Re: ANQ risks to seller? - Posted by JPiper
Posted by JPiper on January 26, 1999 at 24:43:06:
This seller faces an ongoing liability regarding this FHA loan, for a period of 5 years, if the seller permits a buyer to assume the loan via simple assumption. Further, if the new buyer resells the house one year later to a third buyer, the current seller STILL has an ongoing liability for an additional 4 years?.even in the event that this 3rd unknown buyer defaults.
The problem with this is that the seller has deeded the property, but has no recorded interest. Not having a recorded interest gives the seller no way to regain title in the case of a default, and no way to bring the payments current short of just making the payments for the buyer. He has no right to foreclose and no other way to protect himself in this scenario.
The only way the seller can protect himself when allowing a buyer to assume this loan is to require the buyer to formally assume it (causing the buyer to qualify), or by carrying a second mortgage which creates a recorded interest. This recorded interest would enable the seller to step forward in the case of default, bring the payments current on the FHA loan, and then initiate a foreclosure proceeding.