Posted by JPiper on April 02, 1999 at 18:41:09:
Just understand that a “Request for notice…” does not notify you of a payment that is not made.
JPiper
Assumable mortgage - Posted by Reif
Posted by Reif on April 02, 1999 at 11:29:03:
I am in a nightmare.
On the advice of folks on this board I put a clause in a note on a condo I bought:
“Note and mortgage may be assumed by any future buyer of the collateralized property without restriction or qualification.”
Sounds good to me.
My escrow officer is telling me that the beneficiary has the right under CA civil code to approve my byer for the assumption.
Does tht sound right to anyone?
Jiminy crickets, the guy signed the note in the first place. If he didn’t like it, he should have said so.
Can the note holder blow my deal?
Reif
Re: Assumable mortgage - Posted by JPiper
Posted by JPiper on April 02, 1999 at 12:19:59:
This post bothered me. It bothered me because it illustrates a point that has been made repeatedly here on the newsgroup that people repeatedly ignore. I’m not trying to jump you personally, so please understand that, but I do want to take a minute using your situation to illustrate the point.
Real estate transactions are all about the law, amongst other things. Laws concerning some aspects of real estate are specific to each state?.although there are some generalizations that can be made. Participants of this newsgroup for the most part are NOT lawyers. Further, eventhough some participants ARE lawyers, they may not be qualified to express a specific opinion in any particular state. There is considerable information on this newsgroup that is useful?.but do yourself a favor. Seek out a qualified real estate attorney in your area. Run your ideas by him. Pay him for his advice. He/she is worth it. Don’t penny pinch in this area?.because when the rubber meets the road, it’s all about laws. I spend considerable money every year on legal advice. Sometimes when I look at the amount it both surprises me and aggravates. But believe me, I don’t stop using an attorney. Now the question for everyone to ponder is this?if I still use an attorney on a regular basis for advice and/or answering questions after as long as I’ve been in this business, why wouldn’t you?? I don’t just call an attorney AFTER I have a problem?.I run my ideas by him if there is ANYTHING that is a question in my mind. He’s a legal sounding board.
Having said all this?.and hopefully having created a desire to speak with a California attorney regarding this?here’s my thoughts. My guess (and you know what that’s worth) is that the escrow agent is wrong. HOWEVER, whether the escrow agent is right or wrong, is not really the issue in my mind. IF this note is assigned WITHOUT the noteholders approval, you will retain an ongoing liability for the note. This would be true in California, or any other state. So the bottomline is that I WOULD NOT assign this in the manner that you’re wanting to.
You have a couple of different ways to go here. One is you can go to the noteholder and get his written approval. I have done this many, many times. And when I do it I get a formal release of liability signed at the same time. I like to take personal information regarding the assignee, to include his credit report, which I have the noteholder initial and date to PROVE he has read it. These steps will take you out of the chain of liability concerning this note.
Another way you could handle this is to wrap around the note. This leaves you liable for the underlying note, but at least you’re still in control. If you do this in California I would get specific legal advice. Chances are you’ll find out that a contract for deed as an example is not a good idea in California. An AITD might be a better solution.
To me the real issue here is one of what your liability is under this note. Even if the escrow agent is wrong, that changes nothing in your liability?.and this is the more important issue for you to address. So focus on the important issue. Call an attorney and ask what the law states. But if you permit the assumption of this note, get a release of liability from the seller. And again, even if the seller doesn’t permit the assumption there are ways around this as described above.
JPiper
No offense taken, Jim . . . - Posted by Reif
Posted by Reif on April 02, 1999 at 15:21:18:
Sure, I know I need to get a lawyer involved if this becomes an issue - maybe before it becomes an issue. I’m out of town and it’s Friday, so I was hoping to get a little guidance before the billable hours started ticking.
Right now it’s not an issue, because the note holders have not intimated that they would need to qualify my buyer.
In any case, I’m getting a second (performance) mortgage on the place, so that if my buyer defaults, I can step in if I have to.
In this case I’m more concerned about the noteholders screwing up my deal, not my liability.
I don’t expect you to recall, but I am selling this condo above market to a hard to qualify buyer - that’s the whole point here.
