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Comment by nazgulsenpai | Hacker News Reader

Case in point -- I mortgaged my home with a local bank then without me knowing or being asked I became a Wells Fargo customer. At least you can uninstall the extensions :)

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I strongly believe that selling ongoing loans to other companies should just be flat out illegal. You entered into a contract with your local bank, not Wells Fargo. It should not be legal any party in the contract to unilaterally rope the others into a contractual relationship with someone who was not involved.

I certainly don't remember all the terms of my mortgage, but surely there's a "we can resell your mortgage" provision in the terms that we bilaterally agreed to.

If you don't have the ability to strike that clause is it really bilateral?

You are under no obligation to sign. They are under no obligation to accept a modified contract. Both sides can walk away. Both sides will be bummed, but the bank is likely to care a lot less.

These kind of libertarian explanations always conveniently neglect to mention any power imbalances between the parties. When called on it the response is usually just a less polite version of "oh well".

It's not unilateral. The contract you sign has a clause that gives them permission to sell the loan.

It is unilateral. That you agreed to give them the right to make such a unilateral change doesn't make it no longer unilateral.

I think it's an unconscionable clause.

Why would it be unconscionable? I don’t understand why people would care if their loan is sold. My student loans have been sold a couple times and I didn’t mind. What’s the downside for the borrower?

Who owns the loan doesn't make a lot of difference, really, compared to who services the loan. But even still, you may not want to do business with some company for any number of reasons: maybe they treated you or someone you know poorly in the past; maybe you don't like how they do business; etc.

The loan servicer is more important --- some of them are terrible at their job and tend to misapply payments etc, causing extra work for the borrower.

How about if a company is taken over? Should I be “forced” to work for a company I did not decide to work for?

You can quit your job. You can't quit your mortgage.

What would an alternative be in the case of a lender being sold? Force a balloon payment for the balance? It seems a better alternative to be able to transfer the loan like any other asset.

Well, that's an entirely different, and special, case that would require different rules, of course.

That's not what causes loans to be transferred to others in the vast majority of cases.

You can, though, that's literally what refinancing is.

In many (but not all) cases, that's true enough, yes.

Return the house keys to the mortgage holder and walk away.

(This is about as convenient, pleasant, and useful advice as the "just quit your job" advice).

Actually it’s much easier than that, though not in the current interest rate environment: you just refinance, and likely save money along the way.

Note that your first mortgage in CA is nonrecourse, but a refinanced mortgage is not nonrecourse (meaning the lender can come after you personally if you end up underwater).

They can't change the terms of your mortgage though, can they? If not it doesn't matter much because things cannot get any worse for you.

I think who you are doing business with matters a great deal even if the mortgage terms don't change. You're still being forced to do business with someone that perhaps you strongly object to doing business with.

The company matters just as much as the product or service.

Who you are doing business with can change even if the legal company is the same. Suppose an executive retires, and a new one wants to make their mark, perhaps by cutting costs.

When my mortgage was sold to a big bank I started getting charged a fee for "prepayment" (basically I'd do another payment against the principal once a year or when I had extra cash, which was a non-issue before the sale).

Refinanced with a local CU and stayed with them ever since.

Is this in the US? I would be very surprised if the prepayment (or any) terms are allowed to be changed.

If in the US, I would be surprised to find out about prepayment penalties at all.

https://money.usnews.com/loans/mortgages/articles/what-is-a-...

> A lender cannot assess a prepayment penalty unless the penalty was included in the original terms of the loan.

> According to the Federal Register, Dodd-Frank Act provisions “generally prohibit prepayment penalties except for certain fixed-rate qualified mortgages where the penalties satisfy certain restrictions and the creditor has offered the consumer an alternative loan without such penalties.”

> For lenders that do charge these penalties, prepayment penalties cannot be imposed after the first three years of the loan term.

> When my mortgage was sold to a big bank I started getting charged a fee for "prepayment"

Are you sure? Whether a mortgage has prepayment penalties or not is one of the things that is specifically declared in every mortgage contract I've ever seen. They can't just change it after the fact.

Yes they can. I had a mortgage that was sold to Washington Mutual (no longer in business). They did an audit of my escrow account and sent me a check for $2000. I called and said this seems to be mistake. They said no. OK then. Two months later I get a notice from the county that the second half of property taxes was overdue.

WaMu pays after several phone calls. Then sends me a notice that my escrow account is $5000 in appears. So WaMu says that the 2000 was a mistake and I need to send that back, and that they are allowed to maintain an excess balance for taxes and insurance, so I need to send them another 3000 to bring the account current.

I refinanced with a different organization that week.

I was very happy to see them crater during the financial crisis.

That is a shitty mortgage servicing operation, not changing the terms of service.

You don't think another company coming in and demanding $3000 be paid early is changing the terms? Whatever you want to call it, it's bad. Even if it was authorized before, it's a very significant change to start demanding it. The practical terms have changed.

I assume every mortgage has terms to include funding an escrow account with the next ~12 +/- 6 months of property tax + insurance.

For sure, there is an adverse impact to a borrower who is not well versed in how mortgages work, but in terms of financial agreements, but unfortunately, the US does not punish financial companies for negligence in customer service.

The old company wasn't using that term, though. I think activating a major term is reasonable to talk about as a change.

> You don't think another company coming in and demanding $3000 be paid early is changing the terms?

No, because if (as here) the original mortgage contract included an escrow account, that contract surely allowed the mortgage holder to demand money to keep the escrow balance where they want it to be.

So no, they didn't change the terms of the mortgage contract.

> At least you can uninstall the extensions

Not a great example because the terms of the mortgage are fixed by the original contract, regardless of who they sell it to later.

Whereas the extension (or any software) can radically change their terms (privacy policy, etc) in a single ugprade.

You can ask that the mortgage not be sold, and continue to be serviced at your local bank. I don't know if this increases costs, though.

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