Mortage terms change when sold (loan, fixed rate, premium, rate)

[tkemery]

I know that banks sell mortgages often. My question is can they change the terms of the loan. Specifically, can they change the minimum amount of insurances you must have?

[brokerdave]

no, nothing changes. all that changes is who you mail your check to. the terms and documents you sign are your contract. your insurance covers cost replacement, which the lender requires you to have. there is not minimum amount, its specific type(s). were you rezoned onto a flood zone or something? why do you ask?

[tkemery]

Originally Posted by brokerdave

no, nothing changes. all that changes is who you mail your check to. the terms and documents you sign are your contract. your insurance covers cost replacement, which the lender requires you to have. there is not minimum amount, its specific type(s). were you rezoned onto a flood zone or something? why do you ask?

I had my mortage with Bank A. They require, why is another whole story since I am in the NE but NOT on the ocean, flood insurance. Since the beginning, I carried enough flood insurance to cover my mortgage, reducing it every year. Bank A sold to Bank B, who sold to Bank C...and so on. I continued to reduce it every year. Now my bank is with Bank X and they are telling me that it is a Fannie Mae mortgage now and I have to go by their minimum, which increased my premium 2-3 times. I tried to call Fannie Mae, they will not give me any information and told me to call the bank. The bank is telling me to call Fannie Mae. My insurance broker and several attorneys are telling me this is wrong, but no attorney will take on the fight since it is not big bucks to them.

Sorry for the vague details, but I do not want to violate any laws my naming the exact bank.

[rcarrillo]

They can't change any terms of your principle, interest or amoritzation... however, if rules have changed for insurance or taxes you may be obligated.

They can't just "change" a loan to Fannie Mae and require it from my experience. But if new flood insurance changes have occurred in your area they can require you to keep up with the times. Just as if taxes were to go up or a new city tax added... the first you hear of it might be when the loan is sold (because the new bank looks it up) but it would have changed regardless.

I would look into it though, either someone is explaining it wrong or their may be an issue there.

[carol1969]

we have recieved a loan modification from our mortgage company.We currently have an adjustable rate of about 11 percent they are going to change us to a fixed rate of 6.95 which will drop our payments alot.It looks as though they are going to keep the terms of the orginal note maturity date etc.,however it does state that on maturity a balloon payment will be due.Can you explain that to me how would anything be due if all payments are on time?

[SuSuSushi]

Originally Posted by carol1969

Can you explain that to me how would anything be due if all payments are on time?

They want the money you agreed to pay them.

[scuba steve]

Balloon payments are like this - for example on a 30 year mortgage with a balloon at 15 years you would pay as you would normally on a 30 year amortization scale. At the beginning of year 15 though, the remaining principal would be due (usually with no obligation for the lending institution to renew the mortgage). A new loan may be written with whatever terms both parties agree to (basically, anything is negotiable since it is a new note), or it may not if the lender is unable to qualify for a new loan for some reason or if the loan value is so small that the bank would rather not deal with it. In short, at the time the balloon is due the original loan expires and the balance must be paid or a new loan written.

Personally, I have only seen 15 year balloon payments and only on smaller (10% of sale price) sized mortgages.

Hope this helps!

[SmartMoney]

Back to the OP, contact your insurance agent and ask him/her for help. They will certainly be aware of the exact situation and be able to explain what is happening.