Wrap-around mortgage - Posted by Mike

Posted by Paul Carlin on February 26, 2001 at 08:42:46:

Use a trust at a bank. They will accept the payment and then make two payments going out, one to you, one to the 1st. This way your buyer know the 1st is being payied.

Wrap-around mortgage - Posted by Mike

Posted by Mike on February 25, 2001 at 20:49:54:

The buyer is obilgated to pay seller monthly payments; the seller in turn is obligated to make payments on the underlying 1st mortgage. What protects the buyer from being forclosed upon if the seller does not make monthly payments to the lender? Are there legal clauses available or paper that can allow the buyer to make the necessary payments to the lender rather than to the seller?

What about this… - Posted by Rick Wheat

Posted by Rick Wheat on February 26, 2001 at 06:08:37:

If you are buying the property to sell on a “Wrap”, you collect your payment from the buyer, make your payment check out to the mortgage company, but mail it to the seller. If the seller needs to make sure you are making payments as promised, mail the payment to him in time for him to forward it to the mortgage company.

I’ve had to do this a few times with sellers concerned about their credit after I’ve bought “Subject-To” the mortgage, but after a while, they just let me send it on to the mortgage company.

Something that might make it easier for your seller to swallow is the fact that quite a few states have statutes concerning the collecting of payments from a buyer, but not making payments to the mortgage company. This is considered a felony in Florida.


Rick Wheat

Re: Wrap-around mortgage - Posted by Bud Branstetter

Posted by Bud Branstetter on February 26, 2001 at 01:02:15:

Maybe you could make out two checks. One made out to the mortgage company. The other for the difference to the seller. Mail both to the seller and let him be responsible to get it there on time.

You could check the laws in your state to see if they use a request for notification. Similar to when a 2nd note wants to know that the first is foreclosing.

Re: Wrap-around mortgage - Posted by Irwin(CA)

Posted by Irwin(CA) on February 25, 2001 at 22:36:35:

You’re right. If you relinquish control to the seller and allow him/her to make payments on the underlying loan ther is nothing to prevent him/her from pocketing the money and defaulting on the underlying loan. Of course if they do this, they will lose their equity in the wrap around mortgage so there is probably some incentive to play straight. You could contract with a third party, like a bank or attorney (ugh!!) to collect your payments and make the payment on the underlying loan.

Personally, I never allow the seller to make MY payments. You might consider buying subject to the loan with yourself making the payments. The seller could then take back their equity as a 2nd or 3rd or…

Hope this helps.