Wraps and due on sale clause

[T. Alan Ceshker]

I want to start a discussion re the due on sale clause

We are seeing more issues re lenders calling notes due.  Some because of mistakes with insurance.  But, some due to lenders looking.

One lender/servicer is HomeLoanServ.  They actually are looking at prior foreclosures that were reinstated.

What are you folks seeing?  Are you taking measures to protect your deals?

Thanks and let us know -- let's get info flowing

Alan 

[Jay Hinrichs]

Quote from @Account Closed:

Quote from @T. Alan Ceshker:

I want to start a discussion re the due on sale clause

We are seeing more issues re lenders calling notes due.  Some because of mistakes with insurance.  But, some due to lenders looking.

One lender/servicer is HomeLoanServ.  They actually are looking at prior foreclosures that were reinstated.

What are you folks seeing?  Are you taking measures to protect your deals?

Thanks and let us know -- let's get info flowing

Alan 

Your comment: "We are seeing more issues re lenders calling notes due. Some because of mistakes with insurance. But, some due to lenders looking."

Although forthcoming and we appreciate the honesty, it does not build confidence in the process.

The ramifications are serious, especially when we consider the crowd in the "subto community" and how it's being promoted there. If something could be done to convince the head "guru" that buying overleveraged properties in and of itself is reckless for creative finance, done so that he can boast he has “none of his own money involved” and attract people with little money to join his program, perhaps the trajectory of the conversation could be more positive toward solving the problem.

But, Why would we want to promote his risky & bad investing?

I think it's a slow motion train wreck as it stands. I want no part of it.

As I have mentioned many times on this subject  and having done many of this at least 200 . I never ever bought anything or would buy anything without the same principals I buy or lend on today IE there has to be equity day one. Paying over retail only has in my mind one benefit or a reason to do it.. well maybe two .  Tax write off and you really want to own the place as in its a very nice up scale type of property you may want to use as a second home etc.  buying mid grade or lower rentals with zero equity with all these moving parts and not properly capitalized in the first place simply leaves one with no outs in the case of an engine failure.

[T. Alan Ceshker]

Quote from @Joe S.:

Quote from @Josh Bowser:

As opposed to writing Seller Financed deals where there is a loan in place, I've been writing them with the lease with option to purchase route.

Tax benefits stay with the seller until title is transferred, but it still get's the point across.

Safer for both parties as 2nd position liens will get wiped out if the first calls the loan / forecloses here in Georgia.

A lot of controversy about lease options here in Texas.  there’s people that claim to be experts saying they’re doable and then there’s other people that claim to be expert saying stay miles away from lease options. 

The absolute bottom line per the statutes is: if there is a lender not approving the LPO (if longer than 180 days) then you cannot do a LPO.  Period.  There is no "legal LPO" without the approval from the lender. 

[T. Alan Ceshker]

Quote from @Joe S.:

Quote from @T. Alan Ceshker:

Not certain how to work the quote/reply vs reply -- but trying to have my last reply to the "this is illegal" this is unethical" "this is whatever" crowd and try to get to a discussion on structuring wraps for the investors doing these the right way

I have closed over 15,000 wraps without one going back to the bank.  We have had buyers default and we cure.  We have had lenders call due - and we cure.

I am looking for a discussion amongst investors on how to overcome the poor teaching by gurus, tighten up the industry, and get solid wraps accomplished.

There is no harm to the lender when a wrap is completed.  I argued this before the Texas legislature successfully.  A lender has a borrower -- if the borrower cannot pay and they sell via a wrap, then that betters the lender because another is now paying.  Lenders want payments.  They do not want qualified payments -- they want dollars monthly.  If the new buyer does not pay - the lender is in no worse position than if the investor did not come along.

I buy via non-qualified assumption and sell via seller finance wrap.  If my buyer does not pay -- I do.  Then I recover property and sell to a new buyer -- and make dollars.  Lender remains 100% in the same position as before the wrap and after the wrap.  The wrap is a nullity to the business of the lender. Period.

I will engage with those looking to advance discussions on bettering wraps for all and not discuss the esoteric people's money ethical concerns of fictitious harms to billion dollar companies - sorry -- just being real here for a bit.

Thanks to all -- but I prefer to discuss an improvement to an industry vs the fictional worries of those trying to invent wrongdoings to lenders.

Thanks much to all

Alan

So due to a couple of in your face sub2  gurus and the potential of newbie investors muddying in the water the attitude has been in the past and is now anti-Sub2 to the most part on bigger Pockets. 
There are a few posters on Bigger Pockets that have a lot of experience and they are somewhat adamant that Sub2 are not illegal, but do hold some risk. 
I realize that you made this post with the hopes of gaining inside and recommendation, but the chances are  you’ll simply get more challenges. 🧐

I did have a question for you. If you buy a property Sub2 in a trust and then you want to owner finance it would it simply come out of the trust? And if it came out of the trust, would not that defeat the purpose of placing it in trust?

Thanks for adding additional points of view to this. :-)


 

Usually the beneficiary interest is transferred vs selling to end buyer.

I still do not like this method - but with the DOS issue, it may be a necessity.

[Joe S.]

Quote from @T. Alan Ceshker:

Quote from @Joe S.:

Quote from @T. Alan Ceshker:

Not certain how to work the quote/reply vs reply -- but trying to have my last reply to the "this is illegal" this is unethical" "this is whatever" crowd and try to get to a discussion on structuring wraps for the investors doing these the right way

I have closed over 15,000 wraps without one going back to the bank.  We have had buyers default and we cure.  We have had lenders call due - and we cure.

I am looking for a discussion amongst investors on how to overcome the poor teaching by gurus, tighten up the industry, and get solid wraps accomplished.

There is no harm to the lender when a wrap is completed.  I argued this before the Texas legislature successfully.  A lender has a borrower -- if the borrower cannot pay and they sell via a wrap, then that betters the lender because another is now paying.  Lenders want payments.  They do not want qualified payments -- they want dollars monthly.  If the new buyer does not pay - the lender is in no worse position than if the investor did not come along.

I buy via non-qualified assumption and sell via seller finance wrap.  If my buyer does not pay -- I do.  Then I recover property and sell to a new buyer -- and make dollars.  Lender remains 100% in the same position as before the wrap and after the wrap.  The wrap is a nullity to the business of the lender. Period.

I will engage with those looking to advance discussions on bettering wraps for all and not discuss the esoteric people's money ethical concerns of fictitious harms to billion dollar companies - sorry -- just being real here for a bit.

Thanks to all -- but I prefer to discuss an improvement to an industry vs the fictional worries of those trying to invent wrongdoings to lenders.

Thanks much to all

Alan

So due to a couple of in your face sub2  gurus and the potential of newbie investors muddying in the water the attitude has been in the past and is now anti-Sub2 to the most part on bigger Pockets. 
There are a few posters on Bigger Pockets that have a lot of experience and they are somewhat adamant that Sub2 are not illegal, but do hold some risk. 
I realize that you made this post with the hopes of gaining inside and recommendation, but the chances are  you’ll simply get more challenges. 🧐

I did have a question for you. If you buy a property Sub2 in a trust and then you want to owner finance it would it simply come out of the trust? And if it came out of the trust, would not that defeat the purpose of placing it in trust?

Thanks for adding additional points of view to this. :-)


 

Usually the beneficiary interest is transferred vs selling to end buyer.

I still do not like this method - but with the DOS issue, it may be a necessity.

One of my concerns with transferring the beneficial interest to the end buyer is if the end buyer stops paying.

.How hard would it be to regain possession of the property as opposed to simply transferring the deed in the new buyer’s name and doing a standard wrap?

[T. Alan Ceshker]

Quote from @Joe S.:

Quote from @T. Alan Ceshker:

Quote from @Joe S.:

Quote from @T. Alan Ceshker:

Not certain how to work the quote/reply vs reply -- but trying to have my last reply to the "this is illegal" this is unethical" "this is whatever" crowd and try to get to a discussion on structuring wraps for the investors doing these the right way

I have closed over 15,000 wraps without one going back to the bank.  We have had buyers default and we cure.  We have had lenders call due - and we cure.

I am looking for a discussion amongst investors on how to overcome the poor teaching by gurus, tighten up the industry, and get solid wraps accomplished.

There is no harm to the lender when a wrap is completed.  I argued this before the Texas legislature successfully.  A lender has a borrower -- if the borrower cannot pay and they sell via a wrap, then that betters the lender because another is now paying.  Lenders want payments.  They do not want qualified payments -- they want dollars monthly.  If the new buyer does not pay - the lender is in no worse position than if the investor did not come along.

