FCI exchange no longer facilitates buying/selling land contracts

[Bob M.]

hi everyone,

i bought a performing CFD on FCI last year for at about 70% UPB, have been sitting on it collecting payments for a year and recently got a bite to sell it at 88% UPB. I was happy to make the sale but half way through the transaction was notified by FCI that they cannot facilitate a transaction involving "real property". I was confused considering I have purchased two CFD's from FCI including this one and always received a note assignment and a quitclaim deed for the property itself, created by FCI! I have not been able to get a response back about when this policy changed, etc. but find it aggravating and wondered if anyone else has run into this. thanks!

[Bill Gulley]

Anyone buying an old CFD as if it were a note probably messed up, to accomplish that you need to buy the property subject to the sale contract and the note/financial obligation. If you buy just the note, the financial obligation, at the end of the contract you need title to convey it per the contract. Buying a CFD doesn't put you in title to the property to convey it.

Then you go to the deeds in escrow arrangement, if you can find them.

Funny thing happened on the way to the Recorder's Office.

County Recorders have been updating filing requirements, aren't computer systems great, (?) they changed recording requirements, type size, top, bottom and side margins, room for recording stamps, (seems like  revenue ploy as it takes more pages to get a deed filed now) but anyway, the deeds that were executed 3 years ago can't be filed! Need to go get them signed again under the new filing requirements otherwise, you can't perfect the deeds!

Another issue with installment contracts, unlike a note, is that you're now selling the real estate, yep, you get to pass title. Some might think that takes a license to facilitate a real estate sale when they don't own the property. (Oh my, haven't note brokers and loan servicers heard of wholesalers?)

Oh, and that quit claim deed you get to hold, wait till your buyer has his attorney nail you for an unlawful foreclosure circumventing foreclosure laws.......what, no security agreement allowing a non-judicial foreclosure.....you might get to go the judicial route after all!

Now, if I were @Bob M. I'd be calling my attorney to get the mess straighten out. BTW, you can't just modify the CFD without Dodd-Frank compliance, a modification is a new extension of credit, remind your attorney. Hopefully too, the installment contract was made prior to Dodd-Frank or you may have other issues.

Speaking of installment sales and buying the paper, I'm not really sure who the IRS hits up under the new "equitable exchange" rules that constitute a sale for tax purposes. They will probably treat the gain from the discount as interest is my guess, either way, that's going to be fun too. 

Moral of my post, don't buy CFDs, buy notes and DOTs or mortgages. Bob, I do hope you don't get stuck with it, it might be better just to keep it and let your attorney iron out the wrinkles when it's paid off. :)