All Forum Posts by: Michael Morrongiello

Tom- was not sure WHETHER an ENTITY could served as Attorney in Fact for an individual.
SO that is good to hear.
Regarding the concern your brought up;
The ORIGINAL Borrowers impound escrow funds from their Lender that are to be deposited into the Attorney in Fact - corporate account, in theory should be OK
BECAUSE;
# 1 - They ALSO have a written agreement with the ORIGINAL Borrower on the loan
that they have relinquish any interest they they may have in those impound funds
AND
# 2  - Did give and Grant a SPECIFIC POA - power of attorney rights to their ENTITY to
act on their behalf in matters dealing with the PROPERTY and and the LOAN or any assignee of the Loan.

NOW here is a TWIST and POSSIBLE FUTURE COMPLICATION that COULD exist when someone has taken over an existing loan SUBJECT TO that loan and ALSO has a POA and other such agreements.

Q- What happens IF they ORIGINAL Borrower on the loan that was taken over SUBJECT TO the Loan dies and is deceased ?  HMmmm now the POA is extinguished !!

Mitch - A Good Strategy however;
Can an ENTITY (your corporation) be designated as AIF - Attorney in Fact for INDIVIDUAL borrowers who's loan is being paid off? (where you acquired title to their property SUBJECT 2 their loan)

We've been told that ONLY a PERSON (an individual) having the capacity to contract is QUALIFIED to act as an Attorney in Fact for an individual. That seems to preclude
YOUR company from acting a Attorney in Fact on their behalf?

When the Loan Servicer / Bank is paid off they will issue a CHECK to THEM (the original borrowers)

SO, assume the AIF is designating YOU (as an individual AIF) to act on their behalf
then YOU as an individual endorse the check as their AIF over to YOUR company's Name?

"Pay to the order of < MY COMPANY NAME> by virtue of the Power of Attorney in Fact granted to <YOUR INDIVIDUAL NAME> by <The Borrowers Name> 

THOUGHTS ???

BACKGROUND:
Bought a property SUBJECT 2 an existing 1st lien (lets say serviced by Shellpoint) years ago.
Loan is NOT in our name but in the name of the original borrowers. This account includes ESCROW IMPOUNDS being collected for the payments of taxes and insurance bills as their occur. We have made payments on the loan that is NOT in our names.

SITUATION:
SOLD the home under a LEASE OPTION (or it could be even a WRAP AROUND Mortgage (or Deed of Trust) type of sale.
They PAY US (on our LEASE or the Wrap Around Note) and We pay the underlying 1st lien lender (serviced by Shellpoint)

PROBLEM:
The Value of the property has gone up a lot. Now the Tenant Buyers / or Wrap Around Note payors are REFINANCING and getting ALL new
financing which means the underlying Note which we took over SUBJECT 2 is being PAID OFF in FULL.

The 1st lien lender REFUSES to return the funds ($$) currently being held in the loan escrow account to US - since we are NOT the actual Borrowers named on the Note they are servicing. The insist that once the account is paid off in FULL, those funds MUST go to the original borrowers. NOTE: We have a specific POA - power of attorney given to us to act on behalf of the loan borrowers with regard to THIS property and their loan. We also have a written agreement stating that the ORIGINAL Borrowers have relinquished any rights they may have to the escrow impound funds that exist or may exist in the Escrow Impound Account. The Lender does not care! THEY REFUSE to issue checks to anyone other than the ORIGINAL borrowers on the Note they are servicing.

Any thoughts on HOW TO - be able to EASILY get these escrow impound funds (which are thousands of $$) disbursed to us ???
I am SURE this has come up with many others when an existing loan that was taken over SUBJECT 2 that loan is paid off.

BACKGROUND:
Bought a property SUBJECT 2 an existing 1st lien (lets say serviced by Shellpoint) years ago.
Loan is NOT in our name but in the name of the original borrowers.  This account includes ESCROW IMPOUNDS being collected for the payments of taxes and insurance bills as their occur.  We have made payments on the loan that is NOT in our names.

