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All Forum Posts by: Ron S.

Ron S. has started 0 posts and replied 1907 times.

Post: Wraps and due on sale clause

Ron S.#3 Foreclosures ContributorPosted
  • Paradise, CA
  • Posts 1,932
  • Votes 870
Quote from @T. Alan Ceshker:
Quote from @Doug Smith:
Quote from @T. Alan Ceshker:
Quote from @Doug Smith:
Quote from @T. Alan Ceshker:
Quote from @Doug Smith:
Quote from @T. Alan Ceshker:
Thanks for the question

Yes it does 

First - get insurance in place correctly -- use a proven insurance provider -- this is most important 

Educate seller to not contact the bank

Use a trust structure to have the conveyance appear to comply with Garn St Germain

Be ready to fix if needed via a deed flip flop or paying off the mortgage

These transactions should only be attempted by experienced and ready investors -- those with the knowledge and ability to fix if needed

Thanks

Alan

 Hi Alan, I've made it no secret that I have ethical issues with many of the sub-to tactics being used nowadays, but I have to ask about your statement "educate your seller not to contact the bank". You're knowingly advising a client to hide a covenant break to a financial institution which weakens the lender's risk rating on a deal. How is that any different than concealment in cases such as bankruptcy? What is to keep an unqualified applicant from being declined a loan at a bank only to have them "secretly assume" a mortgage loan from a previously qualified applicant? The Due on Sale Clause was born out of Sub-To deals 30-40 years ago where properties are transferred to non-approved, usually unqualified applicants. How can a financial institution manage risk if properties are secretly being transferred to unqualified applicants with attorneys actively coaching clients to circumvent and conceal covenant breaks. I realize your an attorney, but that smells like mortgage fraud. What specific statutes keep what your advising from being concealment at best and mortgage fraud at worst?


Simple -- the fraudulent actions and misrepresentations you reference are against statutes and contractual terms.  The due on sale clause is a permissive act allowed to the bank and not a prohibitory clause.  Very simple.

In a wrap, nobody is deceiving the bank.  They just are not proactively advising a permissive right has been triggered.  This is not actionable conduct and any attorney that says it is -- is wrong and likely trying to scare their clients into buying something from them - legal services, coaching, docs or otherwise.

I may be in the wrong forum for a high level discussion on how to make wraps safer and more risk free than they already are.

Maybe someone will pop out soon and have something other than misinformation and scare tactics.

I remain hopeful

Thanks

Alan




 Perhaps this is the wrong forum. My low-level intellect can't seem to function on your level. You're right...it is a permissive act, however your active recommendation of concealment is what I am taking issue with. When we underwrite a loan, we are underwriting the borrower. Sub-to without our permission increases our risk. You're recommendation to conceal it from us is what I am taking issue with. 

A borrower, opposing counsel, adversary in any manner is only required to disclose what they are required to disclose.  I liken it to Officer and A Gentleman quote "I will do all things fair and unfair to trip you up".  We have no requirement to advise the lender of their permissive right.  Failure to advise of this is not a breach, not fraud, not a misrepresentation, not a breach of duty, not a breach of contract -- nothing.

Let me ask you this -- since you are on the lender side of things -- how is a lender harmed by having their borrower required to pay their investment each month - ie the mortgage -- and another party now required to pay the mortgage each month.  How does this harm a lender.  I do not care if the second liable party is the worst credit risk know since man existed -- how does this harm the lender that 2 are liable to pay?  It only increases the chance their mortgage is paid and their investment is sound and protected.

Let me know re this

But -- wraps are not leaving -- all the nay sayers in the world can post misinformation and fear mongering -- they will exist -- I merely wanted to provide a venue so we can do them as legal and sound as possible.