How would you approach the note holder with a hard to qual buyer?
He’s coming in with 20% cash down, I mean, how bad could it be?
Reif
Re: No offense taken, Jim . . . - Posted by JPiper
Posted by JPiper on April 02, 1999 at 17:27:00:
You could do as Phil suggests…although my first step might be to meet with the noteholder (I’m assuming this is a private individual), summarize our agreement according to the note, tell him you’re assigning the note per your agreement, and then present your release of liability. At that point if he balked you could always offer some cash. You could also point out that you have a second mortgage, and that you have an interest in making sure the noteholders note is paid (if that is the case).
Other alternatives are as I described above. The underlying note could be wrapped if the interest rate is low enough to make this feasible. In fact, I might prefer to do this anyway.
Or, a slightly higher risk would be to have the buyer take title subject to the first, with you in the position of the second mortgage holder. In this case, if the seller is a private individual, the chances are that he will be unconcerned about this providing his note is paid. If you do it this way you might want to establish a collection account, so that you’re in the loop as to whether the new buyer’s payment has been received.
The safest course is that first alternative.
JPiper
Re: No offense taken, Jim . . . - Posted by phil fernandez
Posted by phil fernandez on April 02, 1999 at 16:27:01:
Hi Reif,
How about if you took some of your hard to qualify buyers 20% down and gave some of it to the noteholder in return for him to allow the assumption and release you from further liability.
Re: No offense taken, Jim . . . - Posted by Reif
Posted by Reif on April 02, 1999 at 18:06:54:
Yes, that was my thought originally - after the deal was done. I guess I didn’t think that there would be a holdup - and like I said, there may not be. I’ll know Monday.
I’ve tried talking to the noteholder (yes, private individual) three or four times now, and have had no luck (in a meeting, out of town, whatever). He’s not local.
That having been said, the noteholder owns a business and is not shy about calling his lawyer for advice (I know, good lesson).
What will be his incentive for freeing me from liability?
Seond question: I have the second deed of trust - normally how does one find out if the first doesn’t get paid? In this case however I think the noteholder definitely does NOT want this property back (I’d take it), so I think he would call me if it didn’t get paid.
Reif
Re: No offense taken, Jim . . . - Posted by JPiper
Posted by JPiper on April 02, 1999 at 18:36:31:
What is his incentive to release your liability? When you think about it logically he has none?.he’s got you on the hook. But don’t overthink this. My first strategy would be to simply reiterate what he already agreed to (that you can assign the note without qualification), and that you require a form to be signed (one that approves the new buyer and releases your liability). You can point out if he balks that you are remaining as a second mortgage holder, and that therefore in the end you have an interest in making certain that the payments on the 1st are paid. If none of this works, then Phils suggestion for cash is an alternative, or possibly a change in the terms of the note to make them somewhat more attractive to the noteholder (if this is still possible with your new buyer). I like the change in terms better than paying cash?if you can get your new buyer to agree.
Just to reiterate, the fact that he doesn’t release you doesn’t mean you can’t do anything here. You could still wrap, or have the deal taken over subject to. And despite the escrow agents statement, my guess is that she’s wrong (although I’m certainly open to the idea that it’s possible she’s right…let us know). However this does nothing to eliminate your liability, which I think is more important. Understand that there is virtually no difference from a liability standpoint in a subject to transaction, and the transaction that you have proposed (because your transaction does not relieve your liability).
Your second question regarding knowing whether the payment is made on the first. On institutional lenders if you know the account number you can typically check the automated system each month. In this case that isn’t possible. Short of calling him each month, you might have things set up at a third party collection company, so that you could be informed if a payment is not made. I would also record a “Request for Notice of Default” (I believe that’s the name in California)?.a title company will be familiar with it. You will be notified if there is a default on the first mortgage.
JPiper
Re:Record a “request for notice of default” - Posted by Dave(Mi)
Posted by Dave(Mi) on April 02, 1999 at 18:26:01:
Reif, It’s possible to record a “request for notice of default”, on any properties financing (good for expected forclosures)But like you said the note holder senior to your note will probably call you before a “notice of default” is even recorded-that would be better/faster. Just my 1.5 cents
Dave(Mi)