Posted by Frank Chin on July 27, 2003 at 09:36:03:
Hi Ca Ley:
If you want to do a NOO loan by going with a bank, be prepared to put something down.
My wife was a banker doing asset based loans once -with many borrowers wanting 100% plus loans. The banker’s answer is - “if we do 100% loans, we might as well buy and manage the place ourselves. Why give it to you to manage??”
You do 100% NOO loans with sellers.
I’m from NYC, and 20 plus years go when I started, practically all RE Brokers, lawyers, mortgage people were pushing OO loans saying the same thing you mentioned.
I called 2 different brokers for financing on a 4 unit investment property, and asked what kind of low downpayment (5 to 10%)programs they had.
Both wanted to place it as an owner occupied loan, so I can do with 0 down.
I do not intend to occupy the units (they’re 2 hours away from where I work and live), and thus wanted a non-owner occupied loan with low down. Both said to get it with low down, it was best to do it as an owner occupied loan.
I do not want to get utilities in my name to satisfy the lender. One said, all I needed is to show the lender an eviction letter, I didn’t even had to present it to the renter.
When I asked him what were the repercussions, he said, most lenders don’t find out, and both have placed several loans like this in the past. If the lender finds out, he may sell your loan or force you to refinance. They both said I would not go to jail.
I called 2 of his references, although excellent, all were for residential loans.
I think it’s fishy. I read some of the archives that said if I go forward, it would be fraud. It looks like I’m the only one at risk here, not him. What would be the repercussions?
Re: Broker pushing owner occupied loan - Posted by Long Beach Ed
Posted by Long Beach Ed on July 28, 2003 at 09:28:32:
Ca,
Yes, it is bank fraud.
Yes, many people do it. I suppose they can call the loan if they find out you did not properly state your intentions. I suppose they can prosecute you if they really wanted, though I think it would take some effort from you in further screwing with them to get them to do that.
It all depends on the margin of safety you can live with.
**** I do not want to get utilities in my name to satisfy the lender. One said, all I needed is to show the lender an eviction letter, I didn’t even had to present it to the renter. *****
Hi Ca Ley:
I am also looking into an OO 4-unit acqusition.
Regarding the item I excerpted above, could you help me with the following:
To get OO financing from a bank, do I have to present utilities in my name ? How is that possible when I have not yet acquired the property ? What I am saying is that you could not have any utility in your name at that address because you have not bought the place yet, hence your seeking financing to buy the property. Please explain.
2.About the eviction letter, why would the lender want that ? What purpose would an eviction letter serve ? How could you produce one when you are not the property owner yet ?
Obvioulsy these are newbie questions, but I was just confused a bit. So please explain. I look forward to your response, and thank you in advance.