Again - maybe wrong forum

I can easily answer your question. Our spreads as lenders are very, very thin. We can't afford to be wrong more than a little bit. We attempt to keep delinquency below 0.6%. Of the "three C's of credit", capacity is the most important. Meaning "does the borrower have the ability to pay the loan back". We look for primary and secondary exit strategies for the borrower before the tertiary exit strategy of liquidating the collateral. When this happens, it is usually goes through the court system. This, as you know, takes a great deal of time. The time value of money kicks in for us and we end up taking a bath on the deal. As you've demonstrated a few times in this thread, counsel for the borrower will do all they can to draw it out which costs us legal bills and we're on "non-accrual" meaning we're paying for the money we lent out but we are not getting interest back in. When we loan money, we are betting on the person we gave the money to. We are harmed when the property is transferred to a weaker borrower and when attorneys actively coach these new property owners...owners we never agreed to work with...to bend the law and draw it out as long as they can. You've said that I am "fearmongering and spreading misinformation" and you've implied that your obviously in the wrong forum because, either because you feel some of us can't follow your line of thinking or that we're not providing you with an echochamber of agreement. What specifically have I said that is incorrect? Perhaps we see things differently. I have an attorney friend that I have spirited discussions with all the time. He feels that if something is legal and he can get away with it, then its moral. I disagree. The positions of active concealment you advocate most certainly harm us lenders. 

You missed the salient question -- Lender has borrower liable for loan --- a wrap occurs -- there is now a new person (in addition to the first) that is liable for the loan -- 2 people are liable -- how does this decrease the security of the lender -- they still have their "approved" borrower -- and now they have another -- approved or not -- they have 2 -- 2 is better than 1 -- yes?

If not -- please identify how 2 people liable to pay me is worse than 1

Two people aren't liable for the loan. Only the original borrower is liable. The 2nd borrower/buyer may be liable to the 1st borrower but that has nothing to do with the underlying note and DOT. The lender has no duty to the 2nd borrower and vice versa and in fact, the lender may be negligent to regulatory agencies, examiners, investors, the U.S. Treasury Department and more, knowing about and looking the other way regarding the 2nd "borrower".

Also, 2nd borrower is on title and 1st borrower isn't. How is security not reduced!? That's like saying, "Yeah, i know the bank is on the pink slip with me as the registered owner but i sold it to a guy an he's gonna make payments to me. Of course he'll keep the insurance up. Of course he'll list the lender as loss payee...yadda yadda". In this scenario and in most situations where there is a sub to or wrap, the 2nd borrower lacks the capacity to obtain financing in the first place so by definition, the risk is increased. You think the lender's security isn't in jeopardy?

Post: Wraps and due on sale clause

Ron S.#3 Foreclosures ContributorPosted
  • Paradise, CA
  • Posts 1,932
  • Votes 870
Quote from @Account Closed:
Quote from @Account Closed:
Quote from @T. Alan Ceshker:

I want to start a discussion re the due on sale clause

We are seeing more issues re lenders calling notes due.  Some because of mistakes with insurance.  But, some due to lenders looking.

One lender/servicer is HomeLoanServ.  They actually are looking at prior foreclosures that were reinstated.

What are you folks seeing?  Are you taking measures to protect your deals?

Thanks and let us know -- let's get info flowing

Alan 

We do a lot of creative financing. The only real solution is to be well capitalized, experienced and selective, as we are.

Unfortunately, what is popular and is being highly pushed on youtube is to do subject to on over leveraged properties on the MLS, that the market has already said isn't worth what the seller is asking. (Long Days on market) and then using secondary financing for closing and carrying costs. Buyer has no skin in the game. Likely has no access to credit either.

When a due on sale is called on a wrap, it is a very serious problem. Since the property has changed hands and probably to an end buyer who is living in the property, the only solution is for someone to pay off the loan. Who should that person be? The correct way would be for the person who sold on a wrap to pay off the underlying note and carry the note himself. Investors, especially the group doing this on a shoestring, are not in a position to take that approach.

There is no equity to do a refinance and in order to sell, to cure the due on sale, the "buyer" would have to bring money into closing, money he really doesn't have in most cases. Switching to an executory contract also violates the due on sale.

Banks aren’t stupid. Putting the transaction into a land trust and trying to hide ownership creates a problem when a legal action is taken against the borrower or property. (Lawsuits, liens, bankruptcies and so on). People need that notification to address the issues that arise.

Deeding back to the original borrower is still a violation of the due on sale. The lender can choose to enforce at their discretion. Deeding back creates tax problems, possible chain of title problems and costs money the "buyer" may not have. Because of the issue with title fraud in some markets, CA, NV, Phoenix, Dallas, Atlanta, Nashville deeding back may trigger an investigation into fraudulent transfer. In foreclosure rescue or bankruptcy you can have similar problems.

Even a change in servicer or selling the note from one lender to another can create a series of late payments that needs to be sorted out.

It’s just better to do these properly from the start. Be well capitalized, get proper training (not youtube training) and follow the rules. 