SITUATION:
SOLD the home under a LEASE OPTION (or it could be even a WRAP AROUND Mortgage (or Deed of Trust) type of sale.
They PAY US (on our LEASE or the Wrap Around Note) and We pay the underlying 1st lien lender (serviced by Shellpoint)

PROBLEM:
The Value of the property has gone up a lot. Now the Tenant Buyers / or Wrap Around Note payors are REFINANCING and getting ALL new
financing which means the underlying Note which we took over SUBJECT 2 is being PAID OFF in FULL.

The 1st lien lender REFUSES to return the funds ($$) currently being held in the loan escrow account to US - since we are NOT the actual Borrowers named on the Note they are servicing.  The insist that once the account is paid off in FULL, those funds MUST go to the original borrowers.  NOTE: We have a specific POA - power of attorney given to us to act on behalf of the loan borrowers with regard to THIS property and their loan. We also have a written agreement stating that the ORIGINAL Borrowers have relinquished any rights they may have to the escrow impound funds that exist or may exist in the Escrow Impound Account. The Lender does not care!  THEY REFUSE to issue checks to anyone other than the ORIGINAL borrowers on the Note they are servicing.

Any thoughts on HOW TO - be able to EASILY get these escrow impound funds (which are thousands of $$) disbursed to us ???
I am SURE this has come up with many others when an existing loan that was taken over SUBJECT 2 that loan is paid off.

Quote from @Chris Seveney:

Quote from @Michael Morrongiello:

To be clear FBO this a RESIDENTIAL use House. Its occupied by the Wife and Her Children who wish to STAY there. (Thus  cannot be considered commercial or commercial income producing)

Chris - agree with all of your points. The parties are in agreement about what the husband will take if he can get his $550K in cash out.  The BIG issue is the EX-Wife who wishes to maintain a life style she clearly cannot afford and wants to STAY in the home with the Children BUT cannot AFFORD to make the payments on such DEBT that would allow for that (thus her need for $300K +/- in extra proceeds that would in essence be used to make those payments for the 3 years)

Sadly yes there are consequences when families break up, separation's and marital divorce happens.

Even though WE are NOT originating a loan here; it would be the EX-Husband who would be "originating" the Loan (by taking back the Deed of Trust and Note) in order to SELL his 50% interest in the house, the TIE IN is with our BUYING or INVESTING in the purchase of the DOT and Note to generate CASH to him, and CASH OUT to Her is where
this becomes a "Gray Area" of whether it violates any of the CFPB Consumer Financial Protection Bureaus requirements and could be re-characterized as a high cost LOAN IN DISGUISE

ALTERNATIVE THINKING
We are thinking a better way to go here IF the EX-Wife agrees; it to
SELL the house NOW, pay off the EX- Husband and enter into a 3 year LEASEBACK with the buyer of the home.  She will now have the funds to pay the RENT and also can maintain her lifestyle.  What she will have to give up though is a LESSER Sales Price that will have to be accepted for the home sale Vs getting TOP DOLLAR estimated to be $2M to $2.2M + .
She will have to ACCEPT LESS since the Investor BUYING the home and agreeing to lease it back will have her locked in for the next 3 years.

 What is her plan in 3 years when she runs out of $. I will consider giving them $1M+ to rent it back for $100k per year for 3 years. 

Her GRAND PLAN is to live in the house with the Children and then SELL it at the end of 24 or 36 Months from Now. She is really trying to create a "soft landing" for her and her Kids as this Divorce unfolds. We see this often. She feels IF interest rates come down as it looks like they will then in this highly desirable area where residential inventory is still VERY tight, Values will continue to > CLIMB Higher. She is not looking to maintain her lifestyle in this home forever and is realistic in accepting that she will HAVE TO downsize in the Future.

No way will she accept $1M to sell a $2M to $2.2M current value home and rent it back at $8,333 per month ($100K/ Yr). Market Rent is around $6K +/- per month, and she would be better off just listing it NOW and SELLING it traditionally, paying a REALTOR, etc. (yes that would involve a move) and then downsizing. 

