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RISMEDIA, August 20, 2007—(MCT)—The stock markets fell in early trading Thursday in part because a financial analyst raised concerns about the liquidity of Countrywide Financial, the nation’s largest home lender by volume.

The dramatic shift in fortunes for what Wall Street had long considered the most stable mortgage company came in the wake of the failure of other firms in the same industry, including many caught up in the subprime mortgage mess.

The news about Countrywide and the failure of the others raises questions about what this could mean for people with mortgages. Here are some answers to common questions:

Q. If I have a mortgage with a loan company that went bankrupt, what should I do? What happens to my loan?

A. Not much and not much, one mortgage banker said.

“In most cases your loan will be turned over to another servicer or provider,” said Dustin Hobbs of the California Mortgage Bankers Association. “The only thing that changes from the borrower’s perspective is the address you make your loan payments to.”

Q. If I have a loan with a company like Countrywide, should I be worried about my mortgage?

A. Again, this is not something a borrower needs to be concerned about.

“I would not be worried,” Hobbs said. “As far as Countrywide is concerned, this is not the time to worry.”

Q. Does the type of loan I have change these answers? For instance, if my loan is an adjustable-rate mortgage or an even more exotic type of loan?

A. No. But of course borrowers with adjustable rates should keep a close eye on interest rates.

Q. Are there steps I can take now to protect myself against future problems?

A. Homeowners should worry less about their lender and more about their financial situation. In other words, it matters little what happens to the company that handles your mortgage and more what happens to the company that signs your paycheck.

“Foreclosure is a lose-lose situation for both borrower and lender,” said Hobbs, although obviously it’s far more painful for you, the borrower.

Q. Can the terms of my loan be changed if it is sent to a new loan processor?

A. No. A loan is a binding contract.

Q. What about loans in the pipeline when a servicer goes under?

A. This can be a problem.
More than likely your loan will not be funded. In some cases, said Hobbs, “the lender that’s going down can work it out so that the loan gets passed on to the new servicer or provider.”

The good news is that this will not damage your credit history. “A lender won’t hold that against you in the future,” Hobbs said.

Copyright © 2007, San Jose Mercury News, Calif.
Distributed by McClatchy-Tribune Information Services.