Assuming the Non-assumable - Posted by Joe(IN)


#1

Posted by JPiper on November 07, 1998 at 02:20:32:

R. Porter:

I’m wondering if you’re the same R. Porter who I bought a house from a couple of years ago in South K.C.?? It was a house that needed some work, and at one time the renter had had a snake in it. Is this you??

If so, that was a good case in point. You had a house that you had taken over subject to. If I remember correctly you had not recorded the deed. I bought the house from you…subject to in a trust. Later I assigned the deal to another party, who took the loan over subject to in a trust. He fixed the property up and resold on a land contract, and still makes the payment on the underlying loan.

Seems as though the bank has received a large number of checks from unidentified third parties, without ever questioning any of them.

JPiper


#2

Assuming the Non-assumable - Posted by Joe(IN)

Posted by Joe(IN) on November 06, 1998 at 09:37:23:

I have a possible deal on a property in pretty good shape. The house is worth $48K, and seller just wants out from under payments (mortgage balance of $30K)(I will fix up a little for $2,000). My plan is to sell within 1 to 4 months.

Anyway, the mortgage is from a bank and is Non-assumable. He is opposed to a Lease/option in case I can’t sell in a timely manner. He wants to be free.

I see often the suggestion to “assume”, but I havn’t come across any “assumables”.
Question?

  1. Is it possible that the bank would allow me to assume just to keep their loan performing, or is that just not done? (I do have good credit, probably better than the seller’s credit.)

  2. Do I just buy the house by getting a deed, taking over the payments, and ignor the bank rules.

Just a little confussed.

Joe


#3

Another Question… - Posted by Rob FL

Posted by Rob FL on November 07, 1998 at 23:12:38:

If a property is in my name and I deed the property into a corporation or llc in which I am the sole stockholder or sole member would this violate a due on sale clause based on Garn St. Germain? Any input is appreciated.


#4

Re: Assuming the Non-assumable - Posted by Rob FL

Posted by Rob FL on November 07, 1998 at 12:41:08:

Unless the property owner is currently behind on payments or in foreclosure, you could probably take the property subject to the mtg, do whatever rehab is necessary and resell the property before the bank could find out about it and eventually foreclose. In FL, it takes banks about 6-9 months from the filing of a foreclosure complaint until the acutal JUDICIAL foreclsure sale takes place. I know in some states the times are shorter but you could still probably resell the property before the sale anyway.


#5

Seen 'em call the note - Posted by hk CA

Posted by hk CA on November 07, 1998 at 11:54:22:

I have personally seen lenders call notes when they discovered a transfer, but only when it was to their advantage to do so. What I’m talking about was a period in the 1980’s when interest rates skyrocketed to 18% in some areas. The original note may have had a much lower interest rate; then, several years later when the property was sold “subject to,” the interest rate may have been 5 points or more over the original rate. During those times, lenders trained their people to watch (and even search) for these transfers of ownership so that they could reap the higher interest rates.

In these times, and especially if you intend to flip the property in a few months, I wouldn’t be too concerned about it. If payments are being made on schedule, I don’t see much advantage for them to rock the boat. But that’s just my opinion, for what it’s worth.


#6

Re: Assuming the Non-assumable - Posted by Bill Gatten

Posted by Bill Gatten on November 06, 1998 at 14:11:24:

Land Trust! Land Trust! Land Trust!

You become a co-beneficiary with the current owner and a triple net lessee for six months, then refinance the property when you feel like it (or need to). The seller doesn’t have to take any chances with you, since the title stays in the name of his trust. The property is protected. You get all the benefits of ownership. The lender can’t squawk. Talk to me!

Bill Gatten


#7

Re: Assuming the Non-assumable - Posted by Tim (Atlanta)

Posted by Tim (Atlanta) on November 06, 1998 at 11:16:29:

Be careful !
Some mortgage companies will NOT accept payments from anyone other than the person on the mortgage.


