About Real Estate: Mortgage transfer won’t hurt credit

Many banks sell their mortgages to other financial institutions, but the transfer doesn’t affect the borrower’s credit score.

DEAR MR. MYERS: We have had our mortgage for five years, but it was sold to another lender in July. Now we are planning to purchase a new house in December, so we will be applying for a new home loan. Will our credit report show that our payment history has been perfect since we obtained our current loan five years ago, or will it show only our payment history going back to when the new bank purchased it in the summer? Obviously we would like the report to show our perfect history for the five full years, rather than just a few months.

ANSWER: You have nothing to worry about. Your credit report (and resulting credit score) will show that you have dutifully made your monthly mortgage payments for the past five years even though a new company bought the loan this past summer.

It’s fairly common for lenders to sell their mortgages to other financial institutions, or to contract with third-party loan-servicing companies to process their customers’ monthly payments. The financial terms of the original loan cannot be changed when the mortgage is transferred, but the borrower must begin sending the payments to a new address.

Fortunately for dependable borrowers like you, payment information reported by both the original lender and the one that recently purchased the loan will usually appear on a credit report. This ensures that you’ll get the proper credit for promptly making your payments since the mortgage was first issued, which, in turn, should improve your chances of getting approved for the best rate possible when you apply for a brand-new loan to buy another house later this year.

Of course, if you had ever been late with a payment in recent years, that information would also appear on your credit report, even though the loan was transferred to another institution in the summer. More than one or two late payments could result in a lower credit score and force you to accept a higher interest rate when you apply for a new mortgage.

DEAR MR. MYERS: Is it true that there are giant alligators living in the sewers of New York City?

ANSWER: Rumors that super-size saurians roam New York City’s sewer system have been around for about 75 years. A few of the creatures (usually less than 2 feet long) have indeed turned up through the decades: Nearly all were identified as having escaped from the personal aquariums of homeowners, or simply dumped by owners who tired of their pugnacious pets.

Still, the Big Apple’s sewer system is no underground Everglades. Nature writer and animal expert Diane Ackerman notes that gators are especially susceptible to bacteria such as salmonella and E. coli, and sewers are usually loaded with both. In addition, alligators generally live in temperatures ranging from 78 to 90 degrees — meaning they’d never make it through the city’s often brutally cold winters.

DEAR MR. MYERS: I am confused about some comments you recently made about living trusts and how they can save money. If I formed the type of basic living trust that you wrote about, would I be considered the “trustee” or its “beneficiary”?

ANSWER: You would name yourself as the trustee, assuming that you would want to control your own home or other assets that you place into the trust while you are alive and still capable of making decisions for yourself. If you’re married, you could name both yourself and your spouse “co-trustees.”

Your beneficiary is the person (or persons) you select to receive the trust’s assets after you die. Most people name their children or other loved ones as beneficiaries, but some choose a nonprofit organization, university or other institution.

No matter which beneficiary you choose, forming an inexpensive trust now could help to ensure that your heirs will not have to go through the costly and time-consuming probate process that typically eats away at the estate left by those who die with only a common will.

David W. Myers’ column is distributed by Cowles Syndicate Inc.