All Forum Posts by: Andrew Pierce

btw that was an amazing suggestion to see if they could refi favorably out of that term.  would be amazing I will definitely check, thank you for the perspectives!  edit: by "actually get the lawyers involved" I Meant having to litigate against a big bank. Ha. 

Thanks guys. These last two comments mirror my thoughts. Just wanted an outside perspective. I am not making any conclusions just doubting, as previously mentioned, if a 30 year conventional mortgage (nonconforming, but standardized within the banks operations somewhat), necessarily excludes renting it out. I had doubts and still have some but now it sounds like those may have been necessary for their loan program after learning why it's a lower risk and FDIC insured requires that. So thank you. Just frustrating since I was not there and didn't agree to that term and if I saw it would have canceled the closing, and I think the loan officer could have assumed as much since much of our phone conversations surrounded investing and rentals. Of course the worst case is actually getting lawyers involved and I wouldn't go that route I just wanted to make the basic contract law argument about the PoA's limitation. Yes it explicitly allowed things like the term and rate, and I wrote that it should exclude anything additional which is unnecessary since I couldn't be there to read the closing docs themselves (which I assume can vary depending on what the branch leader/loan officer wants for the nonconforming loan).

@Patrick Roberts thanks for your helpful insights.  Would you mind answering my question at the end of this paragraph (2nd to last sentence) sorry I typed a lot of other stuff you don't need to read..
I never would have thought a conventional loan at a big bank would have such twisted fine print.  just really disappointing that the loan officer knew we wanted to rent it out and when the real estate savvy guy wasn't there, made the other buyer sign something preventing that.  she was rushed taking off from work, with the sellers and everyone there, and not in a position to read everything let alone negotiate a change of closing paperwork.  they will lose a ton of interest on 5.5% loan if we refi with someone else, but it would likely be 7% so its a lose-lose, they will lose our business and it could be in their favor to just drop the abusive term, ridiculous that a conventional loan doesn't let you keep the place after moving out. never saw that coming and this type of "pulling a fast one" is exactly why the other buyer who couldn't be present on closing specified that the power of attorney for signing closing documents was limited to exclude anything unnecessary.  This would clearly exclude a ridiculous term which is not included in other conventional doctor loans by default, especially given the understanding that we were investing in real estate and doing rental investing, not just buying a temporary place to stay.  If this isn't clear enough, one could survey the other bank loan officers and see if the other doctor notes included this term around the year the loan was written, if this is one of only a few outliers which they threw the term in for, then any jury would likely conclude it was unnecessary and the power of attorney would make that void... but they as you say if the bank makes all the rules for their conventional since it's not "conforming..." then they could call the loan due and as you said the refi would be needed regardless.  but there is case law that allows you to break some terms of a mortgage agreement if something is unenforceable, for example the sub-to community relies on the Supreme Court cases which say it's not required to notify the lender when you transfer the deed/title.  This would also likely be unenforceable due to no authority to sign such an unnecessary piece of paper onbehalf of the remote buyer.  Assuming the bank has the loan on their balance sheet (not resold), would they want to call it due if the interest rates only went up by 1.5% since the time of closing?  they probably have a bunch of 3% nonconforming loans on their balance sheet so 5.5% is not bad, totally reliable payments, plus in a legal battle they'd likely find the power of attorney didn't extend to the ridiculous term and that there was no breach of any enforceable agreement. 

Thanks for your responses Erik and @Patrick Roberts !  I think it was conventional of the type Patrick described. 

The loan officer was aware borrowers planned to use it as a portfolio rental so the only thing this "special loan" would accomplish is burning the relationship.  Thus a win for them would be to void that term, right?  Even though interest rates have gone up 1%. What would be the right way to approach the bank about this, and who at the bank could void this term of the loan agreement? 

BTW, the closing was done remotely by one of the 2 borrowers, and they explicitly limited the power of attorney to only what was "Necessary" to execute the loan.  Since it was discussed with the loan officer the borrowers were seeking to create rental portfolio assets, they likely knew the borrower who was not present at signing would not have signed that, but apparently the one who was there signed everything presented to her to the point of her hand cramping, without being aware one of those signatures countered their plans for the purchase.  So I doubt it would be enforceable unless the doctor loans "necessarily" include that term.  But I don't know how a legal dispute with the bank would pan out and would avoid that if at all possible to just approach them politely and have them void it.  Any suggestions for how to handle this and still turn it into a rental (it will cashflow) are greatly appreciated!

Hi BP Mortgage pro's,

theoretical scenario: a doctors loan was used to buy a primary residence rental portfolio piece, while talking with the loan officer @ big bank name about how it would be used as a rental portfolio piece after eventually moving out.  Then a couple years later, discovered that a piece of paper was signed at closing which was never read and in fine print says something about the home being owner occupied throughout the duration of the mortgage... wtf?   

Is that necessary terms for all doctors loans?   Does that make any sense to put in a 30 year loan package, or standard by any means?  I thought all 30 year mortgages require only 12 months occupancy.

It seems to be a lose-lose since the lender loses the interest on an otherwise good loan if it had to be sold, and they gain nothing.  Or if they already sold it on the secondary market, still, what could be the reason for this having been added into the fine print?

I would ask, what are the repairs which deliver outsized returns on home value, which can work for on-market properties?  How do you identify the sleeper deals on-market?