#8

Re: Assuming the Non-assumable - Posted by karp

Posted by karp on November 06, 1998 at 09:53:26:

I would go with option B in a heartbeat.
Why?

  1. The bank probably won’t even figure out somebody else is making the payments.
  2. It is a lot easier than option A.
  3. Even if the bank did find out, by the time they get their act together to foreclose (a year or so) you would have already sold the house made a couple more million from real estate and be retired in Malibu.

2 cents is all I got…

karp


#9

6 and one-half-dozen? - Posted by Redline

Posted by Redline on November 06, 1998 at 22:23:09:

Bill - sounds good BUT sounds like maybe it’s unnecessary! The majority of people here seem to think the “due-on-sale” police have no bite.

The jury is still awaiting complete details.

RL


#10

Consider this . . . - Posted by Bronchick

Posted by Bronchick on November 07, 1998 at 10:28:21:

I have lots of mortgages I pay with checks from my “management company” which reads different than the name on the account.

Consider this: since most loans are serviced by an outside source, are they going to rat you out to the lender to lose the servicing account? I think not!


#11

Where the hell did you hear that? - Posted by The Baze

Posted by The Baze on November 06, 1998 at 15:22:41:

Let me understand this - some $8/hr payment processor looks at the check, then at the payment voucher and says, “Oops, we can’t take this. The wrong person made the payment. I have to notify the Due on Sale police.” The bank I send my checks to must have incompentent processors, because I “assumed” a loan 4 months ago, and my checks clear every time. I’ve never heard anyone who’s done this type of transaction say that the bank wouldn’t take their check because they weren’t supposed to be the ones making the payments. Tim, remember, it’s better to be silent and thought a fool than to speak and remove all doubt. Keep it in mind.


#12

Re: Assuming the Non-assumable - Posted by Redline

Posted by Redline on November 06, 1998 at 11:22:31:

uh-oh - heeeeeere we go again!!


#13

www.karp_question.com - Posted by Redline

Posted by Redline on November 06, 1998 at 11:21:55:

OK - question:

Say our man above assumes said loan and who cares what the bank says. My question is: Isn’t the original buyer (now the seller) still going to be on the hook for this mortgage? What if our man above stops paying mortgage? How is this worked out?

RL


#14

Re: Consider this . . . - Posted by Bill Gatten

Posted by Bill Gatten on November 07, 1998 at 21:06:48:

Bill,

No offense, but… (Your information is generally the best in the business and I’ve bought a few of your books and live by them…however…)… but … (as I was saying)… ahem… I’ve had informal assumptions called on me more than once. And I’ve also been a party to calling several others (‘used to own a chunk of a S&L, and served faithfully on the Credit Denial Committee each Tuesday and Thursday–where DOS’ were a major source of brand new higher rate loans, and a way to purge a few of the old skimpy-rate loans, if we could catch 'em doing “no-no’s”).

Another time unauthorized transfers get checked is when S&L’s sell in bulk to other banks. Prior to accepting the package, the new bank will frequently review the performance and condition of title on the loans they are considering acquiring.
I might suggest too that the reason most “alienations” are not being dealt with, is because most of us “aliens” are keeping the payments (and insurance!!!) current. In your own case, the 2-bit per hour clerks in the lender’s offices likely presume (when they see your checks) that their borrowers have hired your management company to handle collection and disbursements on their 1031 properties.

In my company, we currently hold about 600 titles in trust, on which we make payments on behalf of the beneficiaries: and neither have we EVER had a lender raise an eyebrow. Although, I must say that in every transaction we send the lender a notification that our collections company has been retained by their borrower to make all payments and handle all affairs of the property.

Bear in mind, Bill, I do agree with you to the extent that in most parts of the country, a Due-on-Sale call from a portfolio lender is unheard of, unless, of course, rates start climbing and they opt to “refresh their portfolios” (as it were), as has happened here in California more than a few times recently; or they’re selling off their loans. And, at least occasionally, employees of insured servicers (i.e., of FHA, FNMA, GNMA, VA, ETC.) do get their jollies and a gold star on their pointy little foreheads for turning folks in. They get two stars and a happy face, if it?s their own mother.

