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 

[John Clark]

Since it’s non owner occupied lesser restrictions"
--------------------------------------------------------------------------

Depends on if the property is being rented out, and if not, does the state look favorably on equitable owners.

[Jay Hinrichs]

Quote from @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

that would work except as we have seen so many of these folks are doing this and paying retail or above.. there is no equity !

[Chris Seveney]

Quote from @Jay Hinrichs:

Quote from @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

that would work except as we have seen so many of these folks are doing this and paying retail or above.. there is no equity !

 well thats because real estate is linear and only goes up. So whats the risk? The $40,000 home in detroit will be worth $400k in ten years and rents will be $8000/mo.  

[Don Konipol]

Per @t. 

@T. Alan Ceshker

As most regular posters know, I’ve done many sub tos, wraps, etc. both on the buy side and the sell side, but mostly concerning commercial, not residential property.

Here are some of my thoughts….

1. If you have ethical concerns with this method of real estate transaction, then don’t partake in it.  However, please understand that it is in NO WAY illegal, does not involve deception, or lies.  This is because the mortgage document DOES NOT, in fact legally CAN NOT, prohibit a property transfer. It can just give the lien holder the right to accelerate the note.  That’s ALL.

2. ALL my sub tos ended up all right.  However, this isn’t to say there were not problems.  Problems are handled two ways so that the “weaker” party to the transaction does not end up “holding the bag”.  First, by having the best structure and procedures to avoid disaster.  Such as third party loan servicers, vetting of buyers for credit standing/financial strength, insurance placement etc. Second by the purchasing party having financial reserves or borrowing capacity to handle acceleration of the note.

3. I don’t know the OP.  But from the procedures his firm utilizes as per his post, it seems that he provides a reasonably well thought out and “best practices” framework to enhance the success of the subject to transactions he handles. 

4. The OP is an attorney representing parties to a real estate transaction.  He does not represent lenders and therefore owes no responsibility for their interests.  Advising clients on properly structuring sub to transactions, is in no way unethical and does in no way deceive the lender. (  by the way, I am a lender!).

5. The irresponsible utilization of the sub to method of transferring real estate being promoted by a well known guru ( with past legal troubles) to naive, inexperienced, and under capitalized “investors” will  lead to restrictive legislation negatively affecting the ability of responsible investors, desperate homeowners, and home buyers unable to qualify under high interest rates from doing a successful sub to transaction.  I am not worried about my personal ability to do a sub to transaction in the future (though I rarely do them anymore) because any governmental action won’t affect commercial transactions. 

Personally, I’m pleased to see that there are attorneys that have set up legal framework to provide sub to transactions have the best chance of success.  I have no problem with the OP seeking to generate business; I would not have learned of his services otherwise. 

[James Hamling]

Quote from @Jay Hinrichs:

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

OK other than paying off the mortgage everything else you describe is just trying to get away with something that you know gives the lender the option to call the note..  and deed flip flop is going to cause tax implications as someone who was raised i sub to and wrap my dad did them in the 70s and 80s and I have bought about 200 sub 2s but my play was just to fix flip and sell not to own long term this is where the risk comes especially those that wrap these to buyers that may or may not pay.
paying off mortgage is the ONLY sure fire way to make sure these dont end up in a mess.

OR.... And I know I am probably sounding like a broken record at this point but, it's true, OR via doing a Contract For Deed. 

I had one that fit's this literally hours ago. 

I am on listing side of things. Buyer wants to buy Sub2, communicate to seller, who turns out his mortg guy is a life long close friend so said he will only do what he says is a-ok.

I pressed buyer for whay Sub@, what is it he was looking to get at. Control of property, with only ___ down, and payments monthly of ___, for __ term. Ok, simple. I let buyer know, Sub2 isn't only way we can get that done.

Seller checked with finance friend who said C4D A-OK! No issue at all with doing it via C4D. 

Sub2 brings some pretty BIG scarry risk potentials that I just don't understand taking that kind of risk exposure vs C4D.

[Jay Hinrichs]

Quote from @James Hamling:

Quote from @Jay Hinrichs:

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

OK other than paying off the mortgage everything else you describe is just trying to get away with something that you know gives the lender the option to call the note..  and deed flip flop is going to cause tax implications as someone who was raised i sub to and wrap my dad did them in the 70s and 80s and I have bought about 200 sub 2s but my play was just to fix flip and sell not to own long term this is where the risk comes especially those that wrap these to buyers that may or may not pay.
paying off mortgage is the ONLY sure fire way to make sure these dont end up in a mess.

OR.... And I know I am probably sounding like a broken record at this point but, it's true, OR via doing a Contract For Deed. 

I had one that fit's this literally hours ago. 

I am on listing side of things. Buyer wants to buy Sub2, communicate to seller, who turns out his mortg guy is a life long close friend so said he will only do what he says is a-ok.

I pressed buyer for whay Sub@, what is it he was looking to get at. Control of property, with only ___ down, and payments monthly of ___, for __ term. Ok, simple. I let buyer know, Sub2 isn't only way we can get that done.

Seller checked with finance friend who said C4D A-OK! No issue at all with doing it via C4D. 

Sub2 brings some pretty BIG scarry risk potentials that I just don't understand taking that kind of risk exposure vs C4D.

CFD does not include a transfer of title to the buyer.. although it might be a technical alienation not sure myself on that one.

[James Hamling]

Quote from @Jay Hinrichs:

Quote from @James Hamling:

Quote from @Jay Hinrichs:

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

OK other than paying off the mortgage everything else you describe is just trying to get away with something that you know gives the lender the option to call the note..  and deed flip flop is going to cause tax implications as someone who was raised i sub to and wrap my dad did them in the 70s and 80s and I have bought about 200 sub 2s but my play was just to fix flip and sell not to own long term this is where the risk comes especially those that wrap these to buyers that may or may not pay.
paying off mortgage is the ONLY sure fire way to make sure these dont end up in a mess.

OR.... And I know I am probably sounding like a broken record at this point but, it's true, OR via doing a Contract For Deed. 

I had one that fit's this literally hours ago. 

I am on listing side of things. Buyer wants to buy Sub2, communicate to seller, who turns out his mortg guy is a life long close friend so said he will only do what he says is a-ok.

I pressed buyer for whay Sub@, what is it he was looking to get at. Control of property, with only ___ down, and payments monthly of ___, for __ term. Ok, simple. I let buyer know, Sub2 isn't only way we can get that done.

Seller checked with finance friend who said C4D A-OK! No issue at all with doing it via C4D. 