I buy via non-qualified assumption and sell via seller finance wrap.  If my buyer does not pay -- I do.  Then I recover property and sell to a new buyer -- and make dollars.  Lender remains 100% in the same position as before the wrap and after the wrap.  The wrap is a nullity to the business of the lender. Period.

I will engage with those looking to advance discussions on bettering wraps for all and not discuss the esoteric people's money ethical concerns of fictitious harms to billion dollar companies - sorry -- just being real here for a bit.

Thanks to all -- but I prefer to discuss an improvement to an industry vs the fictional worries of those trying to invent wrongdoings to lenders.

Thanks much to all

Alan

So due to a couple of in your face sub2  gurus and the potential of newbie investors muddying in the water the attitude has been in the past and is now anti-Sub2 to the most part on bigger Pockets. 
There are a few posters on Bigger Pockets that have a lot of experience and they are somewhat adamant that Sub2 are not illegal, but do hold some risk. 
I realize that you made this post with the hopes of gaining inside and recommendation, but the chances are  you’ll simply get more challenges. 🧐

I did have a question for you. If you buy a property Sub2 in a trust and then you want to owner finance it would it simply come out of the trust? And if it came out of the trust, would not that defeat the purpose of placing it in trust?

Thanks for adding additional points of view to this. :-)


 

Usually the beneficiary interest is transferred vs selling to end buyer.

I still do not like this method - but with the DOS issue, it may be a necessity.

One of my concerns with transferring the beneficial interest to the end buyer is if the end buyer stops paying.

.How hard would it be to regain possession of the property as opposed to simply transferring the deed in the new buyer’s name and doing a standard wrap?

Ah -- A note and deed of trust lien is drafted to allow you to recover the property.  Same as a normal conveyance.

[T. Alan Ceshker]

Quote from @Account Closed:

Quote from @T. Alan Ceshker:

I want to start a discussion re the due on sale clause

We are seeing more issues re lenders calling notes due.  Some because of mistakes with insurance.  But, some due to lenders looking.

One lender/servicer is HomeLoanServ.  They actually are looking at prior foreclosures that were reinstated.

What are you folks seeing?  Are you taking measures to protect your deals?

Thanks and let us know -- let's get info flowing

Alan 

Your comment: "We are seeing more issues re lenders calling notes due. Some because of mistakes with insurance. But, some due to lenders looking."

Although forthcoming and we appreciate the honesty, it does not build confidence in the process.

The ramifications are serious, especially when we consider the crowd in the "subto community" and how it's being promoted there. If something could be done to convince the head "guru" that buying overleveraged properties in and of itself is reckless for creative finance, done so that he can boast he has “none of his own money involved” and attract people with little money to join his program, perhaps the trajectory of the conversation could be more positive toward solving the problem.

But, Why would we want to promote his risky & bad investing?

I think it's a slow motion train wreck as it stands. I want no part of it.

 The guru methods of "Sub Tos" is not how we consult on assumptions.  We paper them differently and have numerous disclosures and checks and balances in place to ensure the deal is as risk free as currently possible.

I agree the gurus are soiling this industry quite a bit.  Thus, my effort to tighten it up a bit via open discussions and disclosing how we are doing these the right way.

[Ron S.]

Quote from @T. Alan Ceshker:

Quote from @Account Closed:

Quote from @T. Alan Ceshker:

I want to start a discussion re the due on sale clause

We are seeing more issues re lenders calling notes due.  Some because of mistakes with insurance.  But, some due to lenders looking.

One lender/servicer is HomeLoanServ.  They actually are looking at prior foreclosures that were reinstated.

What are you folks seeing?  Are you taking measures to protect your deals?

Thanks and let us know -- let's get info flowing

Alan 

Your comment: "We are seeing more issues re lenders calling notes due. Some because of mistakes with insurance. But, some due to lenders looking."

Although forthcoming and we appreciate the honesty, it does not build confidence in the process.

The ramifications are serious, especially when we consider the crowd in the "subto community" and how it's being promoted there. If something could be done to convince the head "guru" that buying overleveraged properties in and of itself is reckless for creative finance, done so that he can boast he has “none of his own money involved” and attract people with little money to join his program, perhaps the trajectory of the conversation could be more positive toward solving the problem.

But, Why would we want to promote his risky & bad investing?

I think it's a slow motion train wreck as it stands. I want no part of it.

 The guru methods of "Sub Tos" is not how we consult on assumptions.  We paper them differently and have numerous disclosures and checks and balances in place to ensure the deal is as risk free as currently possible.

I agree the gurus are soiling this industry quite a bit.  Thus, my effort to tighten it up a bit via open discussions and disclosing how we are doing these the right way.

Nothing you do to put lipstick on this type of transaction matters if the lender isn't aware and supportive, and no, they aren't going to be supportive of a sub to or wrap. There is no right way to do a sub to. There is a reason notes have a due on sale clause, so that they can have a response to a sub to or wrap. You can smoke and mirror and paper them any way you want but YOUR transaction doesn't involve or jump in front of the transaction between the original borrower and the lender. YOUR transaction by its very nature conflicts with the lender's instructions in the note and violates the term of the note between the lender and the borrower.

Yes, people get away with it every day but no, there is no "right way" to do a sub to/wrap because the lender explicitly states and the borrower agrees at the time of origination, that it cannot and won't be done. Just because you do it, and just because you got away with it, doesn't mean you did something the right way. You just didn't get caught.

And god help you if you do it to a borrower in financial distress or if you do it in a state that prohibits equity skimming, requires licensure or registration, or other nefarious acts against homeowners.

[Jay Hinrichs]

Quote from @Ron S.:

Quote from @T. Alan Ceshker:

Quote from @Account Closed:

Quote from @T. Alan Ceshker:

I want to start a discussion re the due on sale clause

We are seeing more issues re lenders calling notes due.  Some because of mistakes with insurance.  But, some due to lenders looking.

One lender/servicer is HomeLoanServ.  They actually are looking at prior foreclosures that were reinstated.

What are you folks seeing?  Are you taking measures to protect your deals?

Thanks and let us know -- let's get info flowing

Alan 

Your comment: "We are seeing more issues re lenders calling notes due. Some because of mistakes with insurance. But, some due to lenders looking."

Although forthcoming and we appreciate the honesty, it does not build confidence in the process.

The ramifications are serious, especially when we consider the crowd in the "subto community" and how it's being promoted there. If something could be done to convince the head "guru" that buying overleveraged properties in and of itself is reckless for creative finance, done so that he can boast he has “none of his own money involved” and attract people with little money to join his program, perhaps the trajectory of the conversation could be more positive toward solving the problem.

But, Why would we want to promote his risky & bad investing?

I think it's a slow motion train wreck as it stands. I want no part of it.

 The guru methods of "Sub Tos" is not how we consult on assumptions.  We paper them differently and have numerous disclosures and checks and balances in place to ensure the deal is as risk free as currently possible.

I agree the gurus are soiling this industry quite a bit.  Thus, my effort to tighten it up a bit via open discussions and disclosing how we are doing these the right way.

Nothing you do to put lipstick on this type of transaction matters if the lender isn't aware and supportive, and no, they aren't going to be supportive of a sub to or wrap. There is no right way to do a sub to. There is a reason notes have a due on sale clause, so that they can have a response to a sub to or wrap. You can smoke and mirror and paper them any way you want but YOUR transaction doesn't involve or jump in front of the transaction between the original borrower and the lender. YOUR transaction by its very nature conflicts with the lender's instructions in the note and violates the term of the note between the lender and the borrower.

Yes, people get away with it every day but no, there is no "right way" to do a sub to/wrap because the lender explicitly states and the borrower agrees at the time of origination, that it cannot and won't be done. Just because you do it, and just because you got away with it, doesn't mean you did something the right way. You just didn't get caught.

And god help you if you do it to a borrower in financial distress or if you do it in a state that prohibits equity skimming, requires licensure or registration, or other nefarious acts against homeowners.

the crew I rescued in Oregon who did about 30 of these got in major trouble when they started to fail .. under capitalized drank the kool aid.. wrap un qualified buyers into the houses.. original sellers getting NOD's and then filing complaints with the AG etc.. it broke them end of the day they did not get criminally charged .. I know two others that did and went to prison.. bad actors got into title then just ripped rents never paid ruined the sellers.. you will see this for sure as the bad actors learn all this on U tube.. it happens and it will accelerate now..

