Why is my lender so slow in responding?

A couple of days ago I was reading an article about the mortgage investment process from a lender's perspective and thought: "no wonder these guys are so slow to respond, they don't know who owns the loan!". That's when I figured I should briefly discuss how we got to this point.

Back in the good old days, when you took out a mortgage at your local bank, the bank lent you the money and you gave them a mortgage on your home. The home was the collateral on the loan. They kept the loan in their portfolio. Whenever you ran into problems your local bank would contact you and try to help you resolve the situation, because they would rather lose a little bit of money than have to foreclose on your home and lose a lot.

Some banks would sell your loan to another bank or Fannie Mae or Freddie Mac and although things would be a little more difficult to resolve, they were still managable. However, someone came up with the bright idea of handling loans as a security (like stocks). Now, they would take your loan and combine (or pool) it with other loans of similar type and sell it off as a package. These are known as Mortgage Backed Securities (MBS's) because they were backed up by the mortgages on the homes. They weren't backed by the homes but by the mortgages on the homes.

Now it became more difficult to figure out who owns your loan. The bank which gave you the mortgage doesn't own it (it already sold the loan). The company which created the pool the mortgage backed security doesn't own it. It is just a middleman. The Mortgage backed security is owned by a bunch of investors, so how do you get a loan modification from a group of investors.

To make matters worse, that is not the end of it. These mortgage backed securities were then tranched (or divided) into new types of securities called: "Collateralized Mortgage Obligations" or CMO's. Tranching could be done in different ways (I'll discuss tranching in an upcoming article). These weren't backed up by the homes or even by the mortgages on those homes. These were backed up by the Mortgage Backed Securities mentioned above. Now who owns your loan? Hard enough to figure out? Well, the process could be repeated again. That's why when you try to get answers from your lender, you can never get a straight answer. The truth of the matter is, they probably don't know who owns your loan or your loan may be owned by a group of investors far removed from the loan process.