Sub2 but morgage with State Agency. - Posted by billWY

Posted by David G. on October 27, 2003 at 13:49:18:

I have done just 5 subject 2 deals involving state agencies, and none has caused me any problems. As long that you meke payments on time, rarely will banks or any oter institution cause problems.

David G.

Sub2 but morgage with State Agency. - Posted by billWY

Posted by billWY on October 27, 2003 at 11:15:04:


I have a question regarding a sub2 deal in the works.

Owner is willing to deed us the house with no problem.
The mortgage is 5k in arrears according to the mortgage company. Bal inc arrears 87,000. FMV of house $110,000

The only issue I have is that the mortgage is with a state agency. In the mortgage docs, there is a very clear stipulation that, as part of granting the mortgage, the property is to remain owner occupoed at all times. They are not allow to rent it out or in any way have another party occupy the home during the mortgage period.

Now, this stipulation appears to me to be more intimidating than a DOS clause. As we all know, DOS clauses are very rarely put into action. But I read on a forum that there are some state agencies that DO send reps out to the home to make sure it is still owner occupied. And if not, an immediate acceleration occurs as well as legal action taken against mortgagor.

I would like to know from some of the experienced investors, whether or not you would touch this deal.


Re: Sub2 but morgage with State Agency. - Posted by B.L.Renfrow

Posted by B.L.Renfrow on October 28, 2003 at 24:25:59:

If it is a Farmer’s Home Administration/RDC subsidized loan, the responsible agency will indeed verify on a regular basis that the borrower is occupying the property. And if they aren’t, the result is precisely as you cite, plus they will require the borrower to repay the subsidized amount, which will be substantial.

Do NOT try to take one of these loans subject-to, as the owner/occupant policy WILL be enforced and you won’t get the deal you think you’re getting.

Brian (NY)