We do have to remember the banks right under the note is in the section for Events of Default and Alienation of title is one.. so any transfer to new buyer or trust or anything like that is a violation and it gives the lender the right to accelerate the note but its NOT obligated to do so. Thats why sub 2 happens.. U can do them but you do them at your own peril.  And for sure sellers should basically never do them unless they are going to lose the property and they will get some equity by doing it and their credit is already trashed.. this was the model that i ran for all my sub 2 when foreclosure rescue sub 2 was legal in OR and WA. big times laws now.. Plus I know CA has them to.  A seller that values their credit would be  a fool to sell sub 2 thats the bottom line. And if they went to an attorney 99% of attorneys would advise them of these facts.

[T. Alan Ceshker]

Quote from @Ron S.:

Quote from @T. Alan Ceshker:

Quote from @Account Closed:

Quote from @T. Alan Ceshker:

I want to start a discussion re the due on sale clause

We are seeing more issues re lenders calling notes due.  Some because of mistakes with insurance.  But, some due to lenders looking.

One lender/servicer is HomeLoanServ.  They actually are looking at prior foreclosures that were reinstated.

What are you folks seeing?  Are you taking measures to protect your deals?

Thanks and let us know -- let's get info flowing

Alan 

Your comment: "We are seeing more issues re lenders calling notes due. Some because of mistakes with insurance. But, some due to lenders looking."

Although forthcoming and we appreciate the honesty, it does not build confidence in the process.

The ramifications are serious, especially when we consider the crowd in the "subto community" and how it's being promoted there. If something could be done to convince the head "guru" that buying overleveraged properties in and of itself is reckless for creative finance, done so that he can boast he has “none of his own money involved” and attract people with little money to join his program, perhaps the trajectory of the conversation could be more positive toward solving the problem.

But, Why would we want to promote his risky & bad investing?

I think it's a slow motion train wreck as it stands. I want no part of it.

 The guru methods of "Sub Tos" is not how we consult on assumptions.  We paper them differently and have numerous disclosures and checks and balances in place to ensure the deal is as risk free as currently possible.

I agree the gurus are soiling this industry quite a bit.  Thus, my effort to tighten it up a bit via open discussions and disclosing how we are doing these the right way.

Nothing you do to put lipstick on this type of transaction matters if the lender isn't aware and supportive, and no, they aren't going to be supportive of a sub to or wrap. There is no right way to do a sub to. There is a reason notes have a due on sale clause, so that they can have a response to a sub to or wrap. You can smoke and mirror and paper them any way you want but YOUR transaction doesn't involve or jump in front of the transaction between the original borrower and the lender. YOUR transaction by its very nature conflicts with the lender's instructions in the note and violates the term of the note between the lender and the borrower.

Yes, people get away with it every day but no, there is no "right way" to do a sub to/wrap because the lender explicitly states and the borrower agrees at the time of origination, that it cannot and won't be done. Just because you do it, and just because you got away with it, doesn't mean you did something the right way. You just didn't get caught.

And god help you if you do it to a borrower in financial distress or if you do it in a state that prohibits equity skimming, requires licensure or registration, or other nefarious acts against homeowners.

1st - it is not equity skimming.  Equity skimming requires a nonpayment of the underlying mortgage -- to skim the equity -- this is not occurring.  The payments are being issued or the property is recovered.  There is no license that allows equity skimming.  This is an illegal act.

2nd - this is a deed of trust issue and not a promissory note issue.

3rd - A wrap is not precluded.  A wrap gives a lender the right to act in certain ways.  Why do people not understand this?  A buyer and seller are accepting the risk of this permissive right being acted upon.  Proper disclosures are needed.  Eyes wide open acceptance of the risk is needed.  I agree this does not occur in all the wraps occurring now.  Thus - the reason for the post here.  Let's protect all parties -- including the lender.  I do not want to hear unfounded illegal claims - unfounded breach claims - unfounded unethical claims - or anything else.  My purpose is to better a system for all involved -- ALL.

I will say again - ad nauseam - the lender is not harmed in any manner whatsoever.  This is no different than taking advantage of a legal tax loophole.  The lender is paid.  The lender is required to be paid by not only their borrower -- but another party.  This is a betterment for the lender.  More security. 

Let me ask this -- if you are a - "these things are illegal/unethical/wrong/stupid/or whatever person -- start a new thread.  I seek to help and advance in a positive manner.  Advance all parties -- including lender.

Love you guys -- but troll elsewhere if a nay sayer -- and post here if you have some constructive info or knowledge -- I never claim to be the smartest -- just trying to hear from the smartest.

[Jay Hinrichs]

Quote from @T. Alan Ceshker:

Quote from @Ron S.:

Quote from @T. Alan Ceshker:

Quote from @Account Closed:

Quote from @T. Alan Ceshker:

I want to start a discussion re the due on sale clause

We are seeing more issues re lenders calling notes due.  Some because of mistakes with insurance.  But, some due to lenders looking.

One lender/servicer is HomeLoanServ.  They actually are looking at prior foreclosures that were reinstated.

What are you folks seeing?  Are you taking measures to protect your deals?

Thanks and let us know -- let's get info flowing

Alan 

Your comment: "We are seeing more issues re lenders calling notes due. Some because of mistakes with insurance. But, some due to lenders looking."

Although forthcoming and we appreciate the honesty, it does not build confidence in the process.

The ramifications are serious, especially when we consider the crowd in the "subto community" and how it's being promoted there. If something could be done to convince the head "guru" that buying overleveraged properties in and of itself is reckless for creative finance, done so that he can boast he has “none of his own money involved” and attract people with little money to join his program, perhaps the trajectory of the conversation could be more positive toward solving the problem.

But, Why would we want to promote his risky & bad investing?

I think it's a slow motion train wreck as it stands. I want no part of it.

 The guru methods of "Sub Tos" is not how we consult on assumptions.  We paper them differently and have numerous disclosures and checks and balances in place to ensure the deal is as risk free as currently possible.

I agree the gurus are soiling this industry quite a bit.  Thus, my effort to tighten it up a bit via open discussions and disclosing how we are doing these the right way.

Nothing you do to put lipstick on this type of transaction matters if the lender isn't aware and supportive, and no, they aren't going to be supportive of a sub to or wrap. There is no right way to do a sub to. There is a reason notes have a due on sale clause, so that they can have a response to a sub to or wrap. You can smoke and mirror and paper them any way you want but YOUR transaction doesn't involve or jump in front of the transaction between the original borrower and the lender. YOUR transaction by its very nature conflicts with the lender's instructions in the note and violates the term of the note between the lender and the borrower.

Yes, people get away with it every day but no, there is no "right way" to do a sub to/wrap because the lender explicitly states and the borrower agrees at the time of origination, that it cannot and won't be done. Just because you do it, and just because you got away with it, doesn't mean you did something the right way. You just didn't get caught.

And god help you if you do it to a borrower in financial distress or if you do it in a state that prohibits equity skimming, requires licensure or registration, or other nefarious acts against homeowners.

1st - it is not equity skimming.  Equity skimming requires a nonpayment of the underlying mortgage -- to skim the equity -- this is not occurring.  The payments are being issued or the property is recovered.  There is no license that allows equity skimming.  This is an illegal act.

2nd - this is a deed of trust issue and not a promissory note issue.

3rd - A wrap is not precluded.  A wrap gives a lender the right to act in certain ways.  Why do people not understand this?  A buyer and seller are accepting the risk of this permissive right being acted upon.  Proper disclosures are needed.  Eyes wide open acceptance of the risk is needed.  I agree this does not occur in all the wraps occurring now.  Thus - the reason for the post here.  Let's protect all parties -- including the lender.  I do not want to hear unfounded illegal claims - unfounded breach claims - unfounded unethical claims - or anything else.  My purpose is to better a system for all involved -- ALL.

I will say again - ad nauseam - the lender is not harmed in any manner whatsoever.  This is no different than taking advantage of a legal tax loophole.  The lender is paid.  The lender is required to be paid by not only their borrower -- but another party.  This is a betterment for the lender.  More security. 

Let me ask this -- if you are a - "these things are illegal/unethical/wrong/stupid/or whatever person -- start a new thread.  I seek to help and advance in a positive manner.  Advance all parties -- including lender.

Love you guys -- but troll elsewhere if a nay sayer -- and post here if you have some constructive info or knowledge -- I never claim to be the smartest -- just trying to hear from the smartest.

it would help if you would actually give detail about how your helping to keep these transactions safe and sound not just  say so but real actionable advice on how that is done.  Other wise its just the same pitch MOrby gives.

