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What mortgage company changes mean for your home loan

  • March 9, 2023

It’s been a bumpy ride for mortgage companies lately. Some lenders have gone out of business, merged with other companies or narrowed their focus. And more changes are likely in 2023.

What does all this mean for borrowers?

Here are answers to common questions, whether you’re shopping for a mortgage or paying off a home loan.

What’s behind the shakeout?

A key factor: higher mortgage rates. Demand for home loans plummeted last year as the Federal Reserve raised a key interest rate to control inflation and mortgage rates spiked in turn. The average for a 30-year fixed-rate mortgage doubled from near-historic lows in early January 2022 to almost 6.4% at year’s end, according to Freddie Mac, an enterprise created by Congress in 1970 to support the U.S. housing finance system.

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Higher mortgage rates shrink buying power, so elevated rates shut out some prospective home buyers, already squeezed by eye-popping home prices.

And for homeowners who had locked in historically low rates in prior years, the spike removed money-saving incentives to refinance their mortgages. Unless your primary aim is to cash out some home equity, it doesn’t make sense to refinance to a higher rate.

As a result, fewer people applied for mortgages. Mortgage applications to buy homes dropped almost 40% year over year in the last few months of 2022, and refinance applications were down almost 90%, according to a December Mortgage Bankers Association forecast report.

Higher rates also increased risk for banks and mortgage companies that buy mortgage loans from lenders.

What if my lender goes bust?

Here’s what would happen:

  • If the lender that issued your loan goes out of business or goes bankrupt after the mortgage has closed, you’ll be unaffected. The loan terms will stay the same. If the
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