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[Account Closed]

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Find the cash you need by creating a low-interest note secured by a property you own.  Use the note as a down payment on the property you wish to purchase, or sell it to an investor for cash.  Your title company can draft the mortgage and note without an appraisal.  Include a substitution of collateral clause so you have the option to move the debt to another property, a subordination clause to secure 1st position financing, and reserve a pre-payment discount.

Charles Parrish

[Bill Gulley]

Originally posted by @Account Closed:

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Find the cash you need by creating a low-interest note secured by a property you own.  Use the note as a down payment on the property you wish to purchase, or sell it to an investor for cash.  Your title company can draft the mortgage and note without an appraisal.  Include a substitution of collateral clause so you have the option to move the debt to another property, a subordination clause to secure 1st position financing, and reserve a pre-payment discount.

Charles Parrish

Yep, a good way to get to wear an orange jump suit Charles!

Plain English is; a good way to go to jail!

1. Creating a note to sell is a security, it's a bond.

2. The implication of "no appraisal" sounds like an enticement to take an unsuspecting lender, like a note buyer or private money guy to a high LTV, I've seen old timers claim a much higher value to get more out of a note, we can go from mortgage fraud down to simple fraud.

3. Title companies no longer draft notes, they are not mortgage originators. If one can, it will be their attorney in an auxiliary duty, they aren't originators either anymore with owner occupied properties.

4. Predatory lending aspects apply to any maker (borrower) who devises any mortgage.

5. Substitution of collateral in a note requires the lender's approval and is a very touchy area selling an individual on the idea of taking something else as collateral, not that it can't be done, but the door is wide open for the borrower to cheat the lender, the substitution needs to be justified and at or above the value of the original LTV at the time.

6. If you have a mortgage on a property and sign another note, like a second, you can't subordinate the 1st, only the lender can do that. 6 1/2, a borrower who puts a requirement in a note for the lender to subordinate just trashed the entire LTV assessment, the borrower could put a lender in an unsecured position! Back to predatory lending again.

7.  A pre-payment discount, this comes out of the Old West, you're not going to discount the initial principal and interest agreed to originally, that is a forgiveness of debt to a borrower, a taxable issue, if you structure it in revers to pay more over a longer period of time, you can have an illegal adjustable rate.

The most helpful posts from the old timers would be about real estate and that would also be after they caught up with laws that have changed as many of the old timers did things that are considered predatory dealing today........why the past such laws with old clever ways of putting others at a disadvantage. It would really be helpful if those who don't have a clue about new financial requirements would be not post crazy ideas dreamed up trying to show newbies how clever they are or what we pulled off in 1985.

Asking questions is one thing, making suggestions is a blog, not a forum post and in either case if the blogger or poster is not current with applicable laws about what they post, then please keep the fingers off the keyboard. 

Financing violations are up to $100,000 fines and or 10 years in federal prison, violations can be per day by the CFBP, if you're an institutional lender in the business of lending, a $1,000,000! In other words, finance laws aren't something to mess with anymore! :)