[Ron S.]

Quote from @T. Alan Ceshker:

Quote from @Ron S.:

Quote from @T. Alan Ceshker:

Quote from @Account Closed:

Quote from @T. Alan Ceshker:

I want to start a discussion re the due on sale clause

We are seeing more issues re lenders calling notes due.  Some because of mistakes with insurance.  But, some due to lenders looking.

One lender/servicer is HomeLoanServ.  They actually are looking at prior foreclosures that were reinstated.

What are you folks seeing?  Are you taking measures to protect your deals?

Thanks and let us know -- let's get info flowing

Alan 

Your comment: "We are seeing more issues re lenders calling notes due. Some because of mistakes with insurance. But, some due to lenders looking."

Although forthcoming and we appreciate the honesty, it does not build confidence in the process.

The ramifications are serious, especially when we consider the crowd in the "subto community" and how it's being promoted there. If something could be done to convince the head "guru" that buying overleveraged properties in and of itself is reckless for creative finance, done so that he can boast he has “none of his own money involved” and attract people with little money to join his program, perhaps the trajectory of the conversation could be more positive toward solving the problem.

But, Why would we want to promote his risky & bad investing?

I think it's a slow motion train wreck as it stands. I want no part of it.

 The guru methods of "Sub Tos" is not how we consult on assumptions.  We paper them differently and have numerous disclosures and checks and balances in place to ensure the deal is as risk free as currently possible.

I agree the gurus are soiling this industry quite a bit.  Thus, my effort to tighten it up a bit via open discussions and disclosing how we are doing these the right way.

Nothing you do to put lipstick on this type of transaction matters if the lender isn't aware and supportive, and no, they aren't going to be supportive of a sub to or wrap. There is no right way to do a sub to. There is a reason notes have a due on sale clause, so that they can have a response to a sub to or wrap. You can smoke and mirror and paper them any way you want but YOUR transaction doesn't involve or jump in front of the transaction between the original borrower and the lender. YOUR transaction by its very nature conflicts with the lender's instructions in the note and violates the term of the note between the lender and the borrower.

Yes, people get away with it every day but no, there is no "right way" to do a sub to/wrap because the lender explicitly states and the borrower agrees at the time of origination, that it cannot and won't be done. Just because you do it, and just because you got away with it, doesn't mean you did something the right way. You just didn't get caught.

And god help you if you do it to a borrower in financial distress or if you do it in a state that prohibits equity skimming, requires licensure or registration, or other nefarious acts against homeowners.

1st - it is not equity skimming.  Equity skimming requires a nonpayment of the underlying mortgage -- to skim the equity -- this is not occurring.  The payments are being issued or the property is recovered.  There is no license that allows equity skimming.  This is an illegal act.

2nd - this is a deed of trust issue and not a promissory note issue.

3rd - A wrap is not precluded.  A wrap gives a lender the right to act in certain ways.  Why do people not understand this?  A buyer and seller are accepting the risk of this permissive right being acted upon.  Proper disclosures are needed.  Eyes wide open acceptance of the risk is needed.  I agree this does not occur in all the wraps occurring now.  Thus - the reason for the post here.  Let's protect all parties -- including the lender.  I do not want to hear unfounded illegal claims - unfounded breach claims - unfounded unethical claims - or anything else.  My purpose is to better a system for all involved -- ALL.

I will say again - ad nauseam - the lender is not harmed in any manner whatsoever.  This is no different than taking advantage of a legal tax loophole.  The lender is paid.  The lender is required to be paid by not only their borrower -- but another party.  This is a betterment for the lender.  More security. 

Let me ask this -- if you are a - "these things are illegal/unethical/wrong/stupid/or whatever person -- start a new thread.  I seek to help and advance in a positive manner.  Advance all parties -- including lender.

Love you guys -- but troll elsewhere if a nay sayer -- and post here if you have some constructive info or knowledge -- I never claim to be the smartest -- just trying to hear from the smartest.

 That's the beauty of lawyers. They think they know everything and litigate to prove it. One side always loses so at least one of the lawyers is always wrong, or, the other lawyer had a better line of B.S. at least. You lost me completely by your failure to understand that if a buyer approaches a seller and offers to take over their property subject to the lender's lien, and stops paying and puts that borrower into default or, if the borrower was in default already, that "buyer" may run afoul of local/state laws and may be accused of equity skimming. Some greasy lawyer will no doubt jump in and say its not equity skimming, when it is.

Troll elsewhere? You're the one trying to drum up business, and pretty defensive too. Who's the troll?

[T. Alan Ceshker]

Quote from @Jay Hinrichs:

Quote from @T. Alan Ceshker:

Quote from @Ron S.:

Quote from @T. Alan Ceshker:

Quote from @Account Closed:

Quote from @T. Alan Ceshker:

I want to start a discussion re the due on sale clause

We are seeing more issues re lenders calling notes due.  Some because of mistakes with insurance.  But, some due to lenders looking.

One lender/servicer is HomeLoanServ.  They actually are looking at prior foreclosures that were reinstated.

What are you folks seeing?  Are you taking measures to protect your deals?

Thanks and let us know -- let's get info flowing

Alan 

Your comment: "We are seeing more issues re lenders calling notes due. Some because of mistakes with insurance. But, some due to lenders looking."

Although forthcoming and we appreciate the honesty, it does not build confidence in the process.

The ramifications are serious, especially when we consider the crowd in the "subto community" and how it's being promoted there. If something could be done to convince the head "guru" that buying overleveraged properties in and of itself is reckless for creative finance, done so that he can boast he has “none of his own money involved” and attract people with little money to join his program, perhaps the trajectory of the conversation could be more positive toward solving the problem.

But, Why would we want to promote his risky & bad investing?

I think it's a slow motion train wreck as it stands. I want no part of it.

 The guru methods of "Sub Tos" is not how we consult on assumptions.  We paper them differently and have numerous disclosures and checks and balances in place to ensure the deal is as risk free as currently possible.

I agree the gurus are soiling this industry quite a bit.  Thus, my effort to tighten it up a bit via open discussions and disclosing how we are doing these the right way.

Nothing you do to put lipstick on this type of transaction matters if the lender isn't aware and supportive, and no, they aren't going to be supportive of a sub to or wrap. There is no right way to do a sub to. There is a reason notes have a due on sale clause, so that they can have a response to a sub to or wrap. You can smoke and mirror and paper them any way you want but YOUR transaction doesn't involve or jump in front of the transaction between the original borrower and the lender. YOUR transaction by its very nature conflicts with the lender's instructions in the note and violates the term of the note between the lender and the borrower.

Yes, people get away with it every day but no, there is no "right way" to do a sub to/wrap because the lender explicitly states and the borrower agrees at the time of origination, that it cannot and won't be done. Just because you do it, and just because you got away with it, doesn't mean you did something the right way. You just didn't get caught.

And god help you if you do it to a borrower in financial distress or if you do it in a state that prohibits equity skimming, requires licensure or registration, or other nefarious acts against homeowners.

1st - it is not equity skimming.  Equity skimming requires a nonpayment of the underlying mortgage -- to skim the equity -- this is not occurring.  The payments are being issued or the property is recovered.  There is no license that allows equity skimming.  This is an illegal act.

2nd - this is a deed of trust issue and not a promissory note issue.

3rd - A wrap is not precluded.  A wrap gives a lender the right to act in certain ways.  Why do people not understand this?  A buyer and seller are accepting the risk of this permissive right being acted upon.  Proper disclosures are needed.  Eyes wide open acceptance of the risk is needed.  I agree this does not occur in all the wraps occurring now.  Thus - the reason for the post here.  Let's protect all parties -- including the lender.  I do not want to hear unfounded illegal claims - unfounded breach claims - unfounded unethical claims - or anything else.  My purpose is to better a system for all involved -- ALL.

I will say again - ad nauseam - the lender is not harmed in any manner whatsoever.  This is no different than taking advantage of a legal tax loophole.  The lender is paid.  The lender is required to be paid by not only their borrower -- but another party.  This is a betterment for the lender.  More security. 

Let me ask this -- if you are a - "these things are illegal/unethical/wrong/stupid/or whatever person -- start a new thread.  I seek to help and advance in a positive manner.  Advance all parties -- including lender.

Love you guys -- but troll elsewhere if a nay sayer -- and post here if you have some constructive info or knowledge -- I never claim to be the smartest -- just trying to hear from the smartest.

it would help if you would actually give detail about how your helping to keep these transactions safe and sound not just  say so but real actionable advice on how that is done.  Other wise its just the same pitch MOrby gives.

