Posted by JPiper on January 17, 1999 at 13:42:42:
Obviously I can?t tell you what your course material means, without seeing it. I can tell you that wrapping an existing loan that has a due on sale clause in order to transfer the property will violate the due on sale clause. Whether the bank will discover this is another question depending on how it is done. Whether the bank will act on such discovery is still another question (it?s an option to act, not an obligation).
For the situations where I have sold via land contract I have maintained the insurance myself in some cases. Generally I have obtained a landlord policy?.and had the buyer get a renter?s policy. You could add the buyer to your policy as an additional insured if you needed to or felt it appropriate to do so.
How risky?? I?m not sure specifically what you?re asking with this question. ?Wraps? contain risk for both buyer and seller. Obviously one risk is the possible detection of a due on sale clause violation, and a subsequent acceleration of the loan by the lender. If neither you or the buyer have the wherewithal to refinance under those circumstances then obviously this is a risk that should be considered. In a land contract, another risk is that the seller may have problems with deeding the property at the conclusion of the contract. This problem can be handled, but if not addressed it can be a serious risk. Then there are the risks that the seller may not pay the underlying loan. Again, this risk can be handled.
Like most things in life, risk is a function of your knowledge and experience. It?s important to learn how to protect yourself. Good legal advice is always advised.