Re: Sub 2 & the Due on Sale Clause - Posted by JM101
Posted by JM101 on June 04, 2006 at 04:32:12:
It is not just a matter of saying ?screw it? and hope for the best, but then these DOS ?scare tactics? are really blown out of proportion.
I am one of those who is not concerned with the bank calling the loan due, and here is why. Is it a risk ?yes of course it is, but a calculated one.
If and when a lender decides to call a loan due, he better have a good reason to do so. He has investors who are expecting to make money with him and he has to answer to them as to why they are not making money on an up to date performing loan.
A loan that is in default should be called as the lender is in trouble along with the person who has defaulted on that loan. A loan that is current however is something different. Why would a lender call a performing loan and lose money for his investors? That makes no financial sense. It costs the lender money to foreclose on a house, then the waiting time to re-lend those funds, holding costs for that house, repairs needed, commissions paid, etc.
So what does happen if a loan is called? You or your seller will get notices that the lender is accelerating the loan and it must be paid off by a certain date. This is No Big Deal, as you won?t have to pay the loan off tomorrow or the next day?you have time to rearrange for new financing on the house. If you need more time, just contact the lender and ask for it. You have to remember that the lender?s only alternative, if not paid, is to foreclose on the house, and depending upon state law could take quite a while and is quite costly on the lender?s part.
So when I say it is a calculated risk, what I mean is to ensure you always have a way out.
I always make sure that when I buy a property Subject To that I have a way to refi it, if by any slim chance the lender does decide to call the loan, either by having the cash available to pay off the loan, a lender to get it refinanced in a timely manner, or even another investor to help out.
Hope this helps