Update: Lender/Legal Quagmire... - Posted by JPiper

Posted by Redline on March 19, 1999 at 23:59:26:

See, that’s the thing - I don’t think he knew right away so … (he’s got ALOT of rentals).


Update: Lender/Legal Quagmire… - Posted by JPiper

Posted by JPiper on March 17, 1999 at 14:37:24:

For those of you followed the thread concerning this subject below, here’s an update.

I contacted the Assistant General Counsel for the lender involved. We had a pleasant conversation regarding my subject to assumption, and the problem that WE were confronted with since the insurance did not match the name on the loan. I pointed out that it didn’t appear to be in either of our interests to get involved in a dispute over the insurance since the loan had been paid in a timely fashion for about 2 years. In fact, I have one other loan with the same lender, also paid on a timely fashion over the last 1 ½ years. I informed her that I was willing, within limits, to try to accommodate them in order to resolve the situation. The end of the conversation was with her saying that she would check into the situation, and make sure someone got back in touch with me, that she was sure that the situation could be resolved in an amicable manner.

Monday I was contacted by the “supervisor” from customer service. The conversation started with her telling me what I had to do. I asked if she had spoken with her Assistant General Counsel as of yet. She hadn’t. So she hung up to speak with her. When she called back she appeared to have had an attitude adjustment.

The way this was resolved is that I provided a copy of the deed, a copy of the death certificate of one of the borrowers, a copy of an assignment of the escrow account, and a copy of a limited power of attorney. The lender has changed the name on the loan to reflect the name on the deed?..that being a trust. I have signed no loan documents or anything else. I paid no assumption fee, and have signed no assumption agreement. My insurance company has changed the insurance to reflect the exact name on the deed, my trust?.and as of today the situation is resolved?.and the lender is content.

One additional comment. I’d like to thank everyone who responded to my post. The responses were well thought out, and contained a lot of very useful information. The responses showed the true power of this site, and it was very much appreciated on my part. Thanks again.


Re: Update: Lender/Legal Quagmire… - Posted by Tim Jensen

Posted by Tim Jensen on March 18, 1999 at 06:50:11:


I am glad to see that everything is working out for you on this deal. It sounds like you handled it well.

I don’t know all the deatils of what has happened, so I am asssuming that you were caught violating the due on sale clause

I am just wondering why didn’t you just get the place refiananced?

It would have saved a lot of these problems.

As you know, I’m not a real big fan of doing a subject-to assumption. I feel it is wrong(plaese lets not get into this disccussion).

You have the skill to get yourself out of this situation, but there may be a number of people who lack your skills and may get into some hot water with deals like this.

Take Care,

Tim Jensen

You go Man ! nt - Posted by Laure

Posted by Laure on March 18, 1999 at 04:09:50:


Ahhhhhhhhhh… - Posted by karp

Posted by karp on March 17, 1999 at 17:37:26:

Dude, with as crappy a day as I have had,
your news was a sound for soar ears.

I am really glad to hear you got it resolved
and I printed yourpost just in case I get in the same

Which, if this week continues this way, is bound to happen.



Re: Update: Lender/Legal Quagmire… - Posted by Dave Smith in Dallas

Posted by Dave Smith in Dallas on March 17, 1999 at 17:23:05:

Salute to Jim-That is BADA**!

Re: Update: Lender/Legal Quagmire… - Posted by Jerry Greer

Posted by Jerry Greer on March 17, 1999 at 16:02:48:

Jim, This is a very good example for everyone on how to handle these types of situations. The key is to stay calm and don’t create a war. Had you talked to this person and gave her a hard time it is probably safe to say that nothing you could have done would have made them happy.

By using the right attitude and tact you handle this problem perfectly. It can be really easy to get excited when a problem like this happens. I have learned that if you stay calm and look at all of the options it probably isn’t near as bad as it might first appear.

Once again thanks. It’s nice to see you get paid a little back for all you give here.

Jerry Greer.

Re: Update: Lender/Legal Quagmire… - Posted by David Alexander

Posted by David Alexander on March 17, 1999 at 14:47:06:

I guess lenders are people to and things can be worked out. Maybe this will some day alleviate my fear of banks and the long drawn out loan process. But, for now I’ll take the easiest route, doing the Subject To deals and knowing that I have friends that have already traversed the problems really helps. when you first see a post like this, it scares the beejivers out of you knowing the potential problems tha can come up, showing the solution makes it known that everything can be worked out.

Thanks, Jim for helping us all.

David Alexander

Re: Update: Lender/Legal Quagmire… - Posted by JPiper

Posted by JPiper on March 18, 1999 at 12:29:33:


This was not a “due on sale clause” issue. Just to clarify, in my original post I said that the loan was an FHA loan originated in 1987. As you probably know, there is no due on sale clause in this particular loan. The problem was that my insurance did not match the name on the loan?.and the lender (a new purchaser of the loan) decided they had a problem with this. They threatened institution of forced insurance. The details are in my original post which I would guess you can pull up in the archives if you’re interested.

