Only 'cause I promised Piper...another DOS call (Sorry Jim) - Posted by Bill Gatten

Posted by Rob FL on December 22, 1999 at 12:37:36:

I was getting a little off the original subject matter. But thanks for answering my question. I always find your posts enlightening. Merry Christmas.

Only 'cause I promised Piper…another DOS call (Sorry Jim) - Posted by Bill Gatten

Posted by Bill Gatten on December 20, 1999 at 20:23:11:

A week or so ago I mentioned that despite what others may claim, I see DOS calls “all the time.” Subsequently, in a somewhat terse response to that candid and honest post, I felt that my veracity was somehow being questioned by an extremely knowledgeable, intelligent (even brilliant and admirable, if nt enviable) contributor here on CRE ('probably just my imagination… but I did feel the twinge and promised to keep him posted on future incidents of DOS calls none-the-less).

Note that since that original post I did report on yet another DOS call (re. one in Victorville, CA). Now here is a third in as many weeks.

Received this today from a Realtor client in So. Calif. Note that my comments are in [] brackets.

From Norwest Mortgage:

"Re. Unauthorized Transfer of Ownership

Dear Mr. Garbis K… and Mrs. Hripsime K…

This is written to acknowledge our receipt of information indicating your transferring ownership of the above referenced property to a Mrs. Laura B…

Please be advised that Norwest Mortgage did not consent to such transfer of ownership as evidenced by this Deed. Pursuant to Paragraph 17 of your Mortgage, any action taken with regard to the property during the life of the loan requires prior written consent of the Norwest Mortgage. Such consent includes, but is not limited to, the granting of easements, partial releases, leasing of the subject property, changing ownership or occupancy status, etc. Any unauthorized [note the word “unauthorized”] transfer of ownership without the prior written consent of Norwest Mortgage will result in the immediate acceleration of your loan.

Pursuant to our investor guidelines, Norwest Mortgage will permit a transfer of ownership under the following circumstances:

[Their list of exception includes almost all Garn St. Germain exceptions including transfer to an inter vivos trust wherein their borrowers remains a beneficiary and director of the trust: though they’ve conveniently failed to include the right to lease for no more than 3 years: a purchase option notwithstanding]

…As prior written consent was not obtained from the Lender [says “by the Lender,” but I presume its a typo], and since no documentation was provided to support that your transfer falls within the guidelines set forth above, please take the necessary steps at once to re-record the title back into you name and forward a recorded copy to my attention no later than December 16, 1999. Failure to do so will result in immediate acceleration of your loan pursuant to the terms of the Note and Mortgage signed by you at Closing.

If your loan is accelerated pursuant to the terms of the Note and Mortgagee evidencing the indebtedness, you will be given the right to reinstate this account up through and including the foreclosure sale date; and you will have the right to assert in court the non-existence of a default or any other defense. However, Norwest Mortgage is entitled to collect all expenses incurred in pursuing the legal remedies including, but not limited to, reasonable attorneys fees and costs of title evidence.

Sincerely,
Vicky Schaszberger,
Default Operations Support
Phone 301 696 7073"

Note that I have never noticed a bank giving the transferor the right to reinstatement, and bascially to just make nice and start all over again. This one suprised me (…but maybe they have to for some legal reason).

Bill Gatten

try this experiment - Posted by JD

Posted by JD on December 21, 1999 at 22:57:36:

I suggest the following experiment: Locate some properties with DOS violations, then notify the legal departments of the Lenders via certified mail about the violations (include copies of the recorded transfer Deed and quote the DOS language in the original DOT, maybe you could imply you were considering making a junior loan on the property). (maybe your literature could arrive in the mail shortly thereafter :slight_smile: It would be interesting to see if you did this 20 times, how many would result in foreclosure action by the Lender. I would probably search for DOS violations by looking for Quit Claim Deeds then screening out those that were clearly interfamilia.

How was ownership transferred? - Posted by Jim IL

Posted by Jim IL on December 21, 1999 at 13:41:51:

Bill,
After reading that letter, all I can think is "why on earth did the seller just transfer the property to the buyer and NOT use a land trust?"
If they did, where is the problem?
Who told the lender?
All the lender would need to “clear this up” would be a copy of the trust agreement showing the seller as beneficiary, right?
The assignment of beneficial interest stays “hidden” with the buyer.
There are just too many questions here that seem to be either unanswered or the transfer was NOT done right.
Sounds to me like this buyer and seller messed this one up themselves. And now they will pay for there idiotic actions, and lack of knowledge.
No blaming the DOS goblins here.