Sub2 brings some pretty BIG scarry risk potentials that I just don't understand taking that kind of risk exposure vs C4D.

CFD does not include a transfer of title to the buyer.. although it might be a technical alienation not sure myself on that one.

Every bank and every finance institution I have spoken to, up to an including yesterday evening, has said it is NOT alienation and does NOT enact due on sale, long as it's done how I do it. 

Which NOTHING I do is a work-around. It's "full-sun" method, out int he open no BS, full closing with R.E. Attorney who does the finalized C4D. 

As saying goes, sunlight is the best disinfectant, right. 

Now here is the thing, so-what if title does not fully transfer at the time of taking possession? Seriously, so-what!     The ONLY things that matter is -Control and -Monetization, correct? 

Seriously, in big picture say someone is willing to rent you a home on 99yr lease for $1.00yr, that you can rent for $2k mnth, are you gonna say no because you MUST hold title, must have that paperwork to it in the way you want it.

From my vision, arguing how that paperwork is done is like saying you refuse to accept a truck-load of cash if the truck isn't blue in color. Red, yellow, anything but blue turn it around and go away.... 

Control and Monetization, that is all that matters aside from LEGAL because it doesn't matter how much you make if down the road you're gonna loose it all. 

[James Hamling]

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. 

My wife is CFO at a Finance Institution. CEO was formerly at FDIC. Both there opinions on this matter mirror yours Doug.

And a step further, He (the former FDIC person) say's it's absolutely 100% conspiracy to fraud and say's when default's hit a certain tipping point, drawing a certain threshold of interest, the look-backs will start and all will start coming unwound ESPECIALLY in a rate environment as it stands today. And cites the recent Trump case where monies were paid and lenders had no issue, as setting a precedence to make this such thing a 'slam-dunk" for conspiracy to commit fraud.

He may be wrong, IDK. What I know is what he's saying, and what your saying Doug, makes perfect sense. 

I not the argument's otherwise use a LOT of words like "should" and "makes it look like". 

[James Hamling]

Quote from @Account Closed:

Quote from @Jay Hinrichs:

Quote from @James Hamling:

Quote from @Jay Hinrichs:

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

OK other than paying off the mortgage everything else you describe is just trying to get away with something that you know gives the lender the option to call the note..  and deed flip flop is going to cause tax implications as someone who was raised i sub to and wrap my dad did them in the 70s and 80s and I have bought about 200 sub 2s but my play was just to fix flip and sell not to own long term this is where the risk comes especially those that wrap these to buyers that may or may not pay.
paying off mortgage is the ONLY sure fire way to make sure these dont end up in a mess.

OR.... And I know I am probably sounding like a broken record at this point but, it's true, OR via doing a Contract For Deed. 

I had one that fit's this literally hours ago. 

I am on listing side of things. Buyer wants to buy Sub2, communicate to seller, who turns out his mortg guy is a life long close friend so said he will only do what he says is a-ok.

I pressed buyer for whay Sub@, what is it he was looking to get at. Control of property, with only ___ down, and payments monthly of ___, for __ term. Ok, simple. I let buyer know, Sub2 isn't only way we can get that done.

Seller checked with finance friend who said C4D A-OK! No issue at all with doing it via C4D. 

Sub2 brings some pretty BIG scarry risk potentials that I just don't understand taking that kind of risk exposure vs C4D.

CFD does not include a transfer of title to the buyer.. although it might be a technical alienation not sure myself on that one.

 Well, I guess actually reading the Due on Sale clause is in order: :-)

"18. Transfer of the Property or a Beneficial Interest in Borrower. As used in this Section 18, "Interest in the Property" means any legal or beneficial interest in the Property, including, but not limited to, 

those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract or escrow  agreement, the intent of which is the transfer of title by Borrower at a future date to purchaser."

Or, as I have said I have done/do, talking to the lenders themself and getting there decision on such. As of thus far 100% have OK'd C4D. Stated it will NOT enact due on sale. 

The correct C4D clearly states NO transfer of title WITHOUT full satisfaction of..... So there is no "intent" of transfer, just the RIGHT via execution of full terms and via completed execution of all terms which in such satisfies all encumbrances does title transfer. 

Real World vs theory.... 

[John Clark]

Quote from @Don Konipol:

Per @t. 

@T. Alan Ceshker

As most regular posters know, I’ve done many sub tos, wraps, etc. both on the buy side and the sell side, but mostly concerning commercial, not residential property.

Here are some of my thoughts….

1. If you have ethical concerns with this method of real estate transaction, then don’t partake in it.  However, please understand that it is in NO WAY illegal, does not involve deception, or lies.  This is because the mortgage document DOES NOT, in fact legally CAN NOT, prohibit a property transfer. It can just give the lien holder the right to accelerate the note.  That’s ALL.

2. ALL my sub tos ended up all right.  However, this isn’t to say there were not problems.  Problems are handled two ways so that the “weaker” party to the transaction does not end up “holding the bag”.  First, by having the best structure and procedures to avoid disaster.  Such as third party loan servicers, vetting of buyers for credit standing/financial strength, insurance placement etc. Second by the purchasing party having financial reserves or borrowing capacity to handle acceleration of the note.

3. I don’t know the OP.  But from the procedures his firm utilizes as per his post, it seems that he provides a reasonably well thought out and “best practices” framework to enhance the success of the subject to transactions he handles. 

4. The OP is an attorney representing parties to a real estate transaction.  He does not represent lenders and therefore owes no responsibility for their interests.  Advising clients on properly structuring sub to transactions, is in no way unethical and does in no way deceive the lender. (  by the way, I am a lender!).

5. The irresponsible utilization of the sub to method of transferring real estate being promoted by a well known guru ( with past legal troubles) to naive, inexperienced, and under capitalized “investors” will  lead to restrictive legislation negatively affecting the ability of responsible investors, desperate homeowners, and home buyers unable to qualify under high interest rates from doing a successful sub to transaction.  I am not worried about my personal ability to do a sub to transaction in the future (though I rarely do them anymore) because any governmental action won’t affect commercial transactions. 

Personally, I’m pleased to see that there are attorneys that have set up legal framework to provide sub to transactions have the best chance of success.  I have no problem with the OP seeking to generate business; I would not have learned of his services otherwise. 

Nobody said it was illegal. What is unethical ( and possibly illegal) is making the seller withhold material information from his bank so that you can profit in violation of his contract obligation to so inform his mortgagee under the implied covenant of good faith and fair dealing. 


