Homeowners who are having trouble with their mortgages seem to get the same advice wherever they turn: at the first sign of trouble, call your lenders and see if you can work out a payment plan. But that means figuring out who owns your mortgage — which is not as easy as it looks.
I have been trying unsuccessfully to find out who owns my mortgage but the servicing company just gives me a run around. Don't I have a right to know who owns my mortgage? I need to work out a loan modification but can't find out who to call and the servicing company isn't helping.
— J. W., Chesapeake City, Md.
Of the many nightmares facing homeowners caught up in the mortgage mess, this one is perhaps the most frustrating. From individual lenders to the government-sponsored Hope Now Alliance devoted to untangling this mess, the advice to borrowers is the same: as soon as you think you’re headed for trouble, contact the lenders to see about working out an alternate payment plan.
It’s good advice. The sooner you act, the better your chances of not falling so far behind the situation becomes irreversible. For their part, lenders don’t want you to lose your home either. The last thing they need is another piece of real estate to add to the long list of unsold properties on their books.
But contacting the lender means figuring out who owns your loan. In the turmoil that followed the collapse of the housing boom, some lenders went out of business or were bought up by bigger lenders — and the loans from those defunct lenders changed hands.
As the mortgage market has dried up, lenders have had to lay off workers who, just a few years ago, had a hard time keeping up with the flood of new mortgages. Now, with foreclosures rising, there are fewer employees on the other end of the phone to help homeowners in trouble. Experienced real estate attorneys and professional housing counselors report that they’re also not having much luck navigating the maze of voicemail.
Worse, there may be no single “owner” of your loan if the original mortgage was bundled with hundreds of others and placed in a trust which was then sold off in pieces to hundreds of investors. The servicer — the company hired to make sure the monthly payments got to the right investors — never expected to have so many loans go bad. So they weren't really set up to re-negotiate payment terms with thousands of borrowers.
Still, many of those servicers do have the legal authority to work with you on a payment plan you can handle. It’s their job to maximize investors’ returns, and having you default isn’t going to help anyone. If you can get through to the servicer’s “loss mitigation” department, you might be able to get the conversation going.
A better option might be to get some help from a HUD-approved housing counselor or a lawyer who specializes in working with lenders and may be able to help you cut through the significant thicket of red tape. Check out Web site of the National Foundation for Credit Counseling to locate an office near where you live. If you can’t afford a lawyer, look for a non-profit Legal Services office; many of them are spending a lot more time these days on housing and mortgage issues.
And be sure to check out this story by my msnbc.com colleague Laura Coffey on how to sidestep landmines that can lead to foreclosure.
Can I invest in the stock market without the aid of a stockbroker?
— Steve S., New Mexico
Yes, you can. You’ll still need to open a brokerage account, but you can decide which stocks you want to buy and sell. (Technically, you can buy and sell stocks with anyone you want, but you'll get a better price trading in the market the rest of the world of investors use. And some companies will let you buy their stock directly from them, but you'll have to open an account with each company.)
You can also invest in the stock market without trying to figure out which stocks to buy. There are several ways to do this: the most common is to buy a mutual fund. These investments pool money from many investors — often smaller investors who may have just a few hundred dollars to play with. The investment manager running the fund then uses the money to buy a longer list of stocks than you could with just a few hundred dollars.
Investing in lots of stocks at once is a hugely important hurdle for people who are just getting started. It’s the simple, age-old problem of not putting all your eggs in one basket. Not all stocks go up and down at the same time; it’s been proven that if you hold a bunch of stocks that don’t march to the same drummer, you can increase you overall return with less risk than if you try to just pick a few winners.
Mutual funds still carry the risk that the investment manager won’t pick the right stocks either. For every fund that beats the market average, there’s another one that fell short by the same amount. (By definition, only half of the funds can offer returns that are “above average.”) If you subtract the fees that mutual funds charge to pay the investment manager and other expenses, the average return of all funds is going to be less than the overall return of the market you’re investing in.
That’s why some investors like to just buy an “index” fund – which just buys all of the stocks in, say, the Standard and Poor’s 500 index. In effect, you’re buying the entire stock market – and getting maximum diversification — one investment dollar at a time. You’ll pay a much smaller fee, because the fund doesn’t have to spend the money on research and investment advisors — it just duplicates the index you’re investing in.
There are now so man index funds out there you can diversify your investment in another important way. Just as individual stocks march to different drummer, so do different types of stocks. Most index fund investors like to spread their chips around the table — buying indexes that track small stocks, big stocks, foreign stocks, etc. One of the earliest proponents of index funds was John Bogle, the founder of The Vanguard Group of mutual funds. Today you can buy them through dozens fund companies and online brokerages.