Credit Union Re-finance of a fourplex in CA

[Jimmy Bradford]

I'm looking into refinancing a fourplex through my local credit union. I'm unable to qualify for traditional lending at bigger banks because I own too many properties. The credit union are offering me 5/5 loan.   I'm not familiar with these type of notes, but apparently it has a call back option for the Credit Union.

My concern is, if the Credit Union for whatever reason (i.e. credit union goes bankrupt, they want to earn more interest on their loan by lending to someone else, they get bought out), wouldn't they have the right to call back the loan and trigger their acceleration clause. Then I would be scrambling to find a new lender/refinancing. Sure it's unlikely to happen, but people didn't think the recent economic melt down would occur. Is there anything else risky I should consider??

I asked them for a copy of a blank note and below is the language. When it says "you" it means the Credit Union.

You (the Credit Union) have the right to call this loan due on the fifth (5th) anniversary of the loan, and at the end of every five (5) year period thereafter until maturity. You may exercise this right of call anytime during the thirty (30) day period immediately following the fifth (5th) anniversary date of the loan and at any time during the thirty (30) day period immediately following each fifth (5th) year anniversary date of the loan thereafter.

If you exercise Your right to call the loan, I WILL BE REQUIRED TO PAY THE LOAN IN FULL (OR ARRANGE NEW FINANCING) BY THE CALL DATE. I understand that you will mail notice of the call at least ninety (90) days prior to the call date. I am aware that the ANNUAL PERCENTAGE RATE in effect at the time of the call may be substantially higher than the ANNUAL PERCENTAGE RATEon the original loan. If at the time of the call, should I decide (subject to your credit approval) to refinance the outstanding loan balance with you, I understand that the ANNUAL PERCENTAGE RATEshall not exceed my initial ANNUAL PERCENTAGE RATE OF______________ % plus two percent (2%) or the prevailing ANNUAL PERCENTAGE RATEfor this loan type, whichever is lower. Over the Life of the Loan, the interest rate (APR) will never be higher than five (5) percentage points (5.0%) above the initial Loan rate o f_____________ %.

I understand and agree that a refinancing of the outstanding loan balance with you is subject to your credit approval and current credit standards and policies which you reserve the right to change without notice at any time.

It cannot be predicted at this time whether or not you will exercise the option; however, it will generally be to your advantage to exercise the option if an increase in ANNUAL PERCENTAGE RATE has occurred or is anticipated, which would jeopardize your earnings and your ability to meet your financial obligations.