That’s why so many of us took issue with the statement of educating the seller to not disclose to the bank.

[Don Konipol]

“Nobody said it was illegal. What is unethical ( and possibly illegal) is making the seller withhold material information from his bank so that you can profit in violation of his contract obligation to so inform his mortgagee under the implied covenant of good faith and fair dealing.”

LOL, seriously, why do people make stuff up when evidence is presented that proves their position incorrect?  Contract obligation to so inform his mortgage under the implied covenant of good faith and fair dealing?  @John Clark, please provide the legal source for that “implied covenant”.  Do you think that if you just make something up it will be accepted and go unchallenged.  Jeez, this nonsense is what makes having an intelligent discussion so difficult on BP.  Not only are some people totally unknowledgeable and totally invested in their opinions, but they make stuff up to support their opinions and emotional beliefs.  Reminds me of old “Professor Irwin Corey” character. 

[John Clark]

Quote from @Don Konipol:

“Nobody said it was illegal. What is unethical ( and possibly illegal) is making the seller withhold material information from his bank so that you can profit in violation of his contract obligation to so inform his mortgagee under the implied covenant of good faith and fair dealing.”

LOL, seriously, why do people make stuff up when evidence is presented that proves their position incorrect?  Contract obligation to so inform his mortgage under the implied covenant of good faith and fair dealing?  @John Clark, please provide the legal source for that “implied covenant”.  Do you think that if you just make something up it will be accepted and go unchallenged.  Jeez, this nonsense is what makes having an intelligent discussion so difficult on BP.  Not only are some people totally unknowledgeable and totally invested in their opinions, but they make stuff up to support their opinions and emotional beliefs.  Reminds me of old “Professor Irwin Corey” character. 

Google “implied covenant of good faith and fair dealing,” or, if you would prefer, do a Westlaw or Lexis search for the term. 


No emotional belief involved. The mortgagor has a covenant of good faith and fair dealing implied in his mortgage agreement vis-a-vis his mortgagee.

[James Hamling]

Quote from @John Clark:

Quote from @Don Konipol:

Per @t. 

@T. Alan Ceshker

As most regular posters know, I’ve done many sub tos, wraps, etc. both on the buy side and the sell side, but mostly concerning commercial, not residential property.

Here are some of my thoughts….

1. If you have ethical concerns with this method of real estate transaction, then don’t partake in it.  However, please understand that it is in NO WAY illegal, does not involve deception, or lies.  This is because the mortgage document DOES NOT, in fact legally CAN NOT, prohibit a property transfer. It can just give the lien holder the right to accelerate the note.  That’s ALL.

2. ALL my sub tos ended up all right.  However, this isn’t to say there were not problems.  Problems are handled two ways so that the “weaker” party to the transaction does not end up “holding the bag”.  First, by having the best structure and procedures to avoid disaster.  Such as third party loan servicers, vetting of buyers for credit standing/financial strength, insurance placement etc. Second by the purchasing party having financial reserves or borrowing capacity to handle acceleration of the note.

3. I don’t know the OP.  But from the procedures his firm utilizes as per his post, it seems that he provides a reasonably well thought out and “best practices” framework to enhance the success of the subject to transactions he handles. 

4. The OP is an attorney representing parties to a real estate transaction.  He does not represent lenders and therefore owes no responsibility for their interests.  Advising clients on properly structuring sub to transactions, is in no way unethical and does in no way deceive the lender. (  by the way, I am a lender!).

5. The irresponsible utilization of the sub to method of transferring real estate being promoted by a well known guru ( with past legal troubles) to naive, inexperienced, and under capitalized “investors” will  lead to restrictive legislation negatively affecting the ability of responsible investors, desperate homeowners, and home buyers unable to qualify under high interest rates from doing a successful sub to transaction.  I am not worried about my personal ability to do a sub to transaction in the future (though I rarely do them anymore) because any governmental action won’t affect commercial transactions. 

Personally, I’m pleased to see that there are attorneys that have set up legal framework to provide sub to transactions have the best chance of success.  I have no problem with the OP seeking to generate business; I would not have learned of his services otherwise. 

Nobody said it was illegal. What is unethical ( and possibly illegal) is making the seller withhold material information from his bank so that you can profit in violation of his contract obligation to so inform his mortgagee under the implied covenant of good faith and fair dealing. 


That’s why so many of us took issue with the statement of educating the seller to not disclose to the bank.

yes Yes YES, EXACTLY!!!! 

[James Hamling]

Quote from @Don Konipol:

“Nobody said it was illegal. What is unethical ( and possibly illegal) is making the seller withhold material information from his bank so that you can profit in violation of his contract obligation to so inform his mortgagee under the implied covenant of good faith and fair dealing.”

LOL, seriously, why do people make stuff up when evidence is presented that proves their position incorrect?  Contract obligation to so inform his mortgage under the implied covenant of good faith and fair dealing?  @John Clark, please provide the legal source for that “implied covenant”.  Do you think that if you just make something up it will be accepted and go unchallenged.  Jeez, this nonsense is what makes having an intelligent discussion so difficult on BP.  Not only are some people totally unknowledgeable and totally invested in their opinions, but they make stuff up to support their opinions and emotional beliefs.  Reminds me of old “Professor Irwin Corey” character. 

 I think it's very probable that you're both saying the same things, or at least speaking to the same/similar actions/process, but describing and saying such in different ways. 

Don, you spoke of the "guru" with shady past, and all the guided setup for failures. 

I STRONGLY believe one of those, as John has pointed to, would be as a Sub2 buyer instructing seller to hide things from lender. No, best of knowledge most if any have no requirement to inform BUT that does not change the action of instructing to hide things. The issue is that, instructing, conspiring, to hide things. That is a shady action, very shady.

What would you say Don if a borrow called and said they were told NOT to tell you, to keep it secret, how high would the hairs on you're arm raise? 

There is 2 VERY different ways people are going about these sub2's today that make it impossible to say anything on sub2 without defining which one is doing; the "shady-as-hell" popularized trending way, or the well capitalized, professional, trying not to do things shady AND ready to make things right if anything blows back way, which let's be honest maybe 5% of those in the space practice today. 

It's that "shady-as-hell" crowd that are really stirring the pot and packing the bomb that's gonna blow back on everyone when it all blows. 

I high-5 those who are doing it CORRECTLY as some have detailed here. The issue is there the exception today and not the rule. 