 Allrighty -- this is what we need.  And thanks for reminding me to back fill some detail.

Some things off the dome - disclaimer - there may be more:

- we review the file for disparate loan amounts (ie underlying lien cannot be more than new)

- we assist with getting insurance in place

- I stay involved in all my wraps post closing - if needed

- we have auto releases in our deed of trust to avoid needing seller when all are paid off

- we provide POAs to handle return of escrows and insurance claim proceeds

- we advise how to handle re 1098 tax notices

- we actually step in if there is overreaching or errors in structure/contracting

- we encourage 3rd party loan servicing companies be used

- we require the wrapped note to be obtained and reviewed before closing

- we encourage an RMLO be used to vet end buyers

- we advise of all required state and federal disclosures be used

That is all I have off the cuff -- but very much looking forward to hearing from others on their risk avoidance measures

[Frank O.]

Quote from @Doug Smith:

Quote from @T. Alan Ceshker:

Quote from @Doug Smith:

Quote from @T. Alan Ceshker:

Thanks for the question

Yes it does 

First - get insurance in place correctly -- use a proven insurance provider -- this is most important 

Educate seller to not contact the bank

Use a trust structure to have the conveyance appear to comply with Garn St Germain

Be ready to fix if needed via a deed flip flop or paying off the mortgage

These transactions should only be attempted by experienced and ready investors -- those with the knowledge and ability to fix if needed

Thanks

Alan

 Hi Alan, I've made it no secret that I have ethical issues with many of the sub-to tactics being used nowadays, but I have to ask about your statement "educate your seller not to contact the bank". You're knowingly advising a client to hide a covenant break to a financial institution which weakens the lender's risk rating on a deal. How is that any different than concealment in cases such as bankruptcy? What is to keep an unqualified applicant from being declined a loan at a bank only to have them "secretly assume" a mortgage loan from a previously qualified applicant? The Due on Sale Clause was born out of Sub-To deals 30-40 years ago where properties are transferred to non-approved, usually unqualified applicants. How can a financial institution manage risk if properties are secretly being transferred to unqualified applicants with attorneys actively coaching clients to circumvent and conceal covenant breaks. I realize your an attorney, but that smells like mortgage fraud. What specific statutes keep what your advising from being concealment at best and mortgage fraud at worst?

Simple -- the fraudulent actions and misrepresentations you reference are against statutes and contractual terms.  The due on sale clause is a permissive act allowed to the bank and not a prohibitory clause.  Very simple.

In a wrap, nobody is deceiving the bank.  They just are not proactively advising a permissive right has been triggered.  This is not actionable conduct and any attorney that says it is -- is wrong and likely trying to scare their clients into buying something from them - legal services, coaching, docs or otherwise.

I may be in the wrong forum for a high level discussion on how to make wraps safer and more risk free than they already are.

Maybe someone will pop out soon and have something other than misinformation and scare tactics.

I remain hopeful

Thanks

Alan

 Perhaps this is the wrong forum. My low-level intellect can't seem to function on your level. You're right...it is a permissive act, however your active recommendation of concealment is what I am taking issue with. When we underwrite a loan, we are underwriting the borrower. Sub-to without our permission increases our risk. You're recommendation to conceal it from us is what I am taking issue with. 

[T. Alan Ceshker]

Quote from @Ron S.:

Quote from @T. Alan Ceshker:

Quote from @Ron S.:

Quote from @T. Alan Ceshker:

Quote from @Account Closed:

Quote from @T. Alan Ceshker:

I want to start a discussion re the due on sale clause

We are seeing more issues re lenders calling notes due.  Some because of mistakes with insurance.  But, some due to lenders looking.

One lender/servicer is HomeLoanServ.  They actually are looking at prior foreclosures that were reinstated.

What are you folks seeing?  Are you taking measures to protect your deals?

Thanks and let us know -- let's get info flowing

Alan 

Your comment: "We are seeing more issues re lenders calling notes due. Some because of mistakes with insurance. But, some due to lenders looking."

Although forthcoming and we appreciate the honesty, it does not build confidence in the process.

The ramifications are serious, especially when we consider the crowd in the "subto community" and how it's being promoted there. If something could be done to convince the head "guru" that buying overleveraged properties in and of itself is reckless for creative finance, done so that he can boast he has “none of his own money involved” and attract people with little money to join his program, perhaps the trajectory of the conversation could be more positive toward solving the problem.

But, Why would we want to promote his risky & bad investing?

I think it's a slow motion train wreck as it stands. I want no part of it.

 The guru methods of "Sub Tos" is not how we consult on assumptions.  We paper them differently and have numerous disclosures and checks and balances in place to ensure the deal is as risk free as currently possible.

I agree the gurus are soiling this industry quite a bit.  Thus, my effort to tighten it up a bit via open discussions and disclosing how we are doing these the right way.

Nothing you do to put lipstick on this type of transaction matters if the lender isn't aware and supportive, and no, they aren't going to be supportive of a sub to or wrap. There is no right way to do a sub to. There is a reason notes have a due on sale clause, so that they can have a response to a sub to or wrap. You can smoke and mirror and paper them any way you want but YOUR transaction doesn't involve or jump in front of the transaction between the original borrower and the lender. YOUR transaction by its very nature conflicts with the lender's instructions in the note and violates the term of the note between the lender and the borrower.

Yes, people get away with it every day but no, there is no "right way" to do a sub to/wrap because the lender explicitly states and the borrower agrees at the time of origination, that it cannot and won't be done. Just because you do it, and just because you got away with it, doesn't mean you did something the right way. You just didn't get caught.

And god help you if you do it to a borrower in financial distress or if you do it in a state that prohibits equity skimming, requires licensure or registration, or other nefarious acts against homeowners.

1st - it is not equity skimming.  Equity skimming requires a nonpayment of the underlying mortgage -- to skim the equity -- this is not occurring.  The payments are being issued or the property is recovered.  There is no license that allows equity skimming.  This is an illegal act.

2nd - this is a deed of trust issue and not a promissory note issue.

3rd - A wrap is not precluded.  A wrap gives a lender the right to act in certain ways.  Why do people not understand this?  A buyer and seller are accepting the risk of this permissive right being acted upon.  Proper disclosures are needed.  Eyes wide open acceptance of the risk is needed.  I agree this does not occur in all the wraps occurring now.  Thus - the reason for the post here.  Let's protect all parties -- including the lender.  I do not want to hear unfounded illegal claims - unfounded breach claims - unfounded unethical claims - or anything else.  My purpose is to better a system for all involved -- ALL.

I will say again - ad nauseam - the lender is not harmed in any manner whatsoever.  This is no different than taking advantage of a legal tax loophole.  The lender is paid.  The lender is required to be paid by not only their borrower -- but another party.  This is a betterment for the lender.  More security. 

Let me ask this -- if you are a - "these things are illegal/unethical/wrong/stupid/or whatever person -- start a new thread.  I seek to help and advance in a positive manner.  Advance all parties -- including lender.

Love you guys -- but troll elsewhere if a nay sayer -- and post here if you have some constructive info or knowledge -- I never claim to be the smartest -- just trying to hear from the smartest.

 That's the beauty of lawyers. They think they know everything and litigate to prove it. One side always loses so at least one of the lawyers is always wrong, or, the other lawyer had a better line of B.S. at least. You lost me completely by your failure to understand that if a buyer approaches a seller and offers to take over their property subject to the lender's lien, and stops paying and puts that borrower into default or, if the borrower was in default already, that "buyer" may run afoul of local/state laws and may be accused of equity skimming. Some greasy lawyer will no doubt jump in and say its not equity skimming, when it is.

Troll elsewhere? You're the one trying to drum up business, and pretty defensive too. Who's the troll?

Wow -- you are a bit angry.  Did you answer the question -- if the foreclosure is avoided and 2 are responsible to pay the mortgage, how is the lender harmed? 

Kinda hard to troll a post when I am the poster.  You funny.

I receive no dollars from my info posts.  I receive no dollars from helping the way we do on these.  Disparage and rant elsewhere angry one.  I aint selling programs -- advertising coaching -- mentoring for dollars -- nothing.  Why the hate brother.

You are challenged to dispute -- with facts, not false statements and presumptions -- anything I present to the group.  However, you fail to do this.  You choose to troll.

I wish you the best - but you really need to seek other threads to spew hate and baseless allegations -- please -- there are other options for you to Karen out.  I seek input from the folks wanting to do this better - who want to improve the industry standards.