A SALE at SOME (reasonable) reduced sales price with the BUYER then agreeing to LEASE BACK the home to her for 24-36 months seems like the best path to pursue. However the
EX Husband was ONLY willing to accept $550K if she could pay it to him quickly and NOT thru the SALE of THEIR Home; otherwise he can force a PARTITION SALE of the home and thru such a sale receive FAR MORE than the $550K he agreed to accept if it could be paid quickly to him.  Eg. Assuming a $2M Sale Price, Minus $100K (5%) RE commission, leaves $1.9M - MINUS their $270K in Debt leaves $ 1,630,000 for them to Split (he gets $815K and she gets $815K)

Quote from @Don Konipol:

Zsa Zsa Gabor faced almost exactly the same situation.  Her solution was to marry Conrad Hilton. 

Don, yes - Yes TOO FUNNY, and All kidding aside; I guess she could consider "marrying up"
Sadly these types of family dynamics happen all the time

To be clear FBO this a RESIDENTIAL use House. Its occupied by the Wife and Her Children who wish to STAY there. (Thus  cannot be considered commercial or commercial income producing)

Chris - agree with all of your points. The parties are in agreement about what the husband will take if he can get his $550K in cash out.  The BIG issue is the EX-Wife who wishes to maintain a life style she clearly cannot afford and wants to STAY in the home with the Children BUT cannot AFFORD to make the payments on such DEBT that would allow for that (thus her need for $300K +/- in extra proceeds that would in essence be used to make those payments for the 3 years)

Sadly yes there are consequences when families break up, separation's and marital divorce happens.

Even though WE are NOT originating a loan here; it would be the EX-Husband who would be "originating" the Loan (by taking back the Deed of Trust and Note) in order to SELL his 50% interest in the house, the TIE IN is with our BUYING or INVESTING in the purchase of the DOT and Note to generate CASH to him, and CASH OUT to Her is where
this becomes a "Gray Area" of whether it violates any of the CFPB Consumer Financial Protection Bureaus requirements and could be re-characterized as a high cost LOAN IN DISGUISE

ALTERNATIVE THINKING
We are thinking a better way to go here IF the EX-Wife agrees; it to
SELL the house NOW, pay off the EX- Husband and enter into a 3 year LEASEBACK with the buyer of the home.  She will now have the funds to pay the RENT and also can maintain her lifestyle.  What she will have to give up though is a LESSER Sales Price that will have to be accepted for the home sale Vs getting TOP DOLLAR estimated to be $2M to $2.2M + .
She will have to ACCEPT LESS since the Investor BUYING the home and agreeing to lease it back will have her locked in for the next 3 years.

Situation:
Have a family that is going thru a DIVORCE and that owns a $2M+ valued home. Home is located in a VERY HOT Market place.
They only owe about $270,000 on a 1st lien that dates back to 2021 which is at 2.875% Interest and will remain at that FIXED Interest rate for 4 more years. The loan amortizes out over 360 months but is a FIXED / Adjustable rate Note  until 1-2029 (THEN it will have interest rate changes every 6 Months thereafter) . SO They have a TON OF EQUITY.

Current Payment P & I payment is $1,200/ Mo

Husband and wife are on TITLE - their Dissolution of marriage calls for the WIFE to pay $550,000 to the husband and then she can KEEP the 100% of the home. Husband is willing to accept the $550K but IF it cannot be paid then a FORCED SALE OF THE HOME MUST HAPPEN.
Time is running out

Wife and 3 Children LIVE in the home and want to CONTINUE to live in the home as the Children are entering or in High School
(a painful time to have to move or relocate for all) - YES lots of emotions all around involved.

Wife does not EARN enough income (working for a non profit group) to be able to afford large loan payments.

