If mortgage companies are in turmoil, what does it mean for borrowers?

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Demand for home loans plummeted last year as the Federal Reserve raised a key interest rate to control inflation and mortgage rates spiked in turn, leading to fewer people applying for mortgages.

It’s been a bumpy ride for mortgage companies lately. Some lenders have gone out of business, merged with other companies or narrowed their focus. And more changes are likely in 2023.Here are answers to common questions, whether you’re shopping for a mortgage or paying off a home loan.. Demand for home loans plummeted last year as the Federal Reserve raised a key interest rate to control inflation and mortgage rates spiked in turn.

Higher rates also increased risk for banks and mortgage companies that buy mortgage loans from lenders.If the lender that issued your loan goes out of business or goes bankrupt after the mortgage has closed, you’ll be unaffected. The loan terms will stay the same. If the mortgage company that services your loan changes, you’ll be informed of where to send your monthly payments.

Indelicato, whose firm is the lead counsel for unsecured creditors in the First Guaranty Mortgage Corp. case, does not expect to see a big wave of mortgage company bankruptcies. “It’s not so bad that you’re going to see the wholesale bankruptcies like you saw of mortgage originators in 2007 and 2008,” he says.A merge will have little direct impact on you. Your loan terms will stay the same if your lender merges with or is acquired by another company.

Check customer service ratings online and from companies such as J.D. Power, a global data and analytics company. And when shopping for lenders, compare how quickly and helpfully they respond the first time you contact them with questions.“Consumers should not be concerned about a potential crash as the one we saw during the Great Recession for a number of reasons,” Selma Hepp, chief economist at property analytics company CoreLogic, said by email in reference to the 2007-09 financial crisis.

 

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