance. The ’servicer’ then receives payment for administrating – or servicing – the loan. This is who the public deals with.
In contrast, the Investor – also known as the noteholder – is the actual party that OWNS THE LOAN. They are the people behind the servicer that make the decision whether or not to a accept a short sale. In many cases, the investor on any given loan is Fannie Mae or Freddie Mac. Click on the names below to find out if either of these entities own your loan.
If they do not, your loan may be what is commonly referred to as a portfolio loan. In that instance, the ‘lender’ services the loan and also owns the loan. Sometimes the loan could have been sold to a private investor as well.
When we being working on a Carson Valley short sale, one of the first things we do is determine who is the servicer and who is the investor. It’s important for us to know who is the ultimate decision maker in order to get a short sale approved. While short sales are emotionally taxing for sellers and buyers, they are simply economic decisions for the investors. The investor – along with the servicer’s assistance – makes a determination of which option – foreclosure or short sale – will results in the smallest loss to the investor.
This blog post originally published on CarsonValleyShortSales.com on March 1, 2011.