What do mortgage company changes mean for your loan?

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 this?

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 percent at year’s end, according to Freddie Mac.

And for homeowners who had locked in historically low rates in prior years, the spike removed money-saving incentives to refinance their mortgages.

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

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. If the mortgage company that services your loan changes, you’ll be informed of where to send your monthly payments.

■ If your lender runs into trouble and can’t fund the loan when you’re a week or two away from closing, the company will likely work with you to find another lender, says Mark Indelicato, a bankruptcy attorney and partner with Thompson Coburn Hahn & Hessen in New York.

If my lender merges?

A merge will have little direct impact on you. Your loan terms will stay the same if your lender merges with or is acquired by another company.

Mortgage servicer changes?

You’ll be notified of where to send your mortgage payments. Your mortgage servicer is the company that processes payments and manages the loan. If the servicing rights are transferred to a different company, generally the old and new servicers should notify you, according to the Consumer Financial Protection Bureau. The notices will tell you when the old servicer will stop accepting payments, when the new servicer will start accepting payments and the new servicer’s contact information. Read the notices and send payments to the new servicer after the transfer.

What about other changes?

You’ll still have options if you’re seeking a mortgage. Some lenders may change the types of loans they offer or focus on different segments of consumers. Wells Fargo, for instance, said in January that it would create a “smaller, less complex” home lending business focused on bank customers, as well as people in underserved minority communities.

The advice for shopping to get a mortgage remains the same. Look for lenders that offer the types of mortgages you’re interested in and apply with multiple lenders to compare rates and fees.

Is a housing crash near?

No.

Lending standards have been strict in recent years, and a lot of buyers made sizable down payments, Selma Hepp, chief economist at property analytics company Corelogic, said. In addition, most homeowners now have a lot of home equity, thanks to rising home prices.