Either way, thanks for sharing, and pass along some more details for us.
Thanks,
Jim IL

Re: Only 'cause I promised Piper…another DOS call - Posted by JPiper

Posted by JPiper on December 21, 1999 at 10:04:10:

Bill:

Thanks for keeping us posted. Yet ANOTHER due on sale acceleration! I?m seeing more accelerations in the last 3 weeks than I?ve seen in my entire career! Now don?t go getting sensitive on me?.it?s just an observation, not a personal attack.

Here?s what I would be interested in knowing: In the letter from the bank the first sentence is?

?This is written to acknowledge our receipt of information indicating your transferring ownership of the above referenced property to a Mrs. Laura B…?

What information did the bank receive indicating the transfer??? Did they just happen to be perusing the public records and NOTICE the transfer? Did Garbis and Hripsime (where do you get these names) NOTIFY the lender of the transfer??? What type of transfer was it??? Did the payments get made on time??? HOW DOES A LOAN GET REINSTATED (the lender gives them the right to reinstate in the letter) IF IT IS CURRENT??? How was the insurance handled???

I know you?re after that DOS Boogeyman Bill. But let?s make sure exactly what we?re talking about BEFORE we start giving too many opinions. I think we?re all aware as an example that the bank will call a loan where the payments are not made. Further, I think we?re all aware that if payments aren?t made this may eventually precipitate a title check. Depending on what type of deal has been done, a title check may unearth something. Finally, I don?t personally suggest that people notify the lender of their transfer, which this letter seems to indicate happened.

If any or all of these factors exist in this case, it?s an example of a DOS acceleration, you?re good to your word there. But what I asked for is an example of loan that is CURRENT being accelerated. Maybe I should have also added?.a loan that is current where the borrower didn?t rat on themselves.

Looking forward to more details?

JPiper

Re: Only 'cause I promised Piper…another DOS call (Sorry Jim) - Posted by Rob FL

Posted by Rob FL on December 21, 1999 at 08:15:36:

Let us know the progress of this one. I would be very interested to find out if they actually foreclose or if they are just blowing hot air. Keep us posted. Thanks.

Re: Only 'cause I promised Piper…another DOS call (Sorry Jim) - Posted by Judy

Posted by Judy on December 21, 1999 at 06:09:47:

In this case it seems a land trust was not used transfering to a trustee. But Norwest is stating the no prior written consent issue anyway. I’ve read the different opinions on notifying the lender that your putting property in trust for estate purposes. Is it best to tell them or wait til they ask? I want to put a property in trust just for myself and called the bank and asked them their requirements. They wanted me to send the trust agreement plus $30.00 for them in examine and approve. I havent sent them anything yet.
Judy

Another DOS call. What to do??? - Posted by Irwin

Posted by Irwin on December 20, 1999 at 23:28:45:

Bill:
Is the loan a HUD, VA, Conventional FNMA or FHLMC?
I think if this happened to me, I’d go right to the top of the loan guaranty/insuror and tell him/her how idiotic Norwest is being in calling this loan. The interest rate is probably higher than current lending rates, and a foreclosure will probably result in a net loss. I’m pretty sure that the VA would make Norwest back off fo the foreclosure threat. They don’t want any more (f/c) than absolutely necessary. It’s anybody’s guess what the others would do. The mortgage industry should realize that DOS is an anachronism and hurting them, but they don’t. Perhaps enough people screaming at the president of FNMA will get someone’s attention. Good luck trying to talk sense into these guys.

OK, JPiper, you can have the last word: but here’s my response to it - Posted by Bill Gatten

Posted by Bill Gatten on December 21, 1999 at 22:02:38:

Jim,

The “reasons” are not what I’m in this repartee for. Obviously there was a “reason.” Reasons are like body orifices…each of us has a specialized one for just about every special occasion. My promise to you was simply that I’d give you your “proof” so you’d know that I wasn’t embellishing facts to serve my own (presumably alluded-to) ends when I talk about how many of these things I come across (DOS’, not orifices).

[“Oh sure, the horses legs ARE green after all. I’ll give you that, now that I’ve seen for myself. But you said “painted” green. You didn’t say what KIND of paint, and furthermore you haven’t proven that the horse wasn’t in fact born that way?”]

