Installment Land Contract on VA Loans - Posted by Bronchick

Posted by Bill Gatten on April 15, 1999 at 19:11:36:

OK, I will!

Bill

Installment Land Contract on VA Loans - Posted by Bronchick

Posted by Bronchick on April 14, 1999 at 12:47:30:

Someone mentioned a while back that the VA does not consider an installment land contract to violate the due on sale.

Here’s the horse’s mouth:

http://www.va.gov/vas/loan/sg.pdf

Re: Installment Land Contract on VA Loans - Posted by JPiper

Posted by JPiper on April 14, 1999 at 17:51:37:

Thanks for the reference. My interpretation is that a land contract does not violate the due on sale providing that it’s terms exceeds the payoff on the underlying VA loan. What’s yours??

JPiper

Re: Installment Land Contract on VA Loans - Posted by Rick Vesole

Posted by Rick Vesole on April 15, 1999 at 01:42:06:

I don’t think the term of the contract matters - the VA Handbook only requires the purchaser to either formally assume or payoff the loan when title transfers, which would not happen until the contract was paid in full. This would only come into play if at the end of the contract term, there was still a balance owing on the VA loan.

For all of you who want to read the specific reference for yourself - go to page 1-17 of the VA Handbook.

Re: Installment Land Contract on VA Loans - Posted by Bill Gatten

Posted by Bill Gatten on April 14, 1999 at 21:48:08:

Jim!!! Why not?? A land contract is a conveyance of equitable interest in Real Estate!!

My God, man, have you lost your senses??

Bill

Double punction applied for emphasis only, under the common laws of poetic license. Do not try this at home. See your dealer for details.

Re: Installment Land Contract on VA Loans - Posted by JPiper

Posted by JPiper on April 15, 1999 at 02:29:21:

In case you didn’t notice, I found section g.(3) equally interesting. Section g. deals with “Transfer Without Prior Approval”.

Here’s g. (3) Consideration of Loan Acceleration.

Should a purchaser fail to cooperate in the retroactive approval process, then acceleration of the loan may or may not be advisable, depending on the implications under State law of delaying acceleration, as compared to the prospect of accelerating a current loan which has the potential for future timely payments.

JPiper

Re: Installment Land Contract on VA Loans - Posted by karp

Posted by karp on April 15, 1999 at 16:58:35:

Right so, Mr. G.

But we also need to keep in mind that the criteria is not “a conveyance of equitable interest” as far as the VA’s interpretation of said Installment Doohickey…

SO, it becomes incumbant upon us as good citizens to go show th VA the error of their ways and get this nasty loophole removed once and for all!

Thanks,

karp

Re: Installment Land Contract on VA Loans - Posted by Irwin

Posted by Irwin on April 15, 1999 at 06:58:37:

I was going to comment on the fact that my experience with one VA loan service and claims office, over the past 30 years or so, tells me that it would be highly unusual for the VA to accelerate based on DOS only.
The clause that you quoted explains excatly why that is the case.
Frankly, I’m surprised (well, when you consider the parties, I’m really not) that HUD, VA and FNMA haven’t dropped the DOS clause from their forms by now. The Clause was introduced in the 80s in response to market conditions that haven’t existed since interest rates dropped into single digits. I can’t remember when that was, but it has been a while. The clause actually hurts the guarantors by scaring buyers away from homes where they might prevent a foreclosure, which nearly always results in a cash loss to these agencies