Assume a Bank of America commercial loan?

Question

I'm looking at apartments and would like to assume the existing B of A mortgage. Anyone have success with a commercial mortgage assumption lately? Advice?

Darryl Dahlen · Answer

A lot of the important points have already been hit on. Most of the deals I have seen where the loan was assumable required the new borrower to be underwritten to evaluate financial capabilities or that person and their experience. In most cases, the lender also charged a 1% fee.

Jon Holdman · Answer

Commercial loans are different beasts than RESPA loans. I've looked at some that specifically allow assumptions. Numerous listings on LoopNet state the loan is assumable. Now, is it any easier than qualifying for a new loan? No idea. I'd be curious, too.

Paul B. · Answer

It's been almost 13 years since I worked at Bank of America, but as you know, it's a big place. There are many places this loan could have originated. It could have originated in commercial lending, real estate lending, a banking center, the mortgage department, and so on. Frankly, I am not sure any of that matters since I have never heard of Bank of America letting anyone "assume" a loan. (We're not talking about taking a loan subject-to, correct?) If I recall correctly, there were FHA loans way back in the day that were assumable without any credit check or underwriting. At the time, finding these loans was real estate Nirvana. But those days are gone, I believe, not just via FHA but everywhere. My take is that if BofA were going to let you assume the loan, they would do so only after conducting a full underwriting involving your personal financials. And if they are going to do all that, they would likely prefer to skip the documentation risk that exists with assumptions and just get all new paperwork, with you as the borrower. Only if the existing loan had some juicy language in there that made it a winner for them to keep would I envision them letting you assume it, and why would you want that? Or if the rate were fixed and above-market, they might keep it in place. But again, why would do that? So, the Reader's Digest version here, at least from my point of view, is that assumption of a loan -- especially in an institution that has a credit policy manual as big as an Oxford Dictionary -- is unlikely at best. Please let us know if you discover otherwise. We're all here to learn.

Jon Holdman · Answer

When I was looking at apartment buildings some years back I found some of the actual notes were included in the recorded documents. And they did indeed state the note was assumable. Not pre-1978 notes, either, fairly recent. Like Scott says, the bank had the ability to qualify the assumer and got to collect a 1% fee.

Scott Hubbard · Answer

There are instances where commercial loans have provisions that will allow the existing rates and terms to be transfered, but these are traditionally not originated by large institutions like BoA. With all the midnight mergers, it is possible that the loan may be originated by a non-chartered bank or other lending institution like CIT group or an financial services company like an insurance group. You will need to look for a provision in the original note that say something like rights of transferability or loan transfer rights. This is not to be confused assumption, as it will require a qualification and re-origination process as other have indicated. The value here is the term, rate, and amoritization schedule may be able to transfer to the new loan. I have personally seen these although they are rare.

Joel Owens · Answer

You said commercial loan so I am assuming you are talking about a 5 unit or greater building or complex.

Joel Owens · Answer

It really depends on a host of factors. Yes they will want to qualify the liquidity of the new borrower and also many times want a track record of success.Especially when it comes to problem properties they will be assuming. The interest rate of the note to assume as well as how long the note is good for that fixed rate makes a difference. I have seen local banks instead of assuming do a low interest rate with just 10 to 15% down in exchange for a higher sales price. This way the bank gets a higher price than with a cash offer. It all comes down to the strategy of the bank and all of them are different.All you can do is ask the bank.They will very quickly tell you YES OR NO. If it's a maybe or a yes they will tell you under what conditions. I have found the bigger banks want to clean most toxic loans off the books.This makes potential stock purchasers feel better about how many bad loans are still lurking on the books. The goal of bigger banks is to show stronger books so that more stock is purchased in the company to increase the stock price.

Bill Gulley · Answer

Jon, I looked and found some rent/lease to own, wraps that say assume from the seller, or didyou find some with a bank offering assumptions. I can see them doing that as ORE, to market a property, and having someone qualify. I doubt the loan said "Assumable Loan" when the note was made. Were any with BoA, just wondering as that would be a real turn around for institutional lenders. Could they be lenders that are not insured depositories, like HML? Interesting....

Bill Gulley · Answer

Jon, I'm sure someone will disagree with me, but commercial loans are not written with assumption provisions unless the assignee is originally underwritten, such as a co-borrower and it is known that say a business interest will be convey later on. Otherwise, the are not assumable from institutional lenders. There is a difference between assigning the obligation and assuming the note. A lender can allow another to sign an existing note, but they will qualify that new borrower. They will probably not release the original maker, but could, but IMO, unlikely as they have additional recourse. In my area, BoA is not known for allowing such transactions, but those that I have done with notice, after the initial objection, were accomplished without further action. They were not accelerated to maturity. Commercial takes in a large arena of transaction, I assume you mean a residential complex, not a drug store. They will look at the expertise and track record of someone taking over any business concern, obviously since a new druggist could drive an existing business in the ground. Good luck...