I wish you well - but will not reply to any more of your hate.  You take care of California - we got Texas.

[Ron S.]

Quote from @T. Alan Ceshker:

Quote from @Ron S.:

Quote from @T. Alan Ceshker:

Quote from @Ron S.:

Quote from @T. Alan Ceshker:

Quote from @Account Closed:

Quote from @T. Alan Ceshker:

I want to start a discussion re the due on sale clause

We are seeing more issues re lenders calling notes due.  Some because of mistakes with insurance.  But, some due to lenders looking.

One lender/servicer is HomeLoanServ.  They actually are looking at prior foreclosures that were reinstated.

What are you folks seeing?  Are you taking measures to protect your deals?

Thanks and let us know -- let's get info flowing

Alan 

Your comment: "We are seeing more issues re lenders calling notes due. Some because of mistakes with insurance. But, some due to lenders looking."

Although forthcoming and we appreciate the honesty, it does not build confidence in the process.

The ramifications are serious, especially when we consider the crowd in the "subto community" and how it's being promoted there. If something could be done to convince the head "guru" that buying overleveraged properties in and of itself is reckless for creative finance, done so that he can boast he has “none of his own money involved” and attract people with little money to join his program, perhaps the trajectory of the conversation could be more positive toward solving the problem.

But, Why would we want to promote his risky & bad investing?

I think it's a slow motion train wreck as it stands. I want no part of it.

 The guru methods of "Sub Tos" is not how we consult on assumptions.  We paper them differently and have numerous disclosures and checks and balances in place to ensure the deal is as risk free as currently possible.

I agree the gurus are soiling this industry quite a bit.  Thus, my effort to tighten it up a bit via open discussions and disclosing how we are doing these the right way.

Nothing you do to put lipstick on this type of transaction matters if the lender isn't aware and supportive, and no, they aren't going to be supportive of a sub to or wrap. There is no right way to do a sub to. There is a reason notes have a due on sale clause, so that they can have a response to a sub to or wrap. You can smoke and mirror and paper them any way you want but YOUR transaction doesn't involve or jump in front of the transaction between the original borrower and the lender. YOUR transaction by its very nature conflicts with the lender's instructions in the note and violates the term of the note between the lender and the borrower.

Yes, people get away with it every day but no, there is no "right way" to do a sub to/wrap because the lender explicitly states and the borrower agrees at the time of origination, that it cannot and won't be done. Just because you do it, and just because you got away with it, doesn't mean you did something the right way. You just didn't get caught.

And god help you if you do it to a borrower in financial distress or if you do it in a state that prohibits equity skimming, requires licensure or registration, or other nefarious acts against homeowners.

1st - it is not equity skimming.  Equity skimming requires a nonpayment of the underlying mortgage -- to skim the equity -- this is not occurring.  The payments are being issued or the property is recovered.  There is no license that allows equity skimming.  This is an illegal act.

2nd - this is a deed of trust issue and not a promissory note issue.

3rd - A wrap is not precluded.  A wrap gives a lender the right to act in certain ways.  Why do people not understand this?  A buyer and seller are accepting the risk of this permissive right being acted upon.  Proper disclosures are needed.  Eyes wide open acceptance of the risk is needed.  I agree this does not occur in all the wraps occurring now.  Thus - the reason for the post here.  Let's protect all parties -- including the lender.  I do not want to hear unfounded illegal claims - unfounded breach claims - unfounded unethical claims - or anything else.  My purpose is to better a system for all involved -- ALL.

I will say again - ad nauseam - the lender is not harmed in any manner whatsoever.  This is no different than taking advantage of a legal tax loophole.  The lender is paid.  The lender is required to be paid by not only their borrower -- but another party.  This is a betterment for the lender.  More security. 

Let me ask this -- if you are a - "these things are illegal/unethical/wrong/stupid/or whatever person -- start a new thread.  I seek to help and advance in a positive manner.  Advance all parties -- including lender.

Love you guys -- but troll elsewhere if a nay sayer -- and post here if you have some constructive info or knowledge -- I never claim to be the smartest -- just trying to hear from the smartest.

 That's the beauty of lawyers. They think they know everything and litigate to prove it. One side always loses so at least one of the lawyers is always wrong, or, the other lawyer had a better line of B.S. at least. You lost me completely by your failure to understand that if a buyer approaches a seller and offers to take over their property subject to the lender's lien, and stops paying and puts that borrower into default or, if the borrower was in default already, that "buyer" may run afoul of local/state laws and may be accused of equity skimming. Some greasy lawyer will no doubt jump in and say its not equity skimming, when it is.

Troll elsewhere? You're the one trying to drum up business, and pretty defensive too. Who's the troll?

Wow -- you are a bit angry.  Did you answer the question -- if the foreclosure is avoided and 2 are responsible to pay the mortgage, how is the lender harmed? 

Kinda hard to troll a post when I am the poster.  You funny.

I receive no dollars from my info posts.  I receive no dollars from helping the way we do on these.  Disparage and rant elsewhere angry one.  I aint selling programs -- advertising coaching -- mentoring for dollars -- nothing.  Why the hate brother.

You are challenged to dispute -- with facts, not false statements and presumptions -- anything I present to the group.  However, you fail to do this.  You choose to troll.

I wish you the best - but you really need to seek other threads to spew hate and baseless allegations -- please -- there are other options for you to Karen out.  I seek input from the folks wanting to do this better - who want to improve the industry standards.

I wish you well - but will not reply to any more of your hate.  You take care of California - we got Texas.

Anyway...whatever you tell yourself in the mirror to make yourself seem legit is ok with me.

I have no hate. You just like to use trigger words when you get called out for your ambulance chasing tactics that you just can't help. its in your DNA. its in your nature. you can't help yourself. Tried to come off as some sage but your audience has been dealing with this subject for decades and your fluff quickly fell apart when we poked holes in your "theories". Sell some snake oil elsewhere.

[Jay Hinrichs]

Quote from @T. Alan Ceshker:

Quote from @Ron S.:

Quote from @T. Alan Ceshker:

Quote from @Ron S.:

Quote from @T. Alan Ceshker:

Quote from @Account Closed:

Quote from @T. Alan Ceshker:

I want to start a discussion re the due on sale clause

We are seeing more issues re lenders calling notes due.  Some because of mistakes with insurance.  But, some due to lenders looking.

One lender/servicer is HomeLoanServ.  They actually are looking at prior foreclosures that were reinstated.

What are you folks seeing?  Are you taking measures to protect your deals?

Thanks and let us know -- let's get info flowing

Alan 

Your comment: "We are seeing more issues re lenders calling notes due. Some because of mistakes with insurance. But, some due to lenders looking."

Although forthcoming and we appreciate the honesty, it does not build confidence in the process.

The ramifications are serious, especially when we consider the crowd in the "subto community" and how it's being promoted there. If something could be done to convince the head "guru" that buying overleveraged properties in and of itself is reckless for creative finance, done so that he can boast he has “none of his own money involved” and attract people with little money to join his program, perhaps the trajectory of the conversation could be more positive toward solving the problem.

But, Why would we want to promote his risky & bad investing?

I think it's a slow motion train wreck as it stands. I want no part of it.

 The guru methods of "Sub Tos" is not how we consult on assumptions.  We paper them differently and have numerous disclosures and checks and balances in place to ensure the deal is as risk free as currently possible.

I agree the gurus are soiling this industry quite a bit.  Thus, my effort to tighten it up a bit via open discussions and disclosing how we are doing these the right way.

Nothing you do to put lipstick on this type of transaction matters if the lender isn't aware and supportive, and no, they aren't going to be supportive of a sub to or wrap. There is no right way to do a sub to. There is a reason notes have a due on sale clause, so that they can have a response to a sub to or wrap. You can smoke and mirror and paper them any way you want but YOUR transaction doesn't involve or jump in front of the transaction between the original borrower and the lender. YOUR transaction by its very nature conflicts with the lender's instructions in the note and violates the term of the note between the lender and the borrower.

Yes, people get away with it every day but no, there is no "right way" to do a sub to/wrap because the lender explicitly states and the borrower agrees at the time of origination, that it cannot and won't be done. Just because you do it, and just because you got away with it, doesn't mean you did something the right way. You just didn't get caught.

And god help you if you do it to a borrower in financial distress or if you do it in a state that prohibits equity skimming, requires licensure or registration, or other nefarious acts against homeowners.

1st - it is not equity skimming.  Equity skimming requires a nonpayment of the underlying mortgage -- to skim the equity -- this is not occurring.  The payments are being issued or the property is recovered.  There is no license that allows equity skimming.  This is an illegal act.

