Need Solution to KEEP someone IN their House + Plus GET CASH to settle obligations

[Michael Morrongiello]

Situation:
Have a family that is going thru a DIVORCE and that owns a $2M+ valued home. Home is located in a VERY HOT Market place.
They only owe about $270,000 on a 1st lien that dates back to 2021 which is at 2.875% Interest and will remain at that FIXED Interest rate for 4 more years. The loan amortizes out over 360 months but is a FIXED / Adjustable rate Note  until 1-2029 (THEN it will have interest rate changes every 6 Months thereafter) . SO They have a TON OF EQUITY.

Current Payment P & I payment is $1,200/ Mo

Husband and wife are on TITLE - their Dissolution of marriage calls for the WIFE to pay $550,000 to the husband and then she can KEEP the 100% of the home. Husband is willing to accept the $550K but IF it cannot be paid then a FORCED SALE OF THE HOME MUST HAPPEN.
Time is running out

Wife and 3 Children LIVE in the home and want to CONTINUE to live in the home as the Children are entering or in High School
(a painful time to have to move or relocate for all) - YES lots of emotions all around involved.

Wife does not EARN enough income (working for a non profit group) to be able to afford large loan payments.

She has been trying to BORROW the funds she needs $550K to pay off the Husband and another $300K of additional funds (Totaling $850K) so that she has the EXTRA borrowed funds to be able to make 2-3 years of payments on the financing (versus raiding her retirement account). Given that she is a CONSUMER it may be difficult qualify her ABILITY to REPAY.  
Even Hard Money lenders (with 10% to 12% interest rates might have issue with that)

PROPOSAL MADE and SEEKING OTHERS:
Have the Husband agree to SELL her his 50% interest in the House on TERMS to the WIFE who wants to STAY in the home and where he would carry back a WRAP AROUND Note - lets say for $1,425,000 at 7.0% with I/O INTEREST ONLY repayment terms of $8,312.50 monthly and a 36 Month Balloon payment when the entire $1,425,000 would be due. THIS $1,425,000 WRAP AROUND Note would be INCLUSIVE of the existing underlying 1st lien ($270,000 @ 2.875%) . This first lien will pay down to about $245,000 thru amortization over the 36 months.
The WIFE would be the DEBTOR responsible to make the I/O payments of $8,312.50 each month and the future balloon payment due of $1,1425,000

Q- How does the Husband get his funds out to complete the Divorce?
A- The thought is He SELLS his $1,425,000 WRAP AROUND Note at a DISCOUNT to an INVESTOR who agrees to fund around $900,000 In Cash. From that $900,000 in Cash paid for the Note, the About to be EX-Husband receives his $550K that he agreed to accept to SELL his 50% interest in the home. The EX-Wife now owns 100% of the Home. $300,000 of the proceeds paid for the Note will go toward helping her make the $8,312.50 I/O payment each month for the next 3 years. (in essence she is borrowing excess funds to help make the payments)
$8,312.50 x 36 months = $299,250 allocated to MAKE the payments on the $1,425,000 Note obligation.

Benefits for the (EX) Husband;
* he gets his $550K he agreed to accept
* his children and (EX) wife get to STAY in the home as a family unit during the very formative High School days

Benefits for the (EX) wife:
* She gets to stay in the home with the Children thru the High School Days
* She has the extra $300,000 in funds (borrowed) thru the sale of he Note to help her make these payments for the next 36 Months
* She did not have to borrow HARD MONEY rates and its doubtful a lender would even make a LOAN Here given her inability to repay it.

Benefits for the Note Investor: 

* They fund $900,000 +/- to purchase at a DISCOUNT The WRAP AROUND $1,425,000 I/O 7% Note with $8,312.50 monthly payments and and only have to put out $900,000 (since its sitting behind and WRAPPING a $270K 1st lien). They will get monthly payments of $7,112.50 NET To them each month (remember $8,312.50 is coming in on the WRAP AROUND Note of $1,425,000 but $1,200.00 is still DUE and GOING OUT to pay the $270K underlying 1st lien. ) and then when the $1,425,000 Note matures in 36 Months they will also receive approx. $1,180,000 to THEM (this is the $1,425,000 DUE on the WRAP AROUND Note - MINUS the $245K due on the 1st lien payoff -leaving $1,180,000 to them)

Q- Who would buy such a Note ? 
A- Their calculated return would be a 17.44% YTM - yield to maturity on their $900,000 invested.

QUESTION; WHAT issues or possible "Loan" issues or wrinkles does anyone see here ?
Remember its the (EX) Husband Taking back the $1,425,000 DOT and Note (making the loan) here in an effort for
the (EX) Wife to be able to BUYOUT his 50% interest in the home and continue to stay in the home. This is NOT a
Traditional LOAN ORIGINATION 

[Chris Seveney]

Quote from @Michael Morrongiello:

Situation:
Have a family that is going thru a DIVORCE and that owns a $2M+ valued home. Home is located in a VERY HOT Market place.
They only owe about $270,000 on a 1st lien that dates back to 2021 which is at 2.875% Interest and will remain at that FIXED Interest rate for 4 more years. The loan amortizes out over 360 months but is a FIXED / Adjustable rate Note  until 1-2029 (THEN it will have interest rate changes every 6 Months thereafter) . SO They have a TON OF EQUITY.

