Posted by Michael Morrongiello on November 16, 2000 at 11:15:26:
Yes, I would consider doing such a deal , however the parties have to clearly understand that the loan being “wrapped” (the underlying 1st lien) could call their loan due for violation of the DOS clause provision and then seek to accelerate their loan balance.
That will put the buyer in a very tenuous position and may force the wrap mortgage holder to SELL their mortgage off in the attempt to generate enough cash to retire and pay off the 1st lien lender.
SO if you BOTH go into this with the understanding that this may not be a long term way to go, and that IF the 1st lien lender chooses to enforce the DOS, that you may then have to SELL off your Wrap loan. Dislcosure is important but ONLY from the standpoint that the parties are aware of the possibilities here. Disclosure will not compromise the 1st lien lenders rights under the terms and provisions of their mortgage document.
So perhaps you both do the deal with the clear understanding that later on the wrap loan is sold.