Loan Assumption Easy?

[Jason D]

I would like to approach and owner in pre-foreclosure and try to assume the loan. Where would I get the appropriate documentation? How long before the sale is this possible?
Thanks
Jason

[Bill Gulley]

Hi, The dos you need depend on wht your deal is, but first get an autorization from the borrower to discuss their loan with the bank. See if they will allow you to catch up back payments and assume the note by co-signing the loan. If it's past that, in theroy, you can get a deal doen before the Trustee says hear yea, hear yea, hear yea on the courthouse steps. I have stopped a sale on the courthouse steps!
You'll need to provide more information as to what you propose before anyone can tell you what documents you need. It could be, you don't need any except an agreement between you and the borrower. What do you have in mind? Tell us what's going on. Bill

[James Harkness]

Assumptions, at my bank at least, are a long process, and a pain in the butt. This is from my perspective, as an asset manager. They usually take 2 to 3 months to close. Start out by having the owner request assumption paperwork from the asset manager. An authorization form for you to speak with the bank regarding the loan should be included. I do not know a whole lot about the assumption process after that, because I hand it off to the assumption department after the assumption packet is handed out.

I do know though, that you will go through underwriting as if they are writing a new loan. They will assess your risk as a borrower. It helps if you have a large downpayment to bring to the table. Banks love liquid funds in today's economy.

[Bill Gulley]

Hi, James this assumption appears to relieve the borrower from the obligation, or not, I would think that the process depends on the status of the loan. When I have done this, for portfolioed loans, it took them longer to locate the original note than to add me on it. This method was not available for secondary mortgages, so I'm sure your process is as detailed as a refi. However, it seems that if someone wanted to be added as a guarantor at the request of a borrower, why would a bank object, it's just someone else they can look to for collection of amounts due. Interesting. Bill

[James Harkness]

You are right Bill. Adding someone as a guarantor is no big deal, and does not take long. However, if I was wanting to assume a note from someone that I do not know, I would not want them to remain on the note with me. In my book, adding a guarantor is different than assuming the note.

[Bill Gulley]

Hi, absolutely. If I'm buying the property sub2 or on an installment contract, where the seller has an interest in the property, my acting as a guarantor and being made a party to the note gives me access to loan information and the right to make a payment on the note and it puts the bank in a position of making any squak over my transaction between the seller and myself a little difficult. It's a win-win-win in those cases. If, I'm taking title and assuming the note and the borrower is being released, as is the best situation for a seller, to walk away clean, the bank is going to underwrite the deal, it would probably be easier to simply make a new loan except that there is no down payment to meet underwriting, I see the assumption as simply a means to transfer the property without the usual down payment. On the assumption, the loan could also be modified as to rate or terms as well. It just goes to show, that for almost ever rule, there is an exception, well, within reason. Another point is that, as you mentioned, I want them off the note too, what happens if the die, become incapacitated, take bankruptcy, have tax problems or other creditors come after them. These are all issues that should be addressed in any installment contract by the way! Bill

[Jason D]

Bill-James thanks for you input!

Based on what I'm hearing from you guys it would be a big risk to try to assume the loan....perhaps the best option is just to try to buy it from them. That being the case I guess a simple sales agreement would do. Bill, anything about that I should be aware of?

Thanks again,

Jason

[Jon Holdman]

Are you sure you're not thinking of buying subject to? You bring the loan current and take over the payments, but the loan stays in their name. Easily assumable residential loans are nearly non-existent. Subject to, OTOH can still be done, with some risk. There's been a lot written here about the pros and cons, use the search function to turf up old posts.

[Jason D]

I was thinking about subject2 Jon. I will dig up some of the old posts like you recomended, see what the masses think. Thanks for the input.

Jason