Who's looking out for the mortgages?

The Baltimore Sun

The Q:

The recent wild fluctuations seen in the stock market's performance haven't just freaked out banking customers. It's also worrying those with mortgages, like Steve Seffens of Westminster.

"How can I find out if my bank and my mortgage company are sound?" Seffens asked. "I found PNC Bank on the FDIC Web site - the information was not useful, unless you're a financial analyst, and I couldn't even determine if PNC is insured under the FDIC.

"I would also like to be able to determine if my mortgage is safe," Seffens said. "I've read of mortgage companies that went under or were purchased without informing the homeowners, who continued to make mortgage payments (mine are automatically deducted from my checking account) which were not credited and [the homeowners] subsequently lost their home to foreclosure."

The A:

When it comes to the financial health of your bank, you could go to the Federal Deposit Insurance Corp.'s Web site and try to read your bank's financial statements, which might feel like trying to translate ancient Macedonian into Inuit.

Or you could take the easier approach by going to Web sites such as www.Bankrate.com, www.BauerFinancial.com or www.thestreet.com to read reports or ratings systems on your bank. It's also probably wise to go to the FDIC Web site to make sure your bank is FDIC-insured - which PNC Bank is. And if you're really worried, you can always double-check what you find with your bank and ask it point-blank about its financial status.

When it comes to finding out about the financial health of your mortgage company, that process is a little more difficult.

"There's not a whole lot a consumer can do to verify the health of your lender," said Greg McBride, senior financial analyst with Bankrate.com. "That's why it's standard good practice to make sure you shop around and apply with more than one lender before you settle."

But whether your mortgage company is financially sound or on the brink of disaster should not be of any real concern to you, the borrower. The only concern you should have is that you continue to make your payments every month, on time.

Even if your mortgage company fails, that does not mean your debt disappears. There's no free ride here.

Your obligation to pay back that loan is still the same. You've probably seen perfectly healthy mortgage companies selling mortgages to other companies all the time. It's a part of doing business. In the event that your mortgage company fails, it is likely that your loan, which is considered an asset, would be acquired by another company.

Keep in mind that the terms of your mortgage are fixed in most cases. If you're not sure about this, go back to your original contract to see what happens when your mortgage changes hands.

With that said, if your mortgage company goes bankrupt, there are a couple of things you should do to protect yourself. Besides paying on time every month, it is also your responsibility to keep accurate records of your payments.

McBride said, "You've got 24-7 online access, so you should follow up to make sure your payments are posted. In the event of an acquisition, there is usually a grace period of 60 days where you won't be docked for sending a payment to the former address."

So it's incumbent upon you, the borrower, to check your bank statements to make sure your payment has cleared or to stop a check if it has been sent to the wrong place. If you're worried that your check didn't make it because of a mortgage company switch, you should call the new lender and check.

Finally, if your lender doesn't handle it through escrow, remember that you're also responsible for paying the insurance and taxes on your mortgage. Don't fall behind on those payments if your mortgage lender goes belly up - not if you're planning on staying put in your home.

Reach Consuming Interests by e-mail at consuminginterests@baltsun.com or by phone at 410-332-6151. Find an archive of Consuming Interests columns at baltimoresun.com/consuming.

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