Is this Illegal? - Posted by Jim

Posted by Bill Gatten on February 12, 2001 at 17:37:38:

Hi Anne,

Since you’re a member…you’re entitled to any proprietary data we have. The form and a new forms doc manual are being e-mailed as we speak.

Best of luck in your investing career.

Bill Gatten

Is this Illegal? - Posted by Jim

Posted by Jim on February 05, 2001 at 18:31:47:

You know when a seller has to eliminate a debt such as an existing mortgage in order to qualify for another one?

If I were to buy the house from this seller on a Lease Option Agreement, that seller would receive credit for 75% of that liability as far as his lender is concerned, because rentals require maintenance and that 30% would be alloted to cover that expense.

If I were to buy his property on an Agreement for Deed the lender would credit him with 100%, because it is in fact a sale! (Correct me if I’m wrong on any of this)

Now if I were to take title “Subject To” this would mean nothing to the lender correct?

Here’s what I am asking that is a bit twisted.

Can I buy the house “Subject To” (Between me and the seller) but just so he can get his new loan and show that his mortgage is being serviced through a sale…Make an Agreement for Deed for him to produce to the lender and then trash it after he gets his loan and just do the original agreement of the subject to???

Or would it be safer to just do an agreement for deed and buy it that way?

The only reason I ask this is because I would always want to get the deed if possible.

Thanks for your input


Re: Is this Illegal? - Posted by Stacy (AZ)

Posted by Stacy (AZ) on February 06, 2001 at 11:55:03:

Jim, this technique has been suggested at least once before on the newgroup (bogus Contract for Deed). My opinion continues to be that lying to a lender to get favorable treatment is fraud, plain and simple. I’m not a lawyer, but this one seems obvious.

Do others do this anyway? Yes. Would I recommend it? Absolutely not.


Re: Is this Illegal? - Posted by Elyce

Posted by Elyce on February 06, 2001 at 07:45:10:

Seems to me,writing up a bogus contract to obtain a loan from a bank is fraud.But,I’m not a lawyer.I understand your question but I don’t know the answer.

Re: Is this Illegal? - Posted by Bill Gatten

Posted by Bill Gatten on February 06, 2001 at 02:35:59:

In my experience (100’s of PACTrusts wherein the Settlor Beneficiary needed a new loan for his next home), lenders have never balked at a 100% Debt-to-Income Ratio credit, and have never asked for any seasoning by the resident beneficiary (so far).

And…to our knowledge no underwriter has failed to treat the entire transaction as a bona fide sale. We have a standard proprietary form letter we send to lenders on behalf of the applicant, explaining that their borrower has no negative CF, no maintenance or management responsibility, and that the Occupancy Agreement is for an extended period of time…at the end of which the resident beneficiary will either sell or refinance in its own name.

And no: taking a property subject to is not illegal, irrespective of the issue re. the Debt to Income Ratio, which I presume to be your point.

Bill Gatten

Re: Is this Illegal? - Posted by William Bronchick

Posted by William Bronchick on February 05, 2001 at 20:13:31:

In my experience, a subject-to sale satisfies the ex-owner’s NEW lender if you can show 12 months of canceled checks (showing you, the new owner, being responsible for payments).

form letter - Posted by Anne-ND

Posted by Anne-ND on February 08, 2001 at 09:35:56:


I looked through your materials last night and did not find the standard proprietary form letter that you mention in the above post. Did I miss it? If it’s not included, would it be possible to get a copy from you?

Thank you,


Re: Is this Illegal? - Posted by JD

Posted by JD on February 05, 2001 at 22:50:00:

Could you please name one Loan Agent or Loan Broker anywhere in Colorado that has closed a convetional loan using the “12 canceled check payments from the Subject to Buyer” underwriting guideline that you describe.

Re: Is this Illegal? - Posted by Jim

Posted by Jim on February 05, 2001 at 20:27:54:

Well, that’s good to hear! Thanks for that helpful information.

But what about in a case where I am just talking with a seller that needs to get rid of their current situation and I haven’t even signed the deal up yet? This is the area I am referring to in this post.

is what I had mentioned legal or not?

Thanks Again