Countrywide Loan with PMI - More Likely To Call Loan Due???

Question

I've been doing subject to for a few years and have never had a seller complain. Now that it is a "great time to buy" and my last 12 months payments on their loan have given them great credit history - they want to buy but can't because they sold their last property to me via Sub2 and left the Countrywide Loan in place.

They are now actively calling Countrywide to complain. My question is this:
- the loan has PMI on it - which is my understanding insures countrywide if they foreclose. so should I be worried that countrywide will be more than happy to call a loan due with PMI on it because the default will be insured.
- On the statement countrywdie says its a Conventional 30 Year with PMI so I don't think its FHA or any other government type loan.
- I've re-sold the property via wrap to anotehr family who's put a good down payment and loves the home.

- I'm 8 months pregnant and don't want keep losing sleep at night - not sure how much I should be worried.

- I'm trying to communicate with sellers about what will happen if they force the issue. They are listening to a mortgage broker who is trying to help them buy a new house. Duh on his part.

Any help advice or past experience shared would be much appreciated.

Nick J. · Answer

Nice of John to bring back an old post. I'm posting here so I can remember where it is and come back in a few hours and edumacate future readers of this thread.

David Engel · Answer

Thanks for a thought provoking post.

Having completed some 100+ subject to purchases and sales since 2002 - never have had one called. Informed by employee of another investor in Atlanta that had completed some 400 tranactions, without incident. That being said, most I know use the subject to financing as a bridge for 3 to 9 months. I too think these people are blowing smoke about you impeding their puchase efforts..... (I take the liberty of assuming that these people were in some way in default prior to your purchase.)

Can't worry about things out of your control! I call out to other posters to provide us with contract language suggestions to help avoid this situation.

I think nothing will come of it. I think CountryWide could not be a better counterparty to expect no action from.

P.S. At least your new homeowner isn't 8.5 months prego.Cheer up and relax.

G. F. · Answer

Can't believe that a lender will call a performing note due in this climate.

Will Barnard · Answer

Looking forward to the edumacation!

John Davern · Answer

If the seller's contract had a subject to clause then they weren't authorized to let you take over the loan without CW's authorization.

The worst that can happen is CW will call the loan due, usually 30 days but negotiable; you will lose whatever money you have invested if you can't pay off the loan; and the sellers will get a foreclosure on their record if they can't pay off the loan.

If there is enough equity in the property you may want to try paying it off or selling it. But you have to pay CW before their deadline, whatever it is.

Usually the lenders catch the subject to sale and call the loan due. The sellers shot themselves in the foot by complaining to the lender.

Account Closed · Answer

If your buyers love the house and can qualify now to refinance it, do it.

But, if not, you can play hardball with the former seller who is now calling Countrywide to complain.

You could call them and ask them what their chances of buying would be with a foreclosure on their record? Especially one triggered by their breech of a contract.

You could remind them it would be far less traumatic for you to make your current buyers whole than it would be for them to have a foreclosure permanently attached to every mortgage application they fill out from now on.

I would also recommend you contact an attorney who is familiar with area of the law because you mentioned you have made the last 12 payments on the loan to CW. It is possible they have abandoned their ability to call the loan due to their inaction in calling it when they knew, or should have known, the title had changed hands. That is unless you played some land trust games, then it could be trickier.

However, if they have constructively abandoned their right to foreclose, it is my understanding, they could still go after the former seller who breeched the contract.

Anyway, the path of least resistance is usually better so if your buyer can refinance, do it and just move on.

Also, in the future, include verbiage in your contracts when you buy to allow you to seek recovery from the seller when they do something like this later. It stops them cold in their tracks when you point it out to them.

Michael Rossi · Answer

Jessica,

In addition to what Will said, I think that the real risk in having your loan called due is in the future, when inflation rates skyrocket and interest rates rise rapidly. In that environment, it might make financial sense for the loan to be called due. At this point, any loan that is current provides a strong incentive for the company to keep it in place. The only wild card here is that banks often act erratically and work against their own best interest.

Good Luck,

Mike

Will Barnard · Answer

Jessica, if you bought correctly and have enough equity, you should be able to refi out and into your "new buyer's name" judging from your post, you have had the property for some time so seasoning will not be an issue.

As far as PMI, it does not insure the bank from a foreclosure. All it does is insure the amount in excess of 80%.

The couple complaining to countrywide are about to have a foreclosure on their record if you can not refi out the property as the loan is in their name. Now that they want to purchase another property, they will not be able to do that either with the approach they are taking.

Countrywide Loan with PMI - More Likely To Call Loan Due???

Countrywide Loan with PMI - More Likely To Call Loan Due???

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