For whatever it?s worth,

Bill


#15

Re: Where the hell did you hear that? - Posted by Tim in Atlanta

Posted by Tim in Atlanta on December 01, 1998 at 07:19:10:

If you would like I can send you the exact detailed information, but it goes like this. I legally assumed an assumable mortgage. During the time that the county takes to file the new Warranty Deed, the mortgage company would NOT cash the checks I sent them. Once they had the new Warranty Deed filed by the county, the checks were cashed and now everything is fine. The mortgage company is Colonial Mortgage Company. I have also “assumed” 4 other loans with the Warranty Deed subject to these loans in a wrap situation. The checks I sent in for these loans were accepted fine. I called and changed the mailing address on these loans, left the name on the loan the same (because it was not me), and the bank is perfectly happy. Please don’t assume that everyone on this forum is a fool. I would not have posted the message if I did not know it to be true.


#16

Re: Where the hell did you hear that? - Posted by Ed Garcia

Posted by Ed Garcia on November 07, 1998 at 24:45:39:

Tom:

Your right, Tim?s answer is not realistic.
This is a perfect example of what I feel is happening to this board.
People answering questions in what they think is the correct answer,
but really don?t know what their talking about.
They think their answer makes sense, but the truth of the matter is
that their just guessing.
I realize their trying to help each other. But lets face it, it?s the blind
leading the blind.

I?ve said it before and I?ll say it again. If you don?t know the answer
leave the question alone , don?t guess.
I?ve been in this business for over 30 years, have funded hundreds
of millions of dollars , and have never seen this happen. Not even once.

The only way a check would be returned, is if it was not clear as to what
account it should be applied. If you had a different name on the check
and no account number, then who ever was posting the payment would
not know what account to apply the payment to and return the check.

But once again I?d like to caution you people to please consider that
your answers are being looked at by approximately 55,000 people a
month who visit this site to get educated in real-estate. When answering,
be sure of your answer, don?t guess.

Ed Garcia


#17

Re: Where the hell did you hear that? - Posted by Gary Samuelson

Posted by Gary Samuelson on November 06, 1998 at 15:44:55:

Baze,
Tim is hardly a fool. What he described is EXACTLY what happened to me.

Gary


#18

Seller said this will work. - Posted by Joe(IN)

Posted by Joe(IN) on November 06, 1998 at 11:38:04:

I called the seller. I hit him with the idea of just taking over. He said that will work for him as long as I will do my best to move it quickly (within 5 months or so) in order to clear his liability.

Sounds more motivated than before.
Thanks for the help.

Joe


#19

Re: Where the hell did you hear that? - Posted by Karen McCall

Posted by Karen McCall on November 07, 1998 at 16:23:16:

You’re right this sort of thing does not happen often, BUT I have seen it happen. I once worked for a Mortgage Broker who sometimes used his lender status when he didn’t think he could sell a loan, and he would question loan payments not from the original payee. Sometimes Nationsbank on their occassional account audits will TOO. So don’t be so quick to JUDGE. The way around this is to pay by Money Order, fill in the name of the original payee.


#20

Let me understand this . . . - Posted by The Baze

Posted by The Baze on November 06, 1998 at 19:47:25:

You’re telling me you sent your check in, and because it didn’t have the borrower’s name at the top, they sent it back, and enforced the due on sale clause? I’m not doubting you, but you are the only one I’ve ever heard of this happening to. Now, maybe I’m a fool, and it sure as heck wouldn’t be a first, but I know several people in my city whose sole investment strategy is taking over loans “subject to”, and selling on a wrap. I used to be worried about doing that because I thought the bank would call the loan due, but they’ve assured me it won’t happen. Again, I’m not saying it didn’t happen to you, but you’ve got to give some details before I’m thouroughly convinced.

Jim Piper, has this ever happened to you? Ever heard of it happening?