[T. Alan Ceshker]

Quote from @James Hamling:

Quote from @Jay Hinrichs:

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

OK other than paying off the mortgage everything else you describe is just trying to get away with something that you know gives the lender the option to call the note..  and deed flip flop is going to cause tax implications as someone who was raised i sub to and wrap my dad did them in the 70s and 80s and I have bought about 200 sub 2s but my play was just to fix flip and sell not to own long term this is where the risk comes especially those that wrap these to buyers that may or may not pay.
paying off mortgage is the ONLY sure fire way to make sure these dont end up in a mess.

OR.... And I know I am probably sounding like a broken record at this point but, it's true, OR via doing a Contract For Deed. 

I had one that fit's this literally hours ago. 

I am on listing side of things. Buyer wants to buy Sub2, communicate to seller, who turns out his mortg guy is a life long close friend so said he will only do what he says is a-ok.

I pressed buyer for whay Sub@, what is it he was looking to get at. Control of property, with only ___ down, and payments monthly of ___, for __ term. Ok, simple. I let buyer know, Sub2 isn't only way we can get that done.

Seller checked with finance friend who said C4D A-OK! No issue at all with doing it via C4D. 

Sub2 brings some pretty BIG scarry risk potentials that I just don't understand taking that kind of risk exposure vs C4D.

Yes, contract for deed is a good alternative -- but not in Texas.  Also a lease purchase option is not possible without lender approval.

Thus the wrap is quite popular in Texas.

[Joe S.]

Quote from @James Hamling:

Quote from @Jay Hinrichs:

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

OK other than paying off the mortgage everything else you describe is just trying to get away with something that you know gives the lender the option to call the note..  and deed flip flop is going to cause tax implications as someone who was raised i sub to and wrap my dad did them in the 70s and 80s and I have bought about 200 sub 2s but my play was just to fix flip and sell not to own long term this is where the risk comes especially those that wrap these to buyers that may or may not pay.
paying off mortgage is the ONLY sure fire way to make sure these dont end up in a mess.

OR.... And I know I am probably sounding like a broken record at this point but, it's true, OR via doing a Contract For Deed. 

I had one that fit's this literally hours ago. 

I am on listing side of things. Buyer wants to buy Sub2, communicate to seller, who turns out his mortg guy is a life long close friend so said he will only do what he says is a-ok.

I pressed buyer for whay Sub@, what is it he was looking to get at. Control of property, with only ___ down, and payments monthly of ___, for __ term. Ok, simple. I let buyer know, Sub2 isn't only way we can get that done.

Seller checked with finance friend who said C4D A-OK! No issue at all with doing it via C4D. 

Sub2 brings some pretty BIG scarry risk potentials that I just don't understand taking that kind of risk exposure vs C4D.

 Contract for deed is frowned on in Texas  is my understanding..  I like contract for deeds and lease options. 

[James Hamling]

Quote from @T. Alan Ceshker:

Quote from @James Hamling:

Quote from @Jay Hinrichs:

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

OK other than paying off the mortgage everything else you describe is just trying to get away with something that you know gives the lender the option to call the note..  and deed flip flop is going to cause tax implications as someone who was raised i sub to and wrap my dad did them in the 70s and 80s and I have bought about 200 sub 2s but my play was just to fix flip and sell not to own long term this is where the risk comes especially those that wrap these to buyers that may or may not pay.
paying off mortgage is the ONLY sure fire way to make sure these dont end up in a mess.

OR.... And I know I am probably sounding like a broken record at this point but, it's true, OR via doing a Contract For Deed. 

I had one that fit's this literally hours ago. 

I am on listing side of things. Buyer wants to buy Sub2, communicate to seller, who turns out his mortg guy is a life long close friend so said he will only do what he says is a-ok.

I pressed buyer for whay Sub@, what is it he was looking to get at. Control of property, with only ___ down, and payments monthly of ___, for __ term. Ok, simple. I let buyer know, Sub2 isn't only way we can get that done.

Seller checked with finance friend who said C4D A-OK! No issue at all with doing it via C4D. 

Sub2 brings some pretty BIG scarry risk potentials that I just don't understand taking that kind of risk exposure vs C4D.

Yes, contract for deed is a good alternative -- but not in Texas.  Also a lease purchase option is not possible without lender approval.

Thus the wrap is quite popular in Texas.

Would it work in TX if a person placed into LLC, than sold the LLC? I won't run down rabbit hole of details on such but I am thinking the "asset island" method and the veil as to whom ownership in LLC is. Just a random thought.

[T. Alan Ceshker]

Quote from @James Hamling:

Quote from @T. Alan Ceshker:

Quote from @James Hamling:

Quote from @Jay Hinrichs:

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

OK other than paying off the mortgage everything else you describe is just trying to get away with something that you know gives the lender the option to call the note..  and deed flip flop is going to cause tax implications as someone who was raised i sub to and wrap my dad did them in the 70s and 80s and I have bought about 200 sub 2s but my play was just to fix flip and sell not to own long term this is where the risk comes especially those that wrap these to buyers that may or may not pay.
paying off mortgage is the ONLY sure fire way to make sure these dont end up in a mess.

OR.... And I know I am probably sounding like a broken record at this point but, it's true, OR via doing a Contract For Deed. 

I had one that fit's this literally hours ago. 

I am on listing side of things. Buyer wants to buy Sub2, communicate to seller, who turns out his mortg guy is a life long close friend so said he will only do what he says is a-ok.

I pressed buyer for whay Sub@, what is it he was looking to get at. Control of property, with only ___ down, and payments monthly of ___, for __ term. Ok, simple. I let buyer know, Sub2 isn't only way we can get that done.

Seller checked with finance friend who said C4D A-OK! No issue at all with doing it via C4D. 

Sub2 brings some pretty BIG scarry risk potentials that I just don't understand taking that kind of risk exposure vs C4D.

Yes, contract for deed is a good alternative -- but not in Texas.  Also a lease purchase option is not possible without lender approval.

Thus the wrap is quite popular in Texas.

Would it work in TX if a person placed into LLC, than sold the LLC? I won't run down rabbit hole of details on such but I am thinking the "asset island" method and the veil as to whom ownership in LLC is. Just a random thought.

Putting a property in an LLC actually violates the due on sale clause also 

[James Hamling]

Quote from @T. Alan Ceshker:

Quote from @James Hamling:

Quote from @T. Alan Ceshker:

Quote from @James Hamling:

Quote from @Jay Hinrichs:

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

OK other than paying off the mortgage everything else you describe is just trying to get away with something that you know gives the lender the option to call the note..  and deed flip flop is going to cause tax implications as someone who was raised i sub to and wrap my dad did them in the 70s and 80s and I have bought about 200 sub 2s but my play was just to fix flip and sell not to own long term this is where the risk comes especially those that wrap these to buyers that may or may not pay.
paying off mortgage is the ONLY sure fire way to make sure these dont end up in a mess.