2nd - this is a deed of trust issue and not a promissory note issue.

3rd - A wrap is not precluded.  A wrap gives a lender the right to act in certain ways.  Why do people not understand this?  A buyer and seller are accepting the risk of this permissive right being acted upon.  Proper disclosures are needed.  Eyes wide open acceptance of the risk is needed.  I agree this does not occur in all the wraps occurring now.  Thus - the reason for the post here.  Let's protect all parties -- including the lender.  I do not want to hear unfounded illegal claims - unfounded breach claims - unfounded unethical claims - or anything else.  My purpose is to better a system for all involved -- ALL.

I will say again - ad nauseam - the lender is not harmed in any manner whatsoever.  This is no different than taking advantage of a legal tax loophole.  The lender is paid.  The lender is required to be paid by not only their borrower -- but another party.  This is a betterment for the lender.  More security. 

Let me ask this -- if you are a - "these things are illegal/unethical/wrong/stupid/or whatever person -- start a new thread.  I seek to help and advance in a positive manner.  Advance all parties -- including lender.

Love you guys -- but troll elsewhere if a nay sayer -- and post here if you have some constructive info or knowledge -- I never claim to be the smartest -- just trying to hear from the smartest.

 That's the beauty of lawyers. They think they know everything and litigate to prove it. One side always loses so at least one of the lawyers is always wrong, or, the other lawyer had a better line of B.S. at least. You lost me completely by your failure to understand that if a buyer approaches a seller and offers to take over their property subject to the lender's lien, and stops paying and puts that borrower into default or, if the borrower was in default already, that "buyer" may run afoul of local/state laws and may be accused of equity skimming. Some greasy lawyer will no doubt jump in and say its not equity skimming, when it is.

Troll elsewhere? You're the one trying to drum up business, and pretty defensive too. Who's the troll?

Wow -- you are a bit angry.  Did you answer the question -- if the foreclosure is avoided and 2 are responsible to pay the mortgage, how is the lender harmed? 

Kinda hard to troll a post when I am the poster.  You funny.

I receive no dollars from my info posts.  I receive no dollars from helping the way we do on these.  Disparage and rant elsewhere angry one.  I aint selling programs -- advertising coaching -- mentoring for dollars -- nothing.  Why the hate brother.

You are challenged to dispute -- with facts, not false statements and presumptions -- anything I present to the group.  However, you fail to do this.  You choose to troll.

I wish you the best - but you really need to seek other threads to spew hate and baseless allegations -- please -- there are other options for you to Karen out.  I seek input from the folks wanting to do this better - who want to improve the industry standards.

I wish you well - but will not reply to any more of your hate.  You take care of California - we got Texas.

I think you need to make that distinction that your dealing with TX.. the laws in OR WA and CA are very strict when it comes to foreclosure rescue no matter how you do it.. thats why I do not do it anymore.  I dont think there will be any legislation like some others think there will be regarding sub 2.. I think the lender docs  Mortgage/ notes AITD etc give all the power they need to rectify the situation  Of course if that happens the original seller is fubared.

[John Clark]

Your scenarios all depend on “if.”

interest is the price paid for a lender to assume risk of failure, not just failure if occurred. The lender is harmed because the risk he assumed is no longer matched by the interest received. You have no basis for saying “no harm, no foul” applies to finance. There is also the implied covenant of good faith and fair dealing present in every contract. If the homeowner has a material change in circumstances (transfer of title to his house) then he needs to inform his lender. The lender assumes the risk of dealing with a known quantity: his borrower. The lender is harmed by a changed risk profile when he must now deal with an unknown owner whose interest you have actively concealed.

[Jay Hinrichs]

Quote from @John Clark:

Your scenarios all depend on “if.”

interest is the price paid for a lender to assume risk of failure, not just failure if occurred. The lender is harmed because the risk he assumed is no longer matched by the interest received. You have no basis for saying “no harm, no foul” applies to finance. There is also the implied covenant of good faith and fair dealing present in every contract. If the homeowner has a material change in circumstances (transfer of title to his house) then he needs to inform his lender. The lender assumes the risk of dealing with a known quantity: his borrower. The lender is harmed by a changed risk profile when he must now deal with an unknown owner whose interest you have actively concealed.

john while agree with the risk assessment for whatever reason almost all loans to homeowners there is no clause that says they must notify the lender . I suspect with commercial loans it goes farther than alienation is an event of default but there I would suspect is specific language as you allude to. or maybe they are all the same alienate the title and you cannot stop a foreclosure unless you pay it off and its at the lenders sole discretion But I dont think tehre is a clause that says you MUST inform the lender.

[John Clark]

Quote from @Jay Hinrichs:

Quote from @John Clark:

Your scenarios all depend on “if.”

interest is the price paid for a lender to assume risk of failure, not just failure if occurred. The lender is harmed because the risk he assumed is no longer matched by the interest received. You have no basis for saying “no harm, no foul” applies to finance. There is also the implied covenant of good faith and fair dealing present in every contract. If the homeowner has a material change in circumstances (transfer of title to his house) then he needs to inform his lender. The lender assumes the risk of dealing with a known quantity: his borrower. The lender is harmed by a changed risk profile when he must now deal with an unknown owner whose interest you have actively concealed.

john while agree with the risk assessment for whatever reason almost all loans to homeowners there is no clause that says they must notify the lender . I suspect with commercial loans it goes farther than alienation is an event of default but there I would suspect is specific language as you allude to. or maybe they are all the same alienate the title and you cannot stop a foreclosure unless you pay it off and its at the lenders sole discretion But I dont think tehre is a clause that says you MUST inform the lender.

I think it’s covered by the implied covenant of good faith and fair dealing, and have always counseled my clients that way. 


You’re looking for specific language. It’s not explicit, it’s implied, and it is present in every Contract (including Texas) unless it is explicitly disavowed (and if disavowed, why would you contract with such a person who would disavow?).


Google implied covenants to contracts.

[Jay Hinrichs]

Quote from @John Clark:

Quote from @Jay Hinrichs:

Quote from @John Clark:

Your scenarios all depend on “if.”

interest is the price paid for a lender to assume risk of failure, not just failure if occurred. The lender is harmed because the risk he assumed is no longer matched by the interest received. You have no basis for saying “no harm, no foul” applies to finance. There is also the implied covenant of good faith and fair dealing present in every contract. If the homeowner has a material change in circumstances (transfer of title to his house) then he needs to inform his lender. The lender assumes the risk of dealing with a known quantity: his borrower. The lender is harmed by a changed risk profile when he must now deal with an unknown owner whose interest you have actively concealed.

john while agree with the risk assessment for whatever reason almost all loans to homeowners there is no clause that says they must notify the lender . I suspect with commercial loans it goes farther than alienation is an event of default but there I would suspect is specific language as you allude to. or maybe they are all the same alienate the title and you cannot stop a foreclosure unless you pay it off and its at the lenders sole discretion But I dont think tehre is a clause that says you MUST inform the lender.

I think it’s covered by the implied covenant of good faith and fair dealing, and have always counseled my clients that way. 


You’re looking for specific language. It’s not explicit, it’s implied, and it is present in ever Contract (including Texas) unless it is explicitly disavowed (and if disavowed, why would you contract with such a person who would disavow?).


Google implied covenants to contracts.

I get what your saying and dont disagree however as a lender myself I have to rely on what written in the deed of trust and note for the right to foreclose. 

[John Clark]

Quote from @Jay Hinrichs:

Quote from @John Clark:

Quote from @Jay Hinrichs:

Quote from @John Clark:

Your scenarios all depend on “if.”

interest is the price paid for a lender to assume risk of failure, not just failure if occurred. The lender is harmed because the risk he assumed is no longer matched by the interest received. You have no basis for saying “no harm, no foul” applies to finance. There is also the implied covenant of good faith and fair dealing present in every contract. If the homeowner has a material change in circumstances (transfer of title to his house) then he needs to inform his lender. The lender assumes the risk of dealing with a known quantity: his borrower. The lender is harmed by a changed risk profile when he must now deal with an unknown owner whose interest you have actively concealed.

john while agree with the risk assessment for whatever reason almost all loans to homeowners there is no clause that says they must notify the lender . I suspect with commercial loans it goes farther than alienation is an event of default but there I would suspect is specific language as you allude to. or maybe they are all the same alienate the title and you cannot stop a foreclosure unless you pay it off and its at the lenders sole discretion But I dont think tehre is a clause that says you MUST inform the lender.

