Will a Bank Negotiate a No Mortgage Assumption Policy?

Question

If the bank states that they do not allow their mortgages to be assumed, is there any room to negotiate by offering them a one-time upfront payment or offering to have the loan interest rate to adjust up slightly?

Account Closed · Answer

A Subject To needs to be done correctly using the legal method of doing so. The Deed of OWNERSHIP transfers, the Deed of TRUST (mortgage) does not transfer.) These are two entirely different things. You now own the property .You are not on the loan the seller has, and he still is liable to the bank if you don't pay. You are liable to the seller to perform according to the agreement. Yes, the seller actually can sue you if you start missing payments. Yes, you do ruin his credit if you start missing payments. Yes, the bank can start a foreclosure if you start missing payments. Yes, the bank can call the loan due if you start missing payments. Yes, there are solutions if the bank calls the loan due. Do Not Miss Payments. ;-)

Ned Carey · Answer

@William Coet The standard HUD-1 actually has a line for loans taken subject to the existing mortgage. (However new official settlement document is an ALTA which no one likes and most title still use a HUD-1)  Any GOOD tile company should be able to handle this but most title companies are not very good when it comes to investor deals.

The bank does not get notified of the transfer directly. However they may get notified when the insurance changes. You need to get new insurance when the title changes to your name and the bank may get notified of that.

As I mentioned in another thread on this, there are strategies to handle this. The seller can transfer the title into a trust, which is a transfer allowed by law. then the seller sells you the trust. The bank doesn't get notified of the change in beneficial interest in the trust. However trust law is very complex and you need to know what you are doing.      If the bank states that they do not allow their mortgages to be assumed, is there any room to negotiate

Theoretically yes but the bigger the bank the less likely they are to negotiate. Banks want consistency and one off deal that vary from the norm are frowned upon

Account Closed · Answer

Neither you nor the seller have a legal responsibility to notify the bank. If you notify the bank, the deal will collapse. When you record the Warranty Deed (or when escrow does) it is considered constructive notice and it is the bank's responsibility to check if they choose to. They rarely, rarely, rarely check.

Sam Yin · Answer

From a moral standpoint,  I would encourage those that want to engage in a sub2 transaction to explain the full ramifications to the seller. As the buyer/investor, you careless about what happens to the seller. But if the seller want to make future purchases or want to be an investor, that sub2 deal will likely black ball them from loans.

The sub2 deal will come up during title in their future transactions and future/potential lenders will view that person as an untrustworthy borrower that breaks their promise.

This is something that many do not talk about. Probably because they do not know, do not care, or do not understand the loan/title process. However,  I feel compelled to bring it up in case people on here want to engage in it as a seller, but think they can go forth as an investor as well... it's a dangerous game.  It's really only for sellers that do not plan to make other purchases, while in the sub2 deal.

Just my thoughts.  Not trying to make waves, but it's a moral thing.

Steve Vaughan · Answer

Not if it's a standard mortgage most everyone gets.  These are originated by one entity then sold to what eventually becomes a large pool of mortgage-backed securities, serviced by who you make the payment to.

If it's a private lender or local bank portfolio lender,  you may have a chance.  I made seller financing my end game.  You would have a chance if you bought one of mine but I am a nobody and control 0% of the 'mortgage market'.

Study up on proper sub2.  I'd encourage you to get a stronger deed than a quitclaim and leave the insurance alone with yourself listed as additionally insured.  I also do not sub2 if there is a Heloc or some type of 2nd or equity line.  Title is scoured more frequently.

Phil Moore · Answer

@Steve Vaughan The way I'm reading is that you've been able to sell your purchase money mortgage somehow. Is there a way that you could explain this process to me? Who would buy that, and how exactly would the investor make money on it?

Craig O'Boyle · Answer

William,

All FHA, VA, and USDA loans are qualifying assumable and a bank can't deny an assumption of these products.  We'd be happy to talk about your situation.  We have more info online at assumptionsolutions.com