But you bring up some issues which I really can’t resist responding to. You evidently feel that it’s “wrong” to do a subject to assumption where there is a “due on sale” clause in the loan documents. Certainly I would agree that a subject to assumption violates the due on sale clause?.in other words, it is a contractual violation. Whether this is “wrong” is another issue.

Many of the situations where I have done subject to assumptions have been foreclosures, situations where there was no time to get a new loan as you recommend. The question I would pose to you in this situation is, notwithstanding the due on sale provisions, do you think the lenders interests are better served by rigidly adhering to their contract, or by the investor bringing their loan current?

Let’s take another situation. The seller has no equity in his property and is unable to sell as a result. But he has to sell for some reason, perhaps job transfer or divorce. Would your sense of ethics/legalities dictate that we view this situation rigidly, that this seller cannot accept his job transfer? Or alternatively, should the seller shelf his divorce until he has more equity in the property several years hence? Any of the possible solutions here, whether they be subject to assumptions or lease/options will violate the due on sale clause. Oops, forgot the PACTrust ™ which Gatten says doesn’t violate the due on sale clause?..but if the use of this becomes widespread chances are the lenders will modify their due on sale clause in some fashion.

I wonder if you’re aware Tim that there was a time when the “due on sale clause” was illegal, and that in some states it is still illegal. Fortunately lenders have clout. They got the federal government to pass a law which permitted the use of a due on sale clause, with certain exceptions. The passing of this law was primarily an attempt on the part of the bank to get their previously loaned money back so they could loan it out at higher interest rates in the early 80’s. And federal law supersedes state law. The point here Tim is that the due on sale question was never a question of ethics to the lenders?.it was a question of dollars.

As you know Tim, as far as the lender is concerned, a subject to transaction does not relieve the seller of his liability under the loan. Further, if I buy the property under these conditions from a seller, I have an interest in seeing that the seller’s obligations under his loan are fulfilled. In fact, I may have my own liability to the seller regarding the payment of this loan, as a completely separate issue from the lender. In other words, the seller has guaranteed payment to the bank, I have guaranteed payment to the seller.

I certainly have no problem if you or anyone else doesn’t want to do subject to transactions. Certainly, one of these transactions does entail some types of risks that wouldn’t be present in a situation where he simply got a new loan. Using the same type of logic then I presume you are against virtually ALL creative transactions because they’re “wrong”. Again, as you know, they are virtually all forbidden by modern loan documents.

As to the people who read this newsgroup, the whole reason for courses like Bronchick’s courses is to acquaint them with the in’s and out’s of these and other transactions, and ways to protect themselves and to handle the issues that would commonly be present. I would not recommend to anyone that they undertake subject to transactions without understanding them. However, I also don’t assume that everyone here can’t study and get knowledge pertaining to the transactions, and capably handle them. I don’t view a 100 yard dash run in the Olympics, watch one particular runner win at record time, and then advise all the prospective future runners that they should never try to run because they will never be able to run as fast, and that they may face difficulties arising out of their efforts.


Re: Ahhhhhhhhhh… - Posted by Laure

Posted by Laure on March 18, 1999 at 04:07:59:

hey karp, it’s only money.

Laure :slight_smile:

and the giving NEVER stops… - Posted by Jim IL

Posted by Jim IL on March 17, 1999 at 17:47:52:

Thank you sir. Your unselfish giving of advice and sharing of experiences is much appreciated.
Thank you so much sir, and CONGRATULATIONS!
It is nice to hear that the “Good guys” have won one.
Take care,
Jim IL

Due on Sale - Posted by Tim jensen

Posted by Tim jensen on March 18, 1999 at 19:33:15:


First off, sorry for jumping the gun.

Now onto your question “Is a lender’s interest served better by sticking to their contract or by an investor bring the loan current”

I think that is a fair question, but by using a trust to get around the DOS(Due on Sale)clause doesn’t give the lender that choice. You are making that decision for the lender.

How would you feel if you sold a place on contract to a homeowner and that person turned around and sold it to an investor without your consent?

I think you wouldn’t like that, because as you and I know a homeowner is more likly to care of his home better that an investor takes care of a rental. I know that you may sell a place on contract, but I still put these type of homeowners(contract buyer not contract investors)on a whole are in the same class as some renters (well maybe a step above). We both know what some renters can do to a place. We both know what some contract for deed homebuyers can do to places.

I’m getting away from my point. I do feel that doing a subject to assumption is wrong. If it wasn’t then why is there a need to put the place in trust? Why not do it and let the lender know?

As for being against all creative real estate transaction being wrong. I do not believe that at all. I think creative real estate transaction are just fine, as long as it does not involve anything that could be construde as deceptive.