I think it’s covered by the implied covenant of good faith and fair dealing, and have always counseled my clients that way. 


You’re looking for specific language. It’s not explicit, it’s implied, and it is present in ever Contract (including Texas) unless it is explicitly disavowed (and if disavowed, why would you contract with such a person who would disavow?).


Google implied covenants to contracts.

I get what your saying and dont disagree however as a lender myself I have to rely on what written in the deed of trust and note for the right to foreclose. 

Talk to your lawyer, but you may be missing out on a trigger to your explicit rights under the note. 


As for taking active steps (“educating”) parties to a contract to conceal material facts and changes in material circumstances, that smacks of interference with economic advantage, which would require at least a few hours of billable time to research. Be nice to have a third person to go after for my bank client’s losses. No harm, right?

[Jay Hinrichs]

Quote from @John Clark:

Quote from @Jay Hinrichs:

Quote from @John Clark:

Quote from @Jay Hinrichs:

Quote from @John Clark:

Your scenarios all depend on “if.”

interest is the price paid for a lender to assume risk of failure, not just failure if occurred. The lender is harmed because the risk he assumed is no longer matched by the interest received. You have no basis for saying “no harm, no foul” applies to finance. There is also the implied covenant of good faith and fair dealing present in every contract. If the homeowner has a material change in circumstances (transfer of title to his house) then he needs to inform his lender. The lender assumes the risk of dealing with a known quantity: his borrower. The lender is harmed by a changed risk profile when he must now deal with an unknown owner whose interest you have actively concealed.

john while agree with the risk assessment for whatever reason almost all loans to homeowners there is no clause that says they must notify the lender . I suspect with commercial loans it goes farther than alienation is an event of default but there I would suspect is specific language as you allude to. or maybe they are all the same alienate the title and you cannot stop a foreclosure unless you pay it off and its at the lenders sole discretion But I dont think tehre is a clause that says you MUST inform the lender.

I think it’s covered by the implied covenant of good faith and fair dealing, and have always counseled my clients that way. 


You’re looking for specific language. It’s not explicit, it’s implied, and it is present in ever Contract (including Texas) unless it is explicitly disavowed (and if disavowed, why would you contract with such a person who would disavow?).


Google implied covenants to contracts.

I get what your saying and dont disagree however as a lender myself I have to rely on what written in the deed of trust and note for the right to foreclose. 

Talk to your lawyer, but you may be missing out on a trigger to your explicit rights under the note. 


As for taking active steps (“educating”) parties to a contract to conceal material facts and changes in material circumstances, that smacks of interference with economic advantage, which would require at least a few hours of billable time to research. Be nice to have a third person to go after for my bank client’s losses. No harm, right?

so in this case who would you sue the orginal owner or the person who talked them into deeding it to them. ??   For me being a short term lender we get paid within 6 to 12 months and we dont basically loan to folks we know very well.. and no one is going to want to take title sub to a very expensive HML :). so there is the reality a least for us.

[John Clark]

Quote from @Jay Hinrichs:

Quote from @John Clark:

Quote from @Jay Hinrichs:

Quote from @John Clark:

Quote from @Jay Hinrichs:

Quote from @John Clark:

Your scenarios all depend on “if.”

interest is the price paid for a lender to assume risk of failure, not just failure if occurred. The lender is harmed because the risk he assumed is no longer matched by the interest received. You have no basis for saying “no harm, no foul” applies to finance. There is also the implied covenant of good faith and fair dealing present in every contract. If the homeowner has a material change in circumstances (transfer of title to his house) then he needs to inform his lender. The lender assumes the risk of dealing with a known quantity: his borrower. The lender is harmed by a changed risk profile when he must now deal with an unknown owner whose interest you have actively concealed.

john while agree with the risk assessment for whatever reason almost all loans to homeowners there is no clause that says they must notify the lender . I suspect with commercial loans it goes farther than alienation is an event of default but there I would suspect is specific language as you allude to. or maybe they are all the same alienate the title and you cannot stop a foreclosure unless you pay it off and its at the lenders sole discretion But I dont think tehre is a clause that says you MUST inform the lender.

I think it’s covered by the implied covenant of good faith and fair dealing, and have always counseled my clients that way. 


You’re looking for specific language. It’s not explicit, it’s implied, and it is present in ever Contract (including Texas) unless it is explicitly disavowed (and if disavowed, why would you contract with such a person who would disavow?).


Google implied covenants to contracts.

I get what your saying and dont disagree however as a lender myself I have to rely on what written in the deed of trust and note for the right to foreclose. 

Talk to your lawyer, but you may be missing out on a trigger to your explicit rights under the note. 


As for taking active steps (“educating”) parties to a contract to conceal material facts and changes in material circumstances, that smacks of interference with economic advantage, which would require at least a few hours of billable time to research. Be nice to have a third person to go after for my bank client’s losses. No harm, right?

so in this case who would you sue the orginal owner or the person who talked them into deeding it to them. ??   For me being a short term lender we get paid within 6 to 12 months and we dont basically loan to folks we know very well.. and no one is going to want to take title sub to a very expensive HML :). so there is the reality a least for us.

My thoughts would start with the following, and be modified by the facts and the laws of my jurisdiction: Sue the original owner as he didn’t pay the mortgage. Sue the new owner in the alternative for not paying the mortgage. Sue both to foreclose on the property as they both have an interest in the property. Depending on the circumstances, sue the new owner and his (paid) counselor for interference with prospective economic advantage. Sue the old owner for aggravated mopery just on general principles. Do it all in one proceeding.

[Jay Hinrichs]

Quote from @John Clark:

Quote from @Jay Hinrichs:

Quote from @John Clark:

Quote from @Jay Hinrichs:

Quote from @John Clark:

Quote from @Jay Hinrichs:

Quote from @John Clark:

Your scenarios all depend on “if.”

interest is the price paid for a lender to assume risk of failure, not just failure if occurred. The lender is harmed because the risk he assumed is no longer matched by the interest received. You have no basis for saying “no harm, no foul” applies to finance. There is also the implied covenant of good faith and fair dealing present in every contract. If the homeowner has a material change in circumstances (transfer of title to his house) then he needs to inform his lender. The lender assumes the risk of dealing with a known quantity: his borrower. The lender is harmed by a changed risk profile when he must now deal with an unknown owner whose interest you have actively concealed.

john while agree with the risk assessment for whatever reason almost all loans to homeowners there is no clause that says they must notify the lender . I suspect with commercial loans it goes farther than alienation is an event of default but there I would suspect is specific language as you allude to. or maybe they are all the same alienate the title and you cannot stop a foreclosure unless you pay it off and its at the lenders sole discretion But I dont think tehre is a clause that says you MUST inform the lender.

I think it’s covered by the implied covenant of good faith and fair dealing, and have always counseled my clients that way. 


You’re looking for specific language. It’s not explicit, it’s implied, and it is present in ever Contract (including Texas) unless it is explicitly disavowed (and if disavowed, why would you contract with such a person who would disavow?).


Google implied covenants to contracts.

I get what your saying and dont disagree however as a lender myself I have to rely on what written in the deed of trust and note for the right to foreclose. 

Talk to your lawyer, but you may be missing out on a trigger to your explicit rights under the note. 


As for taking active steps (“educating”) parties to a contract to conceal material facts and changes in material circumstances, that smacks of interference with economic advantage, which would require at least a few hours of billable time to research. Be nice to have a third person to go after for my bank client’s losses. No harm, right?

so in this case who would you sue the orginal owner or the person who talked them into deeding it to them. ??   For me being a short term lender we get paid within 6 to 12 months and we dont basically loan to folks we know very well.. and no one is going to want to take title sub to a very expensive HML :). so there is the reality a least for us.

My thoughts would start with the following, and be modified by the facts and the laws of my jurisdiction: Sue the original owner as he didn’t pay the mortgage. Sue the new owner in the alternative for not paying the mortgage. Sue both to foreclose on the property as they both have an interest in the property. Depending on the circumstances, sue the new owner and his (paid) counselor for interference with prospective economic advantage. Sue the old owner for aggravated mopery just on general principles. Do it all in one proceeding.

sounds like there is a play for law firms to start following all these sub 2s  and bringing actions.

[Chris Seveney]

@Jay Hinrichs

We should start a due on sale “insurance company” as one guru calls it where we provide 90 - 180 day financing to people who had the loans called - payoff the first, subordinate the wrap.

Charge 13-15% + several points….

Since it’s non owner occupied lesser restrictions