Posted by Rob FL on February 09, 2001 at 11:59:03:
Since what you are contemplating is most definitely fraud against somebody (probably the first mortgage lender) you might want to contact F. Lee Bailey or Johnny Cochran to review the contract for you. They are used to helping people who do criminal activities.
In all seriousness though, be very careful before you do something like this. It can land you in big trouble with the DA’s office if you every get caught.
Contract language - Posted by Dave - FL
Posted by Dave - FL on February 09, 2001 at 10:20:52:
I’m in the process of buying a duplex from another investor. The intent is for the seller to carry back a second then forgive the mortgage after closing. I’m not sure that the following clauses accomplished that. What do you all think?
“Purchase money second mortgage and note from seller in the amount of $15,000 payable at the rate of 10% per annum with monthly payments of interest only. The loan shall be fully due and payable on the fifth anniversary of the date of closing.”
“Buyer shall have the right to prepay all or part of the sell-held financing without penalty, and shall receive a discount of 100% of the principal amount if financing is paid within 12 months from the date of settlement. Seller shall privide buyer with a mortgage release at settlement.”
Re: Contract language - Posted by tdre
Posted by tdre on February 10, 2001 at 18:30:08:
“Buyer shall have the right to prepay all or part of the sell-held financing without penalty, and shall receive a discount of 100% of the principal amount if financing is paid within 12 months from the date of settlement. Seller shall privide buyer with a mortgage release at settlement.”
100%? That’s a red flag to even the most junior clerks who review these offers for the lenders involved. Suggest you change it to read “shall receive a full discount of the principal amount” instead.
Otherwise, I can’t see any lender knowingly let that clause fly through the cracks - unless it’s on a fraudlent side agreement or addendum that they never see.
Re: Contract language - Posted by JPiper
Posted by JPiper on February 09, 2001 at 13:10:46:
I disagree somewhat with Rob. I don’t think this is fraud UNLESS you hide this from the first mortgage lender. This idea however is one where the existence of this forgiveable second is generally hidden from the lender’s view…and therefore is fraud.
Bottomline is that if you include this clause in your contract and the lender says nothing then you should have no problem. Chances are however that the lender is going to have a problem, and won’t do your deal.
By the way, I didn’t like the clause either. How do you “pay” something that you’re getting “100% discount” on? I’d work on rephrasing that right after you check with the first mortgage lender.
JPiper