I agree with you, Jim (as usual), that it is unlikely (probably even “highly” unlikely) that a lender would (these days) waste the time to go out and look for reasons to foreclose on properly performing mortgages. And my assumption–like yours I’m sure-- is that Norwest undoubtedly contacted one of the parties to the subject transfer; and when apprised of their borrower’s complete divestiture of any control over their security interest, had no choice but to either look the other way and establish a precedent, or demand adherence to their contractual policies (in this case, though, with a backdoor?the reinstatement).

I am told (secondly handedly, by the Realtor who sent me the file) that the loan was never in default (BTW, this is a humble concession: not something to be jumped upon as being “only hearsay, based on a pack of contrived and careless half-truths”…or something).

Believe it or not Jim, irrespective of what “may” have happened to this poor unfortunate bank clerk, there are those out there who just enjoy asserting authority over, and causing pain to, others…simply because they can (and because they get a little star sticker on their forehead for ech bad guy they catch). 'Ever hear of such a thing in your life? 'Ever order a Sausage Surprise after 10:30 AM? 'Ever ask a meter maid to wait while you go for change?

Once again Unca Jim…I ain’t afraid of no D*** DOS Boogy Man! I’m not sensitive (unless you keep on harassing me, bullying me around, picking on me, and hurting my feelings this way)! And I couldn’t care less about what lenders like or don’t like as long as I’m not doing anything to defraud them. And, too…they jest ain’t no “Due-on-Sale Jail” nohow! (Thank you Bill Bronchik. I agree! But…“Due-on-Sale Poor Houses?” Well…).

So…Once again…my point is that there IS–re. the DOS–a risk. And in my opinion, one would be best advised to either – 1) cover his ASSets carefully when confronted with such a potential risk; or 2) avoid it–as well as humanly possible…Period! Amen! I mean it! Dadgum it! Once and for all!

Should you, JPiper, start doing things differently? No! (or as Jim Rhone would say: “Nooooooooooooooooooo”). You are personally comfortable in always being able to make payments on time, and know that your insurance and property taxes will always remain current(and you’re old and cortchety like me). But what about those (Whippersnappers, at it were) who could conceivably imagine themselves having unforeseen financial reversals at some unexpected point in the future…should they just stay the h*** out of our business? Or should they perhaps approach cautiously and protect themselves as well as possible (assuming such protection were possible)?

How about the “hang glider” philosophy:

Either pack a good chute; or firmly determine never to fly any higher than you’re afraid to fall, should the prospect of unplanned descent ever be at issue.

Me? I’m a high flyin’ chute packer!

(Or is it, “High chutin’ fly packer?” Or “High packin’g fly chuter?” …One o’ them…)

Bill Gatten

My take. - Posted by Tim Jensen

Posted by Tim Jensen on December 21, 1999 at 21:29:19:

Jim,

I have a feeling that the way the mortgage company found out about the transfer was from the change in insurance.

Tim Jensen

Man, I Should Have Bet Myself That Lunch! - Posted by Scott (AK)

Posted by Scott (AK) on December 21, 1999 at 11:36:44:

Jim,

I almost could have wrote this post for you because I KNEW you would come back with the exact questions you did.

How’d I know? Because I myself had the EXACT same questions but wanted to wait to see your post. I’m thinking they did something to “rat themselves out” or cause the lender to look at public records.

Why?

Because I myself have more then one L/O with homes financed by the very lender referenced in Bill’s post. All payments are current and the only letter my sellrs (or myself) have gotten from then is the typical “It’s that time of year for your payment to increase because of forcasted escrow shortages” letter. Meaning my cashflow diminishes by about $20 a month.

I can live with that!

Waiting for more info myself.

Scott (AK)

In answer to your question re. notification - Posted by Bill Gatten

Posted by Bill Gatten on December 21, 1999 at 22:46:53:

Judy,

In answer to your question: With the thousand or so PACTrust™ transactions we’ve done or have been a part of, we always have the mortgagor (borrower) notify the lender of the basics of the transaction: i.e. that the property is being leased out and that the payments will be forthcoming from our bill paying agency (PAC Management). Unless they ask for it, we give them nothing else (Occams Razor, you know). There’s really no use in having them review something that we already know conforms to what they insist on anyway, whether they like it or not. Although, in those cases where the mortgagor just feels more comfortable in apprising the bank of the transfer into the trust (“asking permission”), we advise sending them only the trust agreement…none of the documents that will come later (those having to do with assignment of beneficairy interest, leasing, shared power of direction, power of attorney, etc.). Those documents are not completed or executed until the bank acknowledges their acceptance of the trust (everything else is silent)…no lender has ever failed to “approve” so far (as I suspect none have ever read the trust anyway).