 Deeding back would cure the breach and end the lender's default declaration. No lender would prevail in accelerating for due on sale if the offending borrower was placed back on title. Other than that, i agree with most of your postings.

Post: Awarded house in divorce decree, can I remove with quit claim deed?

Ron S.#3 Foreclosures ContributorPosted
  • Paradise, CA
  • Posts 1,932
  • Votes 870
Quote from @Melanie P.:

You may be able to do a novation assumption. There are exceptions where mortgages are assumable following a divorce. Fannie lists the exceptions in D1-4.1-02 and Freddie in 8406.4.

HOWEVER, the best and most effective way to handle your title and loan issues is to simply refinance the loan. If you no longer qualify for a loan you should sell and move. The home loan was based on your combined borrowing power. If you cannot refinance it is unlikely you'll be granted the novation and it will take a lot longer to get an answer on that.


The beneficiary of that assumption has to fully credit qualify so, while yes, I agree that might be an option, it's not a given. I've done one in the last ten years and thankfully that one did not have MI because the MI companies do not have to agree to these assumptions.

Post: Wraps and due on sale clause

Ron S.#3 Foreclosures ContributorPosted
  • Paradise, CA
  • Posts 1,932
  • Votes 870

How would you propose they "Protect" their deals? If they are transferring ownership, doesn't that trigger the due on sale.

Post: Foreclosure Due Diligence

Ron S.#3 Foreclosures ContributorPosted
  • Paradise, CA
  • Posts 1,932
  • Votes 870

looks like someone is getting ready to start their next get rich quick seminar...

Post: Foreclosure Basic Rules

Ron S.#3 Foreclosures ContributorPosted
  • Paradise, CA
  • Posts 1,932
  • Votes 870
Quote from @Nicholas Lilly:

The lienholder is required to provide 21-day notices of foreclosure sales of a residential homestead. This notice must also be filed with the county clerk and posted at the courthouse. The Statute of limitation is four years for lienholders to start the foreclosure process after default. After the statute of limitation expires, the lienholders cannot collect, with a few exceptions.

All lienholders must send a demand letter to debtors with the intent to foreclose on the property, the demand letter must be sent by certified mail. Debtors have 20 days to cure a homestead property, unless the deed of trust states otherwise. If the debtor is able to cure the default then a reinstatement agreement should be executed unless the terms of the debt have been changed, such as a modification agreement or a replacement note.

If the debtor or tenant has paid more than 40% of the amount due or made 48 or more monthly payments, then pursuant to the equity protection provisions of Tex. Prop. Code Sec. 5.066, the seller or landlord must give a 60-day notice of default and opportunity to cure the default. If debt has not been cured, then the trustee may start the foreclosure process.

All superior liens will extinguish subordinate liens. After the sale, any excess proceeds from the foreclosure sale may be distributed to the subordinate lien holders.

Notice must be given to the IRS and U.S. Attorney (if any) 25 days or more prior to the sale. The IRS has 120 days to redeem the property after the sale. The U.S. Attorney has 60 days.

If you are a property owner or lienholder and need assistance with the foreclosure process, be sure to review the deed of trust, note and all other relevant documents.


 Other than not being accurate in a good portion of your diatribe, what is it exactly that you are trying to say, and to whom?

Post: Awarded house in divorce decree, can I remove with quit claim deed?

Ron S.#3 Foreclosures ContributorPosted
  • Paradise, CA
  • Posts 1,932
  • Votes 870
Quote from @Bruce Woodruff:

You have to remove them from the loan first and requalify on your own. After that step, they should be fine with signing a Quit Claim Deed to you.


No lender is removing anyone from an existing loan. The receiving party should refinance the property (Assuming they qualify) into their name only with a new loan. The quitclaim could be a part of the refinance at signing. The prelim would show spouse A being removed and spouse B as the sole borrower and owner.

Post: Has anyone successfully sued their loan servicer?

Ron S.#3 Foreclosures ContributorPosted
  • Paradise, CA
  • Posts 1,932
  • Votes 870
Quote from @Chris Seveney:

@Noah P Bonds

Qualified written response

Question would be what are you suing for? You can only sue for actual damages. What damages did you have? Maybe some extra money owed on taxes? So you are gonna sue and spend thousands to collect maybe a few hundred in penalties?

You won’t get money but if you file complaints they would get fined


 Its actually...Qualified Written Request but who's counting. :)

Post: Has anyone successfully sued their loan servicer?

