Quote from @Steve K.:
We haven't seen that many due on sale clauses being enforced by lenders over the past decade or so. At the same time, we're seeing some gurus selling strategies like subto as if there is no risk of triggering a DOSC. More and more investors are looking to assume low-interest loans rather than deal with reduced cashflow thanks to today's interest rates. It was before my time, but my understanding is that triggering a DOSC was more common in the 80's during a similar rising interest rate environment like we find ourselves in now. Lenders are probably more likely to enforce their right to call the loan if they feel their security is at risk in the hands of an unvetted buyer, or they believe they can make more money if the buyer applies for a new loan. It seems like it is becoming good business for lenders to start enforcing (they may actually also benefit by getting these 2-3% interest loans off their books). Are we about to see an uptick in due on sale clause enforcement? Curious to hear what some lenders and folks who have been around a minute think about this...
First of all Steve is correct when he said "lenders are looking for Security, and watching for the unvetted buyer"
Also, I am involved in many Subject to's all over the Country. If anyone is concerned about the Due on Sale because of interest rates being higher, look who owns the loan and who the servicer is, I hear often people saying that the Bank will call low interest loans just to get a higher interest, the money from the mortgage is from a hedge fund or a Government back mortgage (gets deeper but just as an example), I would never see any other money provider just targeting Subject to's for the sake of the deed changing names.
If someone is concerned about the DOS Clause then they need to convert that energy into education. I know a ton of investors how own over a 100 Sub to's and the last thing on their mind is the DOS clause because they know what they are doing and they are making sure every deal is done right.
I have heard several horror stories over the years, but when it comes down to it, it is because the investor, original mortgage holder (seller) or secondary servicer (on a wrap) screwed up and did not communicate with someone, did not do their insurance correct, did not educate or disclose to the seller or did not make their mortgage payment on time.
In this business the bests defense is a great offence. There is no shortage of people getting into Sub to's that do not know how or trying to make a buck without knowing the risk.
If you worked for a servicer (Wells Fargo, Chase etc.) which all they do is collect funds and do not own the loan, and you went to your boss and said I am going to foreclose on these preforming loans because the deed changed names, I would guess you would no longer work for the Servicer any longer, remember the person who invest in the hedge funds is just looking for a long term return on their investment they can care less who is making the payment, just want the payment to be preforming.
But if the uneducated investor did not do your insurance correct, or did not work with the seller to make sure they are not the one who the Servicer calls with questions or the seller is lead to believe his or her name will be off the loan, or the investor just does not respond to any question the servicer has, all can go bad in a hurry.
I talk to Servicers often, they are just looking for comfort and communication.
I have talked to a few Hedge fund managers who like the concept of the Sub to, makes their product more investment worthy to not have a bunch of non preforming loans to report.