OR.... And I know I am probably sounding like a broken record at this point but, it's true, OR via doing a Contract For Deed. 

I had one that fit's this literally hours ago. 

I am on listing side of things. Buyer wants to buy Sub2, communicate to seller, who turns out his mortg guy is a life long close friend so said he will only do what he says is a-ok.

I pressed buyer for whay Sub@, what is it he was looking to get at. Control of property, with only ___ down, and payments monthly of ___, for __ term. Ok, simple. I let buyer know, Sub2 isn't only way we can get that done.

Seller checked with finance friend who said C4D A-OK! No issue at all with doing it via C4D. 

Sub2 brings some pretty BIG scarry risk potentials that I just don't understand taking that kind of risk exposure vs C4D.

Yes, contract for deed is a good alternative -- but not in Texas.  Also a lease purchase option is not possible without lender approval.

Thus the wrap is quite popular in Texas.

Would it work in TX if a person placed into LLC, than sold the LLC? I won't run down rabbit hole of details on such but I am thinking the "asset island" method and the veil as to whom ownership in LLC is. Just a random thought.

Putting a property in an LLC actually violates the due on sale clause also 

 I know it can, what I am seeing is often times people are asking on doing such and being told go ahead. 

Seeing it more and more commonly with conventional purchase for purpose of SFR, post closing generally some months too yr or so into it asking if ok on it as they'd like anonymity from tenants, and being told ok.

[James Hamling]

Quote from @Joe S.:

Quote from @James Hamling:

Quote from @Jay Hinrichs:

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

OK other than paying off the mortgage everything else you describe is just trying to get away with something that you know gives the lender the option to call the note..  and deed flip flop is going to cause tax implications as someone who was raised i sub to and wrap my dad did them in the 70s and 80s and I have bought about 200 sub 2s but my play was just to fix flip and sell not to own long term this is where the risk comes especially those that wrap these to buyers that may or may not pay.
paying off mortgage is the ONLY sure fire way to make sure these dont end up in a mess.

OR.... And I know I am probably sounding like a broken record at this point but, it's true, OR via doing a Contract For Deed. 

I had one that fit's this literally hours ago. 

I am on listing side of things. Buyer wants to buy Sub2, communicate to seller, who turns out his mortg guy is a life long close friend so said he will only do what he says is a-ok.

I pressed buyer for whay Sub@, what is it he was looking to get at. Control of property, with only ___ down, and payments monthly of ___, for __ term. Ok, simple. I let buyer know, Sub2 isn't only way we can get that done.

Seller checked with finance friend who said C4D A-OK! No issue at all with doing it via C4D. 

Sub2 brings some pretty BIG scarry risk potentials that I just don't understand taking that kind of risk exposure vs C4D.

 Contract for deed is frowned on in Texas  is my understanding..  I like contract for deeds and lease options. 

 Really? That's weird, any explanation for the sentiment? They've been around generations on end, so long I'm not even sure how long. 

[James Hamling]

Quote from @Account Closed:

Quote from @James Hamling:

Quote from @John Clark:

Quote from @Don Konipol:

Per @t. 

@T. Alan Ceshker

As most regular posters know, I’ve done many sub tos, wraps, etc. both on the buy side and the sell side, but mostly concerning commercial, not residential property.

Here are some of my thoughts….

1. If you have ethical concerns with this method of real estate transaction, then don’t partake in it.  However, please understand that it is in NO WAY illegal, does not involve deception, or lies.  This is because the mortgage document DOES NOT, in fact legally CAN NOT, prohibit a property transfer. It can just give the lien holder the right to accelerate the note.  That’s ALL.

2. ALL my sub tos ended up all right.  However, this isn’t to say there were not problems.  Problems are handled two ways so that the “weaker” party to the transaction does not end up “holding the bag”.  First, by having the best structure and procedures to avoid disaster.  Such as third party loan servicers, vetting of buyers for credit standing/financial strength, insurance placement etc. Second by the purchasing party having financial reserves or borrowing capacity to handle acceleration of the note.

3. I don’t know the OP.  But from the procedures his firm utilizes as per his post, it seems that he provides a reasonably well thought out and “best practices” framework to enhance the success of the subject to transactions he handles. 

4. The OP is an attorney representing parties to a real estate transaction.  He does not represent lenders and therefore owes no responsibility for their interests.  Advising clients on properly structuring sub to transactions, is in no way unethical and does in no way deceive the lender. (  by the way, I am a lender!).

5. The irresponsible utilization of the sub to method of transferring real estate being promoted by a well known guru ( with past legal troubles) to naive, inexperienced, and under capitalized “investors” will  lead to restrictive legislation negatively affecting the ability of responsible investors, desperate homeowners, and home buyers unable to qualify under high interest rates from doing a successful sub to transaction.  I am not worried about my personal ability to do a sub to transaction in the future (though I rarely do them anymore) because any governmental action won’t affect commercial transactions. 

Personally, I’m pleased to see that there are attorneys that have set up legal framework to provide sub to transactions have the best chance of success.  I have no problem with the OP seeking to generate business; I would not have learned of his services otherwise. 

Nobody said it was illegal. What is unethical ( and possibly illegal) is making the seller withhold material information from his bank so that you can profit in violation of his contract obligation to so inform his mortgagee under the implied covenant of good faith and fair dealing. 


That’s why so many of us took issue with the statement of educating the seller to not disclose to the bank.

yes Yes YES, EXACTLY!!!! 

The judge ruled that by recording the deed, "constructive notice" has been given. The lender has easy access to that information. I think I will go with the judge on this one.

In fact, I believe the OP stated "They actually are looking at prior foreclosures that were reinstated." proves that lenders know they can do that very thing.

Lenders are not stupid. Don't treat them as though they are.

I would ask, “does a lender has a requirement to inform me that they are losing money and on shaky grounds?” or that “a real estate agent is considering giving up his license or is under investigation” before I spend the time and money tying to obtain their services? Seems fair based on your assertions.

 I don't understand this hyperfocus on giving note holder notice, I don't think anyone has said there is a requirement to give notice. 

What HAS been said, now for 4th time is the action of actively instructing to hide, obfuscate or otherwise intentionally mislead, is the action in point. 