In closing, I have to say Jim that I respect you and what you have done in the creative RE area. You are much more creative then I am. I just think getting around the DOS clause is wrong.

My Mom used to tell me, there is a simple test to see if something is right or wrong (Mom’s are sure know how to kids in line). Would you be ashamed if “60 Minutes” did as story on what you did?

That is my final question to you: "Would you have a problem with “60 Minutes” doing a story on how you get around the DOS clause?

Take care,

Tim Jensen

Re: and the giving NEVER stops… - Posted by phil fernandez

Posted by phil fernandez on March 17, 1999 at 18:32:49:

And Jim is a GOOD guy.

Re: Due on Sale - Posted by JPiper

Posted by JPiper on March 18, 1999 at 20:38:24:


An interesting thought?..an expose!

Mike Wallace shows up at my door and exposes my latest deal! He describes how I bought a house a few days from foreclosure by bringing the loan current, and then taking over a loan subject to??and then, evil of all evils, actually pays the loan into the future on time, and in the amount, that the lender originally agreed to!

Yikes! Maybe Wallace could unravel the costs and time spent for banks to foreclose, and then contrast it with an evil investor who brings the loan current WITHOUT asking permission. Perhaps he could further show the condition of the property that the defaulted seller left it in, and contrast it with the condition that I have now put it in, and the cost and time that took.

I can see it now. Jim Piper takes advantage of NationsBank by paying their loan on time! You gotta admit?this is some hot TV!


Great Idea. - Posted by karp

Posted by karp on March 18, 1999 at 19:52:52:

I would love to be part of the inspiration and rekindling of the american dream…
60 minutes showing how creative individuals were keeping the market more efficient and helping everyone as well as making money for themselves?

Dude, I am IN!



Re: You are Funny - Posted by Tim Jensen

Posted by Tim Jensen on March 18, 1999 at 20:53:29:



and very hot TV!!!

Though, I have a feeling that it wouldn’t be painted in that manner.

But you still did not answer the question?


say “UNCLE”

Tim Jensen


No, you are funny. - Posted by Redline

Posted by Redline on March 19, 1999 at 11:01:04:


I don’t mean this to be an insult as you appear to be an intelligent guy … it’s just that your view of this “subject to” thing is very adolescent. I mean, your viewing this as a child would. You know, everything with a child is black and white because they can’t quite grasp logic and can’t quite grasp the idea that there are other things at play and nothing stands alone in a vaccuum.

You say “subject to” is wrong just because somebody tells you it’s wrong - which again sounds “childish”. We’ve already established (through Jim’s post) that DOS is all about money and NOTHING about ethics yet you discard that and stick to your chivalrous position of defending the banks. It’s kind of like when a parent tells a child: “… because I said so!”, and the child never asks why. Well, sometimes Tim you have to start asking “Why?”.

If some stupid greedy little clause in a contract (for the benefit of someone else and the detriment to everyone else) says it shouldn’t be done you automatically agree with that. Do you make a habit of automatically agreeing with what ANYONE tells you? How do you hash that out? When do decide to think for yourself and make your own decisions?

Life is NOT as black and white as you think it is and if human beings can’t interject logic and reason when solving a problem then we might as well just all sit back and let computers and machines run our entire lives from start to finish.

I’m just curious Tim, do you follow EVERYTHING this literally or is it just a sticking point with the DOS? I mean, if you ever bought a 2 family home on an owner occupied loan and signed the paper that says “I promise I will live here until the loan is paid!” - and then wanted to move in 10 years and rent the place out … WOULD YOU DO IT? Or would some internal moral sense prompt you to refinance the house with a non owner occupied note at that point? Just curious!

Oh yeah, and I think you’re watching WAY TO MUCH television.


On the other hand - Posted by Devil’s Advocate

Posted by Devil’s Advocate on March 19, 1999 at 14:43:44:

Don’t we put things in our contracts that are equal in purpose? For money, that is. How would we feel if we went to collect rent one day and found a new tenent?

Just playing Devil’s Advocate… LOL I have no problems with the back doors of the DOS clause.

Ok, I’ll play!! - Posted by Redline

Posted by Redline on March 19, 1999 at 14:54:08:

OK, if we go to collect rent one day and found a new tenant … GUESS WHAT!!

There’s not a darn thing you can do about it! This very thing has happened to two different people I know and when it went to court, the judge basically said: “Are they paying the rent?”. Friend: “yes”. Judge: “Then stop wasting my time”.

True story.


Re: Ok, I’ll play!! - Posted by Rob FL

Posted by Rob FL on March 19, 1999 at 21:08:20:

If you have knowledge of a new tenant and they pay the rent and you accept it, the court’s term this ESTOPPEL. Once you accept the rent from the new tenant, you are ESTOPPED from kicking the tenant out. The wise thing to do is refuse the rent and immediately file eviction.