Ron S.#3 Foreclosures ContributorPosted
  • Paradise, CA
  • Posts 1,932
  • Votes 870
Quote from @Noah P Bonds:

One of my loans was taken over servicing by Shellpoint. Since then it's been a pita for the last 6-8 months. Essentially my taxes suddenly weren't being paid and they subsequently lowered my escrow payment. I initially found out because my county began sending me delinquent notices. After many attempts to explain this to Shellpoint they finally have readjusted the escrow payment to an even larger than initial amount.  I have been trying to explain this to them since January - it's taken them until June. I had sent them the delinquent notices from the county at least two times. My initial piti payment was 8,870 now it will be 10,359.To make matters more messy I changed insurance during this time - they repeatedly sent me notices that they did not have proof of insurance...I had my insurance rep send them the docs several times before they finally acknowledged the new insurance. I don't know if this is worth pursuing but I feel like they've really dropped the ball over and over. I'm guessing It's not worth it, but I would like to hear if anyone has ever sued a loan servicer and what they outcome was.


I'm a bank and I get sued all the time. I also manage the insurance and escrow department for my bank and while we make mistakes, we fix them and we make sure we pay for any penalties if its our fault. I've had to pay for some insurance premiums and some late penalties on property taxes but i can say, I've never been successfully sued in 15 years, because our process is well documented and its not a pattern or pervasive or malicious in intent (Some elements needed to sue in my opinion) if we make a mistake and, I've always made the borrower whole. Shellpoint is a LOT bigger than my bank so, I'm guessing they probably have a decent process in place as well? 

I'm guessing you have some of the pieces but not all of it? Servicers don't typically just stop impounding for taxes and insurance, if they have impounded in the past. The only why my company stops is by written instruction to cancel. In fact, some states require the borrower to cancel impounds in writing before the lenders/servicer is allowed to cancel so, if they cancelled and you didn't instruct them to, ok maybe they are negligent. However, they cured their negligence by reinstating the impounds for taxes. 

For the most part, they should pay for any penalties from the tax authority but at the end of the day, if you weren't paying for the taxes through escrow, and they weren't disbursing to the tax authority, but now you are and now they have, it makes sense the payment went up because they are covering the shortage for the period you weren't paying. If you were paying into the impound account this whole time, that's another story.

The same goes for insurance. You say your agent sent them proof of insurance but yeah, for 15 years I've heard that story and the agent is usually the one dropping the ball. At the end of the day, you changed insurance. If you can document your previous policy (Exhibit A) was from (As an exampled) 03/01/2023-03/01/2024 and your replacement policy (Exhibit B) was from 03/01/2024-03/01/2025, that's it, that's all you need. Those two declaration pages with coverage periods are all you need to document no lapse in coverage. That said, you must also meet the coverage requirements, loss payee/mortgagee clauses, deductible requirements, etc..  If you had no gap in coverage, the lender cannot make you pay for any gap coverage or force placed coverage. They can charge you a million bucks for a force placed policy but you'll get a 100% refund in my scenario. Shellpoint is smart enough not to double cover and try to charge for it.

If you're just pissed you had to send it several times but it got taken care of ultimate, yeah it sucks but, you aren't going to prevail in any lawsuit. What harm or loss did you suffer? File a complaint with your state agency or their regulatory agency or the FDIC and move on.

Post: Grandfathers Property I want to Rent

Ron S.#3 Foreclosures ContributorPosted
  • Paradise, CA
  • Posts 1,932
  • Votes 870

You own the property but anything can happen between the time you executed the quitclaim and recorded it. If someone jumped in front of you, well, there's that. Not recording doesn't make it not legit but, you'll need to record to protect yourself.

Once you do record, be prepared for the due on sale clause if there is a lien on it. If you are his guardian or somehow legally representing his interests as his successor, you may be able to avoid the due on sale provision in the note. Note, you don't "Take over" the mortgage typically, you just pay as the successor once you legitimately establish yourself as the successor (Will, Trust, Court Order). Short of that, he transferred the property in violation of the promissory not so, the lender could accelerate the loan and declare the full balance due and payable.

If your grandfather and notary didn't sign the quitclaim, you don't have one so, umm...have them sign it and record it. Better yet, have him just add you to title so you don't trigger the due on sale clause.

Just my Humble Opinion.