“WaMu went down… Woo hoo, I don’t have to make payments anymore!” Uh, not so fast!…

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Well, we knew one of the ‘big, big dogs’ was gunna get eaten… and as of Thursday, the guessing game was over. Federal regulators seized Washington Mutual as it became the3rd lender of real interest to close its doors since July, joining IndyMac and Lehman Brothers.

In 2007, these three institutions covered about 10 percent of the mortgage market and now that they have closed shop what they have successfully done is…

…confuse American homeowners. [Or is it just me?]

The most prevalent question:

If my mortgage company fails, do I still have to make my payments?

Well, wouldn’t THAT be nice. We could all just look for the weakest company and all do business with them. Unfortunately that utopia doesn’t exist. If a mortgage company has financial problems [seized, bankrupt, or is otherwise closed] it doesn’t change the terms of the bank’s mortgages whatsoever — possibly just the mailing address.

This is because a mortgage (and its associated note) is a legal contract between the lender and the “lendee” [that’s you], signed on the date of closing. It is binding and cannot be altered by either party. The only way to “end” the contract is to satisfy the contract.

This can happen by:

• Selling the home and the mortgage is paid
• Refinancing the home and the mortgage is paid
• The loan is paid down to $0

So, if a mortgage lender fails, none of the above occurs… so the contract is still in force. So i recommend making those payments…they are still due.

This means that a homeowner will still make the same mortgage payments for the same mortgage but to a different company. Follow me?

To reduce confusion around transactions like this, the government puts two safeguards in place.

1. First, the govt requires the former lender to send a 15-day advance notice of the change to the homeowner.
2. Second, it requires the new lender to do the same.

In other words, the onus is ultimately on the homeowner to open and read their mail, and make the appropriate changes.

SPECIAL NOTE: IF you pay your Orlando Mortgages online, make sure you address this with your online bill pay as well… you likely won’t get notified if you’re sending payments to the wrong place and that may be a headache in the making!