And as far as those ancillary documents are concerned, the nature of an assignment of a beneficiary interest (or remainder interest) to another is that it should be secret, private, annoymous and no body’s business. And such appointment doesn’t effectively relate to the real estate which is the bank’s security: only to the trust.

[The model schooner in the bottle belongs to the bank, but the bottle doesn’t: you and I own the bottle. And by law, the bottle can only be broken open by the bank in order to get to its ship with just reason and legal cause).

Do we refrain from giving all the data to the lender becase of a fear of the DOS? No. It’s simply that virtualy all accountants, most attorneys, ever banker and bank clerk I’ve ever met would not understand what in world a land trust was, much less a PACTrust™. Their first inclination would undoubtedly be to assume that it was something that had to be reviewed, approved, dissected, boiled down and held under water in Legal for eight months. We learned that the hard way. We’ve never had one turned down, but we’ve had a couple deals killed (murdered) because the clients couldn’t wait any longer for the bank’s review and acceptance process.

Bill Gatten

Re: Only 'cause I promised Piper…another DOS call (Sorry Jim) - Posted by Mark (SDCA)

Posted by Mark (SDCA) on December 21, 1999 at 10:18:04:

I am not telling any of my lenders about the transfers into trust. I do, however; have the letter hot on the printer to send back explaining why I have the right to do this in case they ask. I did 4 of them some 2 months ago and haven’t heard a peep.

Mark

Re: Only 'cause I promised Piper…another DOS call (Sorry Jim) - Posted by Glenn

Posted by Glenn on December 21, 1999 at 08:19:04:

My understanding of the Garn St. Germaine act is that you have the right to transfer to a trust, therefore, I would notify the bank of the change so that all documentation gets sent to the trustee. As far as the $30 I would politely tell them where they can put their extra fee for looking over documents they do not have the right to veto.
If you were notifying them of an phone number change, or an insurance carrier change, etc. I don’t think they would try to charge such a fee.
Glenn

Ok, a simple solution… - Posted by David Alexander

Posted by David Alexander on December 25, 1999 at 20:23:04:

Ok, so how about if the new owners simply deed it into a trust called the Garbis & Hripsime Family Trust, the Bank would be none the wiser who has the beneficial interest and would be seemingly more than happy to go away.

David Alexander

One Last Question… - Posted by JPiper

Posted by JPiper on December 23, 1999 at 09:49:45:

I guess we’ve about beat this subject to death…but one final question. How do you reinstate a loan that is not delinquent?

JPiper

Oh Yeah, BTW… - Posted by Scott (AK)

Posted by Scott (AK) on December 21, 1999 at 11:41:12:

When I set one of the L/O’s up with a seller from this very lender…the seller even called the lenders and had "any coorospondance related to this property addressed :

Mr Seller
% Scott (AK)

Does that fall under the “prior approval” plan?

Think not.

Do them right, keep the payments currant…still in wonder if they could ever find out!

Scott (AK)

Re: In answer to your question re. notification - Posted by Rob FL

Posted by Rob FL on December 22, 1999 at 08:20:41:

I believe you have affirmed it before, but just for my own clarification.

Has a lender ever tried to call a loan due that was involved in a PACTRust with the payments cuurent? If they have, did the PACTrust ultimately win in court as a non-violation of the DOS clause?

Re: Only 'cause I promised Piper…another DOS call (Sorry Jim) - Posted by Chris (FL)

Posted by Chris (FL) on December 21, 1999 at 10:58:36:

What’s the verbage on that there letter?

Re: One Last Question… - Posted by Redline

Posted by Redline on December 23, 1999 at 14:28:24:

That’s what I wanted to know - and it seems by the letter the bank will allow them to “reinstate” by reversing whatever silly-ness they did in the first place (i.e. put it back in your name now!!) Sounds almost like the bank WISHES it never found out about this and feels like they HAVE to do something about it now …

Oh yeah, “Garbis and Hripsime” almost certainly deserve a foreclosure for telling their bank what they were doing in the first place! :wink:

RL