All Forum Posts by: T. Alan Ceshker

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. 

 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. 

 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.

 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?

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.