For example there are 2 forms of a lie; commission and omission. A person who argues they didn't lie about something because they simply never said anything about it is wrong, that's definitively a lie of omission. See it's the INTENT, not just accidentally or forgetfully not saying something, no, it's not saying something with intent to hide it, a lie of omission. 

We are saying, the action of instructing, or conspiring, to actively take efforts be it via planned intent or active action, is the issue that by all law to the matter I have read is an act of fraud. 

I know this got wordy but man-alive, 3 times said and still going sideways. 

I'm not a Judge, nor a DA, nor a criminal attorney or any such attorney but I AM a Real Estate Broker, and what I understand of the law in the capacity as is required of my licensure, have experienced of it, and seen of it all, as well as read of it, the exact actions in discussion are way too close for my comfort in fitting the definitive. 

And keep in mind, were in a world now where a former POTUS and very probable future POTUS, has been hit on similar charges, on when lenders were not upset, monies happily received, no non-performance issue, no victims what so ever...... 

So I am feeling that it's a new world where unless one can prove beyond a doubt with definitive documentation of one's legality, your gonna be guilty of anything charged now. 

Hell, by the new standard, I'd be found guilty of being Sasquatch!

[T. Alan Ceshker]

Quote from @James Hamling:

Quote from @Account Closed:

Quote from @James Hamling:

Quote from @John Clark:

Quote from @Don Konipol:

Per @t. 

@T. Alan Ceshker

As most regular posters know, I’ve done many sub tos, wraps, etc. both on the buy side and the sell side, but mostly concerning commercial, not residential property.

Here are some of my thoughts….

1. If you have ethical concerns with this method of real estate transaction, then don’t partake in it.  However, please understand that it is in NO WAY illegal, does not involve deception, or lies.  This is because the mortgage document DOES NOT, in fact legally CAN NOT, prohibit a property transfer. It can just give the lien holder the right to accelerate the note.  That’s ALL.

2. ALL my sub tos ended up all right.  However, this isn’t to say there were not problems.  Problems are handled two ways so that the “weaker” party to the transaction does not end up “holding the bag”.  First, by having the best structure and procedures to avoid disaster.  Such as third party loan servicers, vetting of buyers for credit standing/financial strength, insurance placement etc. Second by the purchasing party having financial reserves or borrowing capacity to handle acceleration of the note.

3. I don’t know the OP.  But from the procedures his firm utilizes as per his post, it seems that he provides a reasonably well thought out and “best practices” framework to enhance the success of the subject to transactions he handles. 

4. The OP is an attorney representing parties to a real estate transaction.  He does not represent lenders and therefore owes no responsibility for their interests.  Advising clients on properly structuring sub to transactions, is in no way unethical and does in no way deceive the lender. (  by the way, I am a lender!).

5. The irresponsible utilization of the sub to method of transferring real estate being promoted by a well known guru ( with past legal troubles) to naive, inexperienced, and under capitalized “investors” will  lead to restrictive legislation negatively affecting the ability of responsible investors, desperate homeowners, and home buyers unable to qualify under high interest rates from doing a successful sub to transaction.  I am not worried about my personal ability to do a sub to transaction in the future (though I rarely do them anymore) because any governmental action won’t affect commercial transactions. 

Personally, I’m pleased to see that there are attorneys that have set up legal framework to provide sub to transactions have the best chance of success.  I have no problem with the OP seeking to generate business; I would not have learned of his services otherwise. 

Nobody said it was illegal. What is unethical ( and possibly illegal) is making the seller withhold material information from his bank so that you can profit in violation of his contract obligation to so inform his mortgagee under the implied covenant of good faith and fair dealing. 


That’s why so many of us took issue with the statement of educating the seller to not disclose to the bank.

yes Yes YES, EXACTLY!!!! 

The judge ruled that by recording the deed, "constructive notice" has been given. The lender has easy access to that information. I think I will go with the judge on this one.

In fact, I believe the OP stated "They actually are looking at prior foreclosures that were reinstated." proves that lenders know they can do that very thing.

Lenders are not stupid. Don't treat them as though they are.

I would ask, “does a lender has a requirement to inform me that they are losing money and on shaky grounds?” or that “a real estate agent is considering giving up his license or is under investigation” before I spend the time and money tying to obtain their services? Seems fair based on your assertions.

 I don't understand this hyperfocus on giving note holder notice, I don't think anyone has said there is a requirement to give notice. 

What HAS been said, now for 4th time is the action of actively instructing to hide, obfuscate or otherwise intentionally mislead, is the action in point. 

For example there are 2 forms of a lie; commission and omission. A person who argues they didn't lie about something because they simply never said anything about it is wrong, that's definitively a lie of omission. See it's the INTENT, not just accidentally or forgetfully not saying something, no, it's not saying something with intent to hide it, a lie of omission. 

We are saying, the action of instructing, or conspiring, to actively take efforts be it via planned intent or active action, is the issue that by all law to the matter I have read is an act of fraud. 

I know this got wordy but man-alive, 3 times said and still going sideways. 

I'm not a Judge, nor a DA, nor a criminal attorney or any such attorney but I AM a Real Estate Broker, and what I understand of the law in the capacity as is required of my licensure, have experienced of it, and seen of it all, as well as read of it, the exact actions in discussion are way too close for my comfort in fitting the definitive. 

And keep in mind, were in a world now where a former POTUS and very probable future POTUS, has been hit on similar charges, on when lenders were not upset, monies happily received, no non-performance issue, no victims what so ever...... 

So I am feeling that it's a new world where unless one can prove beyond a doubt with definitive documentation of one's legality, your gonna be guilty of anything charged now. 

Hell, by the new standard, I'd be found guilty of being Sasquatch!

We have strayed well off the original post path.

The googling you reference is regarding the inception of a mortgage.

Mortgage companies have attorneys.  They know how to right clauses that require action.  Re the DOS clause, they did not.  They made it a permissive right for the lender.  They could have made it a requirement same as getting insurance, making a payment, maintaining the property, etc.

They did not.

Anyone have ideas on making the wrap transaction safer and more secure?  You know, the intent and exact statement in the original post.

We get it -- different people have different opinions on laws and ethics and such.  But - putting this aside, assuming wraps are going to occur despite these opinions, how about the focus of the post.  New threads and topics await all of you law and ethics folks elsewhere.

