Who really owns your loan and why it matters in your short sale

Who really owns your loan and why it matters in your short sale

Contrary to popular belief, the bank you send your payment to rarely actually owns your loan. Loans are actually owned by investors, and only serviced by who you send your payment to. Whether you send your payment to Bank of America, Wells Fargo or GMAC, they do not actually make decisions about your loan or your short sale - they only service your loan according to the investor's guidelines.

The most common investors/entities to own your loan are Fannie Mae, Freddie Mac, FHA, VA or private label investors (usually smaller financial entities). Once in a while your servicer may actually also be the investor on the loan (ie Chase servicing a Chase-owned loan: a portfolio loan), but this is not usually the case.

The entity that will decide how your short sale is handled is actually the investor that owns your loan, never the servicer that you send your payment to. So when I am asked a question like "Will Wells Fargo forgive my debt completely", the answer is that Wells Fargo (as the servicer) does not have the power to make that decision - only the investor does, and the real question is "Will Fannie Mae/Freddie Mac/FHA/VA...forgive my debt?".

Knowing who the investor is on your loan is the single most important piece of information about your loan that will ultimately determine how your short sale will go.

I dont expect the average consumer to know this information, and so it is my very first question as soon as I am able to talk to my seller's lender.  I do expect a real estate agent working a short sale to also have this information. I get a lot of calls from other realtors with questions about their short sales, and I am always shocked when the agent does not know who the investor is. It's the absolute most important  information to know in a short sale! How can you even attempt to work a short sale without knowing who the investor is?

With that being said, if you are a homeseller considering a short sale and your agent doesn't ask about the investor on the loan or know the value of that information, you are dealing with an inexperienced short sale realtor and signing up with this person will likely not get your short sale accomplished ! Run the other way and get yourself a new agent!