Why You Should Be Careful When Porting Your Mortgage!
When reading this article REMEMBER:
Due to the financial crisis many banks are trying to recover money, not lend it out. People who want to port their mortgage usually have valid reasons for wanting to move and will often move anyway, even if they are not able to port their mortgage! This means a bank will get their mortgage money back or an investment company could make a big profit!
In my Last Post Portable Mortgage? – Not as portable as you might think we discussed why porting a mortgage is not always as easy as it’s made out to be!
I also mentioned that you should be careful as some “Lenders” may actually want to cause problems for you when you want to port your mortgage! Why would they want to do this? They might do it for one of two reasons.
1, They’ll make a profit if you repay your mortgage or even get repossessed
2, They need to recover the money they lent to you at any cost
Both the above options involve you repaying all or some of your mortgage, not porting it!
Investors not Lenders!
During the housing and mortgage boom before the credit crunch, mortgage loans were given out for fun. Lenders borrowed money to then lend out to home buyers. They didn’t even care who they were lending the money to because they were packaging all these mortgage loans up in a process known as ‘securitization’ and selling them on to investors. If this happened to your mortgage you would have had a letter in the mail informing you that your mortgage had been sold on to a company you may never previously have heard of!
The problem for these banks was that when the sub-prime mortgage crisis hit in 2007-08 investors stopped buying these mortgage packages because they lost trust in the AAA credit ratings they had been given. This left banks with a lot of mortgages they didn’t really want and couldn’t sell!
How did they get rid of these unwanted mortgages?
Banks had two ways they could get rid of these unwanted mortgages. Some of the mortgages were eventually sold to investment companies at a huge loss. Others were put into a so called “bad bank” and companies were appointed to recover as much of the money from these loans as possible.
Are you starting to see why this might cause problems if you are wanting to port your mortgage?
The mortgages that went to investment companies were sold on at a huge loss. To illustrate let’s say you were lent £100.000 on a mortgage to buy your house currently worth £90000. This £100,000 mortgage may actually have been sold on at a loss to an investor for around £50,000 or even less! This means the investment company could make £50000 if you were to repay your mortgage and up to £40000 if you were to get repossessed! When the opportunity exists to make this amount of money it is in the interests of the business to stop you moving your mortgage. They would rather you sell the property or even get repossessed if you can’t keep up the repayments, the last thing they would want to do is help you to keep the mortgage by porting it!
The same is true if your mortgage got stuck in a bad bank. When Northern Rock had to be rescued by the UK government at the start of the sub-prime crisis, all the risky loans were put into a bad bank called NRAM. NRAM had one main objective, to recover as much of the money from those risky mortgage loans as possible. As a result it would also not be good business if they were to help you to keep your mortgage by porting it. They too would rather you sell up or default!
Why you need to be careful!
If you want to port your mortgage it is very important that you get written conformation of anything that is agreed with a company like NRAM, Webb Resolutions or any mortgage lender for that fact. If you google ‘porting a mortgage with NRAM’ you will come across many reviews and complaints from people who have been told by NRAM that they can port their mortgage. On this basis some of them have sold their house thinking they could buy another. When they have gone back to NRAM to move the mortgage they have been told something completely different meaning they can no longer have the mortgage. Excuses include “I’m sorry Mr Homeless, you now fail the credit score” or “You do realise you need to put down a 10% deposit don’t you?!”
In my eyes it seems that once these companies get their money and make their profit, they will come up with any excuse not to lend the money back to you! In many cases the regulators are also powerless to intervene because of a lack of evidence, which is why I stress to get things in writing!
As mentioned at the beginning of this article, the key point to remember is that many banks are trying to recover money at the moment, not lend it out. People who want to port their mortgage usually have valid reasons for needing to move and will often move anyway if they are not able to port their mortgage. This will mean a bank will get their money back or an investment company will make a big profit!
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