[T. Alan Ceshker]

Quote from @James Hamling:

Quote from @T. Alan Ceshker:

Quote from @James Hamling:

Quote from @T. Alan Ceshker:

Quote from @James Hamling:

Quote from @Jay Hinrichs:

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

OK other than paying off the mortgage everything else you describe is just trying to get away with something that you know gives the lender the option to call the note..  and deed flip flop is going to cause tax implications as someone who was raised i sub to and wrap my dad did them in the 70s and 80s and I have bought about 200 sub 2s but my play was just to fix flip and sell not to own long term this is where the risk comes especially those that wrap these to buyers that may or may not pay.
paying off mortgage is the ONLY sure fire way to make sure these dont end up in a mess.

OR.... And I know I am probably sounding like a broken record at this point but, it's true, OR via doing a Contract For Deed. 

I had one that fit's this literally hours ago. 

I am on listing side of things. Buyer wants to buy Sub2, communicate to seller, who turns out his mortg guy is a life long close friend so said he will only do what he says is a-ok.

I pressed buyer for whay Sub@, what is it he was looking to get at. Control of property, with only ___ down, and payments monthly of ___, for __ term. Ok, simple. I let buyer know, Sub2 isn't only way we can get that done.

Seller checked with finance friend who said C4D A-OK! No issue at all with doing it via C4D. 

Sub2 brings some pretty BIG scarry risk potentials that I just don't understand taking that kind of risk exposure vs C4D.

Yes, contract for deed is a good alternative -- but not in Texas.  Also a lease purchase option is not possible without lender approval.

Thus the wrap is quite popular in Texas.

Would it work in TX if a person placed into LLC, than sold the LLC? I won't run down rabbit hole of details on such but I am thinking the "asset island" method and the veil as to whom ownership in LLC is. Just a random thought.

Putting a property in an LLC actually violates the due on sale clause also 

 I know it can, what I am seeing is often times people are asking on doing such and being told go ahead. 

Seeing it more and more commonly with conventional purchase for purpose of SFR, post closing generally some months too yr or so into it asking if ok on it as they'd like anonymity from tenants, and being told ok.

In Texas, the members are known -- anonymity does not occur.  Owner occupiers do not do this as they lose the homestead tax exemption we have here.

Personally, it is my legal opinion that a lender would lose a fight in court if I deeded my property to an entity in which I am the sole member.  And, I have seen lenders ask for this proof when reviewing a conveyance to an LLC.

Lastly, there is little risk since the LLC can easily deed the property back to borrower if lender had an issue.

[James Hamling]

Quote from @T. Alan Ceshker:

Quote from @James Hamling:

Quote from @Account Closed:

Quote from @James Hamling:

Quote from @John Clark:

Quote from @Don Konipol:

Per @t. 

@T. Alan Ceshker

As most regular posters know, I’ve done many sub tos, wraps, etc. both on the buy side and the sell side, but mostly concerning commercial, not residential property.

Here are some of my thoughts….

1. If you have ethical concerns with this method of real estate transaction, then don’t partake in it.  However, please understand that it is in NO WAY illegal, does not involve deception, or lies.  This is because the mortgage document DOES NOT, in fact legally CAN NOT, prohibit a property transfer. It can just give the lien holder the right to accelerate the note.  That’s ALL.

2. ALL my sub tos ended up all right.  However, this isn’t to say there were not problems.  Problems are handled two ways so that the “weaker” party to the transaction does not end up “holding the bag”.  First, by having the best structure and procedures to avoid disaster.  Such as third party loan servicers, vetting of buyers for credit standing/financial strength, insurance placement etc. Second by the purchasing party having financial reserves or borrowing capacity to handle acceleration of the note.

3. I don’t know the OP.  But from the procedures his firm utilizes as per his post, it seems that he provides a reasonably well thought out and “best practices” framework to enhance the success of the subject to transactions he handles. 

4. The OP is an attorney representing parties to a real estate transaction.  He does not represent lenders and therefore owes no responsibility for their interests.  Advising clients on properly structuring sub to transactions, is in no way unethical and does in no way deceive the lender. (  by the way, I am a lender!).

5. The irresponsible utilization of the sub to method of transferring real estate being promoted by a well known guru ( with past legal troubles) to naive, inexperienced, and under capitalized “investors” will  lead to restrictive legislation negatively affecting the ability of responsible investors, desperate homeowners, and home buyers unable to qualify under high interest rates from doing a successful sub to transaction.  I am not worried about my personal ability to do a sub to transaction in the future (though I rarely do them anymore) because any governmental action won’t affect commercial transactions. 

Personally, I’m pleased to see that there are attorneys that have set up legal framework to provide sub to transactions have the best chance of success.  I have no problem with the OP seeking to generate business; I would not have learned of his services otherwise. 

Nobody said it was illegal. What is unethical ( and possibly illegal) is making the seller withhold material information from his bank so that you can profit in violation of his contract obligation to so inform his mortgagee under the implied covenant of good faith and fair dealing. 


That’s why so many of us took issue with the statement of educating the seller to not disclose to the bank.

yes Yes YES, EXACTLY!!!! 

The judge ruled that by recording the deed, "constructive notice" has been given. The lender has easy access to that information. I think I will go with the judge on this one.

In fact, I believe the OP stated "They actually are looking at prior foreclosures that were reinstated." proves that lenders know they can do that very thing.

Lenders are not stupid. Don't treat them as though they are.

I would ask, “does a lender has a requirement to inform me that they are losing money and on shaky grounds?” or that “a real estate agent is considering giving up his license or is under investigation” before I spend the time and money tying to obtain their services? Seems fair based on your assertions.

 I don't understand this hyperfocus on giving note holder notice, I don't think anyone has said there is a requirement to give notice. 

What HAS been said, now for 4th time is the action of actively instructing to hide, obfuscate or otherwise intentionally mislead, is the action in point. 

For example there are 2 forms of a lie; commission and omission. A person who argues they didn't lie about something because they simply never said anything about it is wrong, that's definitively a lie of omission. See it's the INTENT, not just accidentally or forgetfully not saying something, no, it's not saying something with intent to hide it, a lie of omission. 

We are saying, the action of instructing, or conspiring, to actively take efforts be it via planned intent or active action, is the issue that by all law to the matter I have read is an act of fraud. 

I know this got wordy but man-alive, 3 times said and still going sideways. 

I'm not a Judge, nor a DA, nor a criminal attorney or any such attorney but I AM a Real Estate Broker, and what I understand of the law in the capacity as is required of my licensure, have experienced of it, and seen of it all, as well as read of it, the exact actions in discussion are way too close for my comfort in fitting the definitive. 

