All Forum Posts by: Michael Morrongiello

We've been offered the opportunity to purchase a Seller Financed -Purchase money 1st lien DOT - Deed of Trust securing a promissory Note involving a property in the State of Alabama. We will fund this internally for our fund and take an assignment of the security instrument and endorsement of the promissory Note. There NEVER as a LOAN Title insurance policy issued. TWO (2) Title companies we've approached
have told us that Deeds of Trust are NOT used in the State of Alabama and the commonly used security instrument used to secure
"A Promise" promissory Note involving real estate is a MORTGAGE security instrument. They are RELUCTANT to issue a loan title insurance policy insuring the DOT - Deed of Trust  and have stated that we may have COLLECT ABILITY  issues IF the Note goes BAD in the future and we have enforce our rights as a creditor against the Debtor  to collect.

A quick check online using AI - says that "Yes, Alabama is considered both a mortgage and a deed of trust state. This means that when securing a loan with real estate, Alabama allows the use of either a mortgage or a deed of trust, unlike some states that exclusively use one or the other. "

Q- Does anyone have REAL EXPERIENCE with this issue? Have you used a DOT -Deed of Trust to secure a Promissory note or were you able to obtain a Lender Title insurance policy insuring the DOT and its assignment to you?

Puzzled for sure.....

Question;

If we purchase a DOT - Deed of Trust & Note on a RESIDENTIAL property in Alabama where the Borrower is or was an ENTITY (an LLC) and the property is being used for RENTAL INVESTMENT PURPOSES (not as owner occupants); If it goes to FORECLOSURE and we repossess the property; Does the prior owner (the LLC Entity) still have a RIGHT OF REDEMPTION Period of time AFTER the we've completed the foreclosure and repossessed the property?

Question;

If we purchase a DOT - Deed of Trust & Note on a RESIDENTIAL property in Alabama where the Borrower is an ENTITY (an LLC) and the property is being used for RENTAL INVESTMENT PURPOSES (not as owner occupants); If it goes to FORECLOSURE and we repossess the property; Does the prior owner (the LLC Entity) still have a RIGHT OF REDEMPTION Period of time AFTER the we've completed the foreclosure and repossessed the property?

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.