Foreclosure-Renting-"Note for Sale" - Posted by Stewart Armstrong

Posted by Chris on February 07, 2000 at 14:58:46:


I am curious as to where you are sending your rent checks and are they being cashed? Have you tried to contact the owner at that address?


Foreclosure-Renting-“Note for Sale” - Posted by Stewart Armstrong

Posted by Stewart Armstrong on February 07, 2000 at 14:50:53:

Hello All
I live in Ohio…I am currently renting a house and the owner has defaulted on her mortgage and the mortgage company is foreclosing.
The mortgage comp has tried in vain to reach the owner and has gone so far as to send someone to the house and question us about the owner and why we were here in their house?!
The mortgage comp contacted me and told me of their intent to foreclose(they are now foreclosing)and asked what my intentions were?! I explained that I am a renter and they should be contacting the owner!

The mortgage comp told me that I have no business in the house as the owner did not have any written agreement with them to rent or lease the house?! They further stated that I should cease making rent payments to the owner and I must vacate the premises! They further asked me would I like to consider making an offer on the house,particularly; would I be interested in a “Note for Sale”?

1). What is a note for sale? How do I prepare for talking/negotiating w/the mortgage comp?!
1a).Do I need to talk with the mortgage comp at all?
2). As a tenant,do I have any rights here or am I a bystander in this process until it is over?
3). Is there anything I can do to secure the property?

Re: Foreclosure-Renting-“Note for Sale” - Posted by B.L.Renfrow

Posted by B.L.Renfrow on February 08, 2000 at 09:07:50:

You have a number of options:

  1. Start looking for another place to live now, before you get evicted.

  2. Do nothing and remain in the house. Eventually, you will be evicted once the foreclosure is completed and title transfers to the mortgage holder. How long that would take depends upon the laws of your state and how aggressively the mortgage company moves.

  3. Locate the owner and offer to take the problem off her hands and prevent the foreclosure from appearing on her credit report. You would do this by bringing the mortgage current and taking title subject to the existing mortgage, or by using a land trust. This supposes you either have available, or can get, the cash which would be required to bring the payments current.

  4. Contact the mortgage company and see if they would allow you to assume the mortgage. This would require the owner’s cooperation, and would almost certainly require you to qualify for the loan, as if you were obtaining a new mortgage. This would be worthwhile if the loan’s terms are favorable. Or, you could negotiate for a “short sale”, where they sell for less than the balance owed. Again, owner’s cooperation would be necessary, and you would need to find and qualify for financing.

  5. Negotiate with the mortgage company to buy the mortgage itself. They might be willing to give you a substantial discount, as mortgage companies generally want performing loans, not property. This would require some effort, and you could expect to spend significant time on the phone before you even get to the right person who could make a decision. This would NOT require the owner’s cooperation, but then after you buy the note, you would either have to get the property owner to deed it to you, or you’d have to foreclose on her yourself.

Which is best really depends upon your situation, your credit and available cash, what the property is worth, how much is owed, how badly you want to continue living there, and how much time/effort you want to spend.

If you are interested in owning the property, the time to act is now. If you wait until after the foreclosure sale, you can expect it to be listed at full market value. Keep in mind that mortgage companies are like people. Some are reasonable, some are completely off the wall. It all depends on the company, the person you speak with, phase of the moon, etc.

Of course, before you consider any action that could lead to ownership, you need to find out about any other mortgages, liens, judgments, back taxes, etc. You do this by checking the title, or having a lawyer or title company check it.

As to whether you should continue paying rent, I don’t know anything about OH law, but in some states it’s illegal to collect rent and not pay the underlying mortgage. If that’s not the case in your state, then you have to consider the risk vs. benefit of not paying. What’s the likelihood the owner will pursue collection? Of course, if you don’t pay, and she finds a way to reinstate the mortgage before the foreclosure sale, then you’d have to come up with any unpaid back rent.

Brian (NY)

Full of hot air - Posted by Bud Branstetter

Posted by Bud Branstetter on February 07, 2000 at 23:33:52:

The mortgage company would prefer to have the house vacant and may be vindictive toward the owner. Here in Texas there is the right of occupancy. On a foreclosed property the buyer(mortgage company) has no right to possession for 30 days after the deed is recorded if the existing occupant pays rent. You likely have some right to possession but you will have to find out what that is for your state.

Re: Foreclosure-Renting-“Note for Sale” - Posted by mark

Posted by mark on February 07, 2000 at 15:33:46:

Hi Stewart,
I was curious to what part of OH are you in. Maybe I can help you out with a lawyer or something else.

Re: Foreclosure-Renting-“Note for Sale” - Posted by george

Posted by george on February 07, 2000 at 15:28:32:

1). What is a note for sale? How do I prepare for talking/negotiating w/the mortgage comp?!
note = mortgage in this case.
Talk to a lawyer and get a title search done(Is this a 1st or 2nd mortgage, are back taxes owed?).

1a).Do I need to talk with the mortgage comp at all?
You need to pay the owner of the mortgage to assign(sell) it to you.

2). As a tenant,do I have any rights here or am I a bystander in this process until it is over?
Your rights are determined by the landlord tenent law wherever you live. Evicting you will cost them depending on your temperment and your legal recourses.

3). Is there anything I can do to secure the property?

Buy the property from the owner, perhaps the owner will give you the deed in exchange for taking over payments.

Buy the note, foreclose on your landlord, and evict yourself so that you can raise the rent :wink:

The bank might sell you the note for less than the principle owed.