All Forum Posts by: Bryan Hartlen

Quote from @Bob E.:

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I would approach to buyer about refinancing you out of the property.  Make them buy the note for 100% of face value, much better than selling for a discount latter.

Thanks Bob. We do have a due on sale clause and we know that selling notes requires a discount. We started with this asset as a non-performing note purchase and has transitioned through REO to performing seller financed note to non-performing and we expect performing again. That said, getting full face value through a refi would be preferred. But getting it current is the first priority - and they are in the process of bringing the account current.

Quote from @Marco Bario:

@Bryan Hartlen -

I wouldn't modify the loan or allow an assumption by the new property titleholder. 

The ultimate guarantor on any loan secured by real estate is the property. Your lien is attached to the property until it's released no matter who is on title. 

So long as you're covered by equity, you're in good position. You could exercise your due on sale provision at any time you wish.

The payor needs to keep property taxes and HOA assessments (if applicable) current, and name you as loss payee on the hazard policy. Also, enforce the requirement which should be in your loan docs stating they provide current proof of insurance.

 Thanks Marco.  Why wouldn't you modify or allow an assumption?  Our plan is to sell the note once it's performing and I would think that matching names on deed and note would make that a cleaner and higher valued sale (this is my opinion - so far haven't heard anyone confirm or correct this logic).  And even if we planned to hold the note; I would think that getting the new owner to assume or guarantee would make things cleaner if they went delinquent and we had to FC?

Quote from @Peter Walther:

First, if you do decide to not call the Note due, I, as some of the other posters noted, would require the Grantee to assume and guarantee the debt.  I would also contact the title agent that issued the title policy and ask for an endorsement to change the effective date of the policy through the recording of assumption agreement.  

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Do you know what the buyer paid for the property?  Does it seem reasonable?  Does it appear they have any skin in the game or did they buy it for the cost of recording the deed?  You wrote the Note is currently eight months behind, personally, I'd have started the foreclosure by now.  I've seen far to many subject to buyers never make a payment but collect rent while the property is being foreclosed on since they don't have any liability for the debt.  Just a few concerns I'd have.

Thanks Peter.  Is there a standard document that would allow the new owners to "assume" the existing mortgage? or is it basically a refi?

We have some details on the sale.  Limited skin from the buyer BUT they've already made a payment moving the note forward several months.  Not current but better than before and enough that we'll pause FC.

Quote from @Ned Carey:

Your rights under your mortgage have not changed at all.  you are in a better position now than you were since the former owner was in default. It wouldn't concern me in the least.

I am sure the title company had your mortgage as an exception to the title insurance.

You  might look at your loan documents. Is this considered a default? If it is, is there a default interest rate that the loan changes too? You can potentially use this situation as a negotiating tool, or simply be happy you now have a performing note. 

Thanks Ned. The sale doesn't trigger a default - it does give us the option to exercise the due on sale clause. But this is something we don't really want to do assuming (i) the buyers bring it current and (ii) having the note and deed in different names doesn't tank the value of the note when we go to resell it.

Quote from @Adam Walter:

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I think trying to sell a note where the note holder and property owner don't match would create red flags and probably decrease the value of the note.  Would it be beneficial to redo the note in the rental company's name?  What are the pluses and minuses to doing a new loan?  

Thanks Adam... We're also assuming that having the note in one name and the deed in another is going to at least complicate selling the note. We're wondering if anyone has any experience buying or selling a note in this situation. 

Wondering if this is common and what we should be wary of as the note holder...

- We originated a note on a property (in Brazil, IN; Clay County in case that matters).  We went through a local title company for the closing.  The mortgage note and deed are recorded.  Our mortgage has a due on sale clause.

- Our borrower performed for a year before falling behind. They are currently about 8 months behind.

- Yesterday we received a call from a company that purchased the property from our borrower.  The seller was calling to see about bringing the note current.  We confirmed that they purchased the property through another title company and a deed in their name has been recorded.

- We contacted their title company and asked how they could issue a new deed without bringing the underlying mortgage note current, or notifying the mortgage holder that a transaction was taking place. The response from the lawyer was "We were retained to make a title transfer only, which we did, subject to all liens of record. Your lien remains in the same position as prior to the transfer and you still have all remedies available to you per your loan documents."

We're familiar with the subject to purchase strategy but have never come across a title company that would participate in the transaction. Is this common or appropriate for a title company?  

The current 'owners' are a SFR rental company that appears to want to bring the note current. Assuming they do so within the next 2 weeks, we're inclined to let them keep operating under the existing mortgage and not exercise the due on sale clause. We do plan to sell the note once it's performing again. Any words of warning should we let them keep paying the note? Would it hamper our ability to sell the note?

Thanks in advance.

Look at the gosection8.com website to see what properties are being listed at... although this is asking rents so no guarantee it's 100% accurate.  A more accurate estimate would come from calling property management companies that handle Sec8 properties. They can also share any nuances on the housing authorities process to determine specific properties rents. You could also try calling the HAs that serve the area but they're typically too busy to answer or discuss. Finally, in most HAs the final rent can be influenced by the renter's family make-up.  Eg a family of 5 with 3 kids will pay more than a family of 2. 

Hi all.  We have a contractual issue that looks like we may have to resolve through the courts. It has to do with rights to sell (or not sell) an asset, so I think some real estate experience would be helpful but may not be 100% necessary.Wondering if anyone can recommend a lawyer or firm in Birmingham.

I would assume they have to be paid in full and adjust your purchase price offer accordingly.  If you can afford the holding time to negotiate them down and are successful it’ll be a bonus.  If not, you can always pay them in full and move on with your plan.

We’ve used ProClerks several times.