And keep in mind, were in a world now where a former POTUS and very probable future POTUS, has been hit on similar charges, on when lenders were not upset, monies happily received, no non-performance issue, no victims what so ever...... 

So I am feeling that it's a new world where unless one can prove beyond a doubt with definitive documentation of one's legality, your gonna be guilty of anything charged now. 

Hell, by the new standard, I'd be found guilty of being Sasquatch!

We have strayed well off the original post path.

The googling you reference is regarding the inception of a mortgage.

Mortgage companies have attorneys.  They know how to right clauses that require action.  Re the DOS clause, they did not.  They made it a permissive right for the lender.  They could have made it a requirement same as getting insurance, making a payment, maintaining the property, etc.

They did not.

Anyone have ideas on making the wrap transaction safer and more secure?  You know, the intent and exact statement in the original post.

We get it -- different people have different opinions on laws and ethics and such.  But - putting this aside, assuming wraps are going to occur despite these opinions, how about the focus of the post.  New threads and topics await all of you law and ethics folks elsewhere.

 I agree, I like the direction of let's side table all that other stuff and just brain storm and group dissect potentials to the 1 specific. 

That solved, we can move onto peace in middle east and all other conflicts in the world. 

I may have not come up with a solution as of yet, but at least I've been throwing ideas out there. 

[James Hamling]

Quote from @Account Closed:

Quote from @James Hamling:

Quote from @Account Closed:

Quote from @James Hamling:

Quote from @John Clark:

Quote from @Don Konipol:

Per @t. 

@T. Alan Ceshker

As most regular posters know, I’ve done many sub tos, wraps, etc. both on the buy side and the sell side, but mostly concerning commercial, not residential property.

Here are some of my thoughts….

1. If you have ethical concerns with this method of real estate transaction, then don’t partake in it.  However, please understand that it is in NO WAY illegal, does not involve deception, or lies.  This is because the mortgage document DOES NOT, in fact legally CAN NOT, prohibit a property transfer. It can just give the lien holder the right to accelerate the note.  That’s ALL.

2. ALL my sub tos ended up all right.  However, this isn’t to say there were not problems.  Problems are handled two ways so that the “weaker” party to the transaction does not end up “holding the bag”.  First, by having the best structure and procedures to avoid disaster.  Such as third party loan servicers, vetting of buyers for credit standing/financial strength, insurance placement etc. Second by the purchasing party having financial reserves or borrowing capacity to handle acceleration of the note.

3. I don’t know the OP.  But from the procedures his firm utilizes as per his post, it seems that he provides a reasonably well thought out and “best practices” framework to enhance the success of the subject to transactions he handles. 

4. The OP is an attorney representing parties to a real estate transaction.  He does not represent lenders and therefore owes no responsibility for their interests.  Advising clients on properly structuring sub to transactions, is in no way unethical and does in no way deceive the lender. (  by the way, I am a lender!).

5. The irresponsible utilization of the sub to method of transferring real estate being promoted by a well known guru ( with past legal troubles) to naive, inexperienced, and under capitalized “investors” will  lead to restrictive legislation negatively affecting the ability of responsible investors, desperate homeowners, and home buyers unable to qualify under high interest rates from doing a successful sub to transaction.  I am not worried about my personal ability to do a sub to transaction in the future (though I rarely do them anymore) because any governmental action won’t affect commercial transactions. 

Personally, I’m pleased to see that there are attorneys that have set up legal framework to provide sub to transactions have the best chance of success.  I have no problem with the OP seeking to generate business; I would not have learned of his services otherwise. 

Nobody said it was illegal. What is unethical ( and possibly illegal) is making the seller withhold material information from his bank so that you can profit in violation of his contract obligation to so inform his mortgagee under the implied covenant of good faith and fair dealing. 


That’s why so many of us took issue with the statement of educating the seller to not disclose to the bank.

yes Yes YES, EXACTLY!!!! 

The judge ruled that by recording the deed, "constructive notice" has been given. The lender has easy access to that information. I think I will go with the judge on this one.

In fact, I believe the OP stated "They actually are looking at prior foreclosures that were reinstated." proves that lenders know they can do that very thing.

Lenders are not stupid. Don't treat them as though they are.

I would ask, “does a lender has a requirement to inform me that they are losing money and on shaky grounds?” or that “a real estate agent is considering giving up his license or is under investigation” before I spend the time and money tying to obtain their services? Seems fair based on your assertions.

 I don't understand this hyperfocus on giving note holder notice, I don't think anyone has said there is a requirement to give notice. 

What HAS been said, now for 4th time is the action of actively instructing to hide, obfuscate or otherwise intentionally mislead, is the action in point. 

For example there are 2 forms of a lie; commission and omission. A person who argues they didn't lie about something because they simply never said anything about it is wrong, that's definitively a lie of omission. See it's the INTENT, not just accidentally or forgetfully not saying something, no, it's not saying something with intent to hide it, a lie of omission. 

We are saying, the action of instructing, or conspiring, to actively take efforts be it via planned intent or active action, is the issue that by all law to the matter I have read is an act of fraud. 

I know this got wordy but man-alive, 3 times said and still going sideways. 

I'm not a Judge, nor a DA, nor a criminal attorney or any such attorney but I AM a Real Estate Broker, and what I understand of the law in the capacity as is required of my licensure, have experienced of it, and seen of it all, as well as read of it, the exact actions in discussion are way too close for my comfort in fitting the definitive. 

And keep in mind, were in a world now where a former POTUS and very probable future POTUS, has been hit on similar charges, on when lenders were not upset, monies happily received, no non-performance issue, no victims what so ever...... 

So I am feeling that it's a new world where unless one can prove beyond a doubt with definitive documentation of one's legality, your gonna be guilty of anything charged now. 

Hell, by the new standard, I'd be found guilty of being Sasquatch!

Your comment: "but I AM a Real Estate Broker,"

My most humble apologies. I didn't realize you held such a high honor of esteem!  ;-)

When "Real Estate Brokers" can decide cases and settle disputes and can issue fines & judgments, you will be super special, indeed.

Meanwhile, take a breath and relax. No one here can give definitive decisions in the court of Bigger Pockets.

 Wow, that's some thin skin ya got there, easily intimidated huh? 

Maybe try reading and posting the whole context of what I said, all the things I am NOT in realm of legal, but what I AM, which part of licensure as a Real Estate Broker IS a required component of real estate contract law, yup, sooooo that's why it's pertinent. 

But hey, so sorry that if anyone is anything of any stature it's a threat to ya and we all need to just be quiet little sheeple to not hurt your feelings, got-it.