Current Payment P & I payment is $1,200/ Mo

Husband and wife are on TITLE - their Dissolution of marriage calls for the WIFE to pay $550,000 to the husband and then she can KEEP the 100% of the home. Husband is willing to accept the $550K but IF it cannot be paid then a FORCED SALE OF THE HOME MUST HAPPEN.
Time is running out

Wife and 3 Children LIVE in the home and want to CONTINUE to live in the home as the Children are entering or in High School
(a painful time to have to move or relocate for all) - YES lots of emotions all around involved.

Wife does not EARN enough income (working for a non profit group) to be able to afford large loan payments.

She has been trying to BORROW the funds she needs $550K to pay off the Husband and another $300K of additional funds (Totaling $850K) so that she has the EXTRA borrowed funds to be able to make 2-3 years of payments on the financing (versus raiding her retirement account). Given that she is a CONSUMER it may be difficult qualify her ABILITY to REPAY.  
Even Hard Money lenders (with 10% to 12% interest rates might have issue with that)

PROPOSAL MADE and SEEKING OTHERS:
Have the Husband agree to SELL her his 50% interest in the House on TERMS to the WIFE who wants to STAY in the home and where he would carry back a WRAP AROUND Note - lets say for $1,425,000 at 7.0% with I/O INTEREST ONLY repayment terms of $8,312.50 monthly and a 36 Month Balloon payment when the entire $1,425,000 would be due. THIS $1,425,000 WRAP AROUND Note would be INCLUSIVE of the existing underlying 1st lien ($270,000 @ 2.875%) . This first lien will pay down to about $245,000 thru amortization over the 36 months.
The WIFE would be the DEBTOR responsible to make the I/O payments of $8,312.50 each month and the future balloon payment due of $1,1425,000

Q- How does the Husband get his funds out to complete the Divorce?
A- The thought is He SELLS his $1,425,000 WRAP AROUND Note at a DISCOUNT to an INVESTOR who agrees to fund around $900,000 In Cash. From that $900,000 in Cash paid for the Note, the About to be EX-Husband receives his $550K that he agreed to accept to SELL his 50% interest in the home. The EX-Wife now owns 100% of the Home. $300,000 of the proceeds paid for the Note will go toward helping her make the $8,312.50 I/O payment each month for the next 3 years. (in essence she is borrowing excess funds to help make the payments)
$8,312.50 x 36 months = $299,250 allocated to MAKE the payments on the $1,425,000 Note obligation.

Benefits for the (EX) Husband;
* he gets his $550K he agreed to accept
* his children and (EX) wife get to STAY in the home as a family unit during the very formative High School days

Benefits for the (EX) wife:
* She gets to stay in the home with the Children thru the High School Days
* She has the extra $300,000 in funds (borrowed) thru the sale of he Note to help her make these payments for the next 36 Months
* She did not have to borrow HARD MONEY rates and its doubtful a lender would even make a LOAN Here given her inability to repay it.

Benefits for the Note Investor: 

* They fund $900,000 +/- to purchase at a DISCOUNT The WRAP AROUND $1,425,000 I/O 7% Note with $8,312.50 monthly payments and and only have to put out $900,000 (since its sitting behind and WRAPPING a $270K 1st lien). They will get monthly payments of $7,112.50 NET To them each month (remember $8,312.50 is coming in on the WRAP AROUND Note of $1,425,000 but $1,200.00 is still DUE and GOING OUT to pay the $270K underlying 1st lien. ) and then when the $1,425,000 Note matures in 36 Months they will also receive approx. $1,180,000 to THEM (this is the $1,425,000 DUE on the WRAP AROUND Note - MINUS the $245K due on the 1st lien payoff -leaving $1,180,000 to them)

Q- Who would buy such a Note ? 
A- Their calculated return would be a 17.44% YTM - yield to maturity on their $900,000 invested.

QUESTION; WHAT issues or possible "Loan" issues or wrinkles does anyone see here ?
Remember its the (EX) Husband Taking back the $1,425,000 DOT and Note (making the loan) here in an effort for
the (EX) Wife to be able to BUYOUT his 50% interest in the home and continue to stay in the home. This is NOT a
Traditional LOAN ORIGINATION 

1. Since this is an owner occupied property, the ability to repay is not there and if the wife ever defaults in the future she can claim it was a fraudulent loan.

2. The husband would need to state to the note seller where the money is going to be used. Most likely no note buyer would buy this loan based on those facts.

3. What is to stop the husband from just keeping the $900k and not giving the wife a penny?

While it looks all good, I would be curious to see if an attorney would view this as mortgage fraud.

On a sidenote: I will get up on my hill and say we see so many instances where someone cannot afford a property but think by the graces of their believer they can save it. If oyu cannot afford it you cannot afford it and move it. It is unfortunate for them and for the kids, but there is this thing called reality. 

I assume the woman is not over 62 so she cannot get a reverse mortgage. 

Sell the house, move on and find a new house you can afford.