She has been trying to BORROW the funds she needs $550K to pay off the Husband and another $300K of additional funds (Totaling $850K) so that she has the EXTRA borrowed funds to be able to make 2-3 years of payments on the financing (versus raiding her retirement account). Given that she is a CONSUMER it may be difficult qualify her ABILITY to REPAY.  
Even Hard Money lenders (with 10% to 12% interest rates might have issue with that)

PROPOSAL MADE and SEEKING OTHERS:
Have the Husband agree to SELL her his 50% interest in the House on TERMS to the WIFE who wants to STAY in the home and where he would carry back a WRAP AROUND Note - lets say for $1,425,000 at 7.0% with I/O INTEREST ONLY repayment terms of $8,312.50 monthly and a 36 Month Balloon payment when the entire $1,425,000 would be due. THIS $1,425,000 WRAP AROUND Note would be INCLUSIVE of the existing underlying 1st lien ($270,000 @ 2.875%) . This first lien will pay down to about $245,000 thru amortization over the 36 months.
The WIFE would be the DEBTOR responsible to make the I/O payments of $8,312.50 each month and the future balloon payment due of $1,1425,000

Q- How does the Husband get his funds out to complete the Divorce?
A- The thought is He SELLS his $1,425,000 WRAP AROUND Note at a DISCOUNT to an INVESTOR who agrees to fund around $900,000 In Cash. From that $900,000 in Cash paid for the Note, the About to be EX-Husband receives his $550K that he agreed to accept to SELL his 50% interest in the home. The EX-Wife now owns 100% of the Home. $300,000 of the proceeds paid for the Note will go toward helping her make the $8,312.50 I/O payment each month for the next 3 years. (in essence she is borrowing excess funds to help make the payments)
$8,312.50 x 36 months = $299,250 allocated to MAKE the payments on the $1,425,000 Note obligation.

Benefits for the (EX) Husband;
* he gets his $550K he agreed to accept
* his children and (EX) wife get to STAY in the home as a family unit during the very formative High School days

Benefits for the (EX) wife:
* She gets to stay in the home with the Children thru the High School Days
* She has the extra $300,000 in funds (borrowed) thru the sale of he Note to help her make these payments for the next 36 Months
* She did not have to borrow HARD MONEY rates and its doubtful a lender would even make a LOAN Here given her inability to repay it.

Benefits for the Note Investor: 

* They fund $900,000 +/- to purchase at a DISCOUNT The WRAP AROUND $1,425,000 I/O 7% Note with $8,312.50 monthly payments and and only have to put out $900,000 (since its sitting behind and WRAPPING a $270K 1st lien). They will get monthly payments of $7,112.50 NET To them each month (remember $8,312.50 is coming in on the WRAP AROUND Note of $1,425,000 but $1,200.00 is still DUE and GOING OUT to pay the $270K underlying 1st lien. ) and then when the $1,425,000 Note matures in 36 Months they will also receive approx. $1,180,000 to THEM (this is the $1,425,000 DUE on the WRAP AROUND Note - MINUS the $245K due on the 1st lien payoff -leaving $1,180,000 to them)

Q- Who would buy such a Note ? 
A- Their calculated return would be a 17.44% YTM - yield to maturity on their $900,000 invested.

QUESTION; WHAT issues or possible "Loan" issues or wrinkles does anyone see here ?
Remember its the (EX) Husband Taking back the $1,425,000 DOT and Note (making the loan) here in an effort for
the (EX) Wife to be able to BUYOUT his 50% interest in the home and continue to stay in the home. This is NOT a
Traditional LOAN ORIGINATION 

Brian - There are a few investor friendly title companies who can handle a SUB 2 Deal
You did get some good advice about networking and seeking help thru some of the local REIA groups. One in the SF Bay area that has been around a LONG LONG time is BAWB which stands for Bay Area Wealth Builders - they might be able to direct or assist you.

Quote from @Brian Batista:

Hi Everyone,

I'm looking at maybe taking over an FHA loan subto for a condo in Oakland, CA. The seller's title company says they won't do a subto on an FHA loan. Does anybody have a title company that is familiar with doing subto on FHA loans?

Thanks!