Posted by Ed Copp (OH) on May 22, 2000 at 08:21:01:
Sam,
You say that you are confused and afraid, GOOD. It’s about time this is YOUR problem. You will probably have to solve it. If the underlying lender forces forclosure the chances that he will get all of his money are pretty good (at the sheriff sale). The chances of you loosing all the money that you have put in so far are also pretty good.
You might be able to refinance and get up enough money to pay off the first lender, or you might be able to deal directly with the first lender and purchase his note from him.
In the future it would be a good idea to read the underlying noted on a transaction that you are involved in…ED
Wrap around mortgages - Posted by Sam Suleiman
Posted by Sam Suleiman on May 22, 2000 at 04:59:04:
Here is my situatiion:
I recently purchased some apartments in CA. The seller had an existing note of about $220K. When I purchased them the seller and I created a note where he would carry about $400k. I guess this is called a wrap around, where I pay him for my note and he continues to pay the smaller note.
The person with the origional note is threatning the seller because he had a due on sales clause.
My question is what happens to me! If the person with the origional note tries to forclose on the seller, is that between them, or does he have a right to take back the property, leaving me with nothing?
I confused and afraid! Does anyone out there know the deal with wrap arounds. Thanks.
Re: Wrap around mortgages - Posted by JohnWe (NoCA)
Posted by JohnWe (NoCA) on May 22, 2000 at 20:56:15:
Sam,
Unfortunately, Ed’s right. The wrap is in 2nd position behind the 1st, so if the 1st forecloses, you’re out of luck.
I would call the 1st’s bluff. It’s very rare that the 1st will actually act on their DOS clause. If they do, there’s usually a good reason – like the guy hasn’t been making his payments, and got the lender angry.
I’m not telling you what to do, but if it were me, I’d wait to see if the 1st actually started foreclosing. If they do, I’d contact the lender and find out what’s going on. Lenders can over-react. They might think they need to call the note due, when all they really want is to make sure they get paid on time. In this case, you can ease their mind by hiring a 3rd party firm to process the wrap.
Good luck.