We have heard in recent months about how many Americans have lost their jobs due to the coronavirus pandemic and the stay at home orders. Many of those folks have a mortgage they may not be able to pay.

After the great recession, companies that offer home mortgages became more conservative in the borrowers they lent to. Before the crisis there was a virtual pandemic of what were called “Liar Loans” entering the mortgage market – essentially lending more than a borrower could reasonably handle.

What the mortgage market didn’t examine were the lenders. Not all companies that offer home mortgages are banks. Banks are mandated by law to hold a certain amount of cash in reserve. During a crisis like the one we are currently in they have been allowed to dip into those funds to keep the bank running – even as many people cannot pay their mortgage.

Those mortgage companies that are not banks are merely managing the loan, not the holder of the note like a bank. A mortgage servicer merely collects the mortgage payment from homeowners, handles things like taxes, and then sends the money to the investors – the holders of the note. What they get in return is a small sliver of each loan, allowing them to pay their expenses and maybe even make a bit of profit.

Why mortgage servicers cannot float delinquent borrowers is that unlike banks they are not made to hold cash in reserve. So, no matter how Congress may require banks to offer mortgage relief, mortgage servicers are not in that category, and so not obligated to live by the same rules. If you find your mortgage company not being helpful it may be that they are a servicer and not a bank.