- 1 CREATIVE FINANCING OVERVIEW
- 1.1 Bothell Real Estate Attorney
- 1.2 Real Estate Attorney And Real Estate Broker
- 1.3 Author
- 1.4 Buyers With a Good Down Payment But Poor Credit
- 1.5 Seeking Lease Option and Contract Sellers
- 1.6 Let Freedom Ring – Song
- 1.7 Underwater Properties – Short Sales – Modification
- 1.8 Condo Dues – Short Sale Then Bankruptcy
- 1.9 Open Telephone Line
- 1.10 Blacks Against Mandatory Vaccination
- 1.11 $5,000 Principal Reduction
- 1.12 Services We Offer
- 1.13 Door-To-Door Transit
- 1.14 Seller Financing – The Original Financing
- 1.15 I Help Brokers Do Seller Financed Deals
- 1.16 Lease-Option Deals Open Doors
- 1.17 Servicers Make More Money By Modifying Than By Foreclosing
- 1.18 Zombie Foreclosures
- 1.19 New Federal Rules on Foreclosure
- 1.20 Washington MERS Suits Fail
- 1.21 Modification on Rental
- 1.22 Making Home Affordable Continues
- 1.23 Rental Property Modification
- 1.24 $157,105 Wells Fargo Principal Reduction
- 1.25 Wells Fargo – 3 Year Modification
- 1.26 Principal Reduction Modification
- 1.27 Deceptive Practices in Foreclosures
- 1.28 Low Modification Approval Rate
- 1.29 Renters’ Rights in Foreclosure`
- 1.30 Eminent Domain To Modify Loans
- 1.31 Fannie and Freddie Loosen Modification Guidelines
- 1.32 Lenders Lie to Modification Applicants
- 1.33 Bank of America – Fannie Modification
- 1.34 Banks Forgive Mostly Worthless Seconds
- 1.35 More Foreclosures Coming
- 1.36 Zombie Titles
- 1.37 Consumer Financial Protection Bureau Guidelines
- 1.38 Aurora, Bank of America, Citibank, Chase, MetLife, PNC, Sovereign, SunTrust, U.S. Bank, Wells Fargo –
- 1.39 Calibur – Formerly Vericrest
- 1.40 Debt Forgiviness Will Be Imputed Income Unless Congress Acts
- 1.41 Obama to Replace DeMarco – Stingy Leader of Fannie and Freddie
- 1.42 California Puts Attorneys Out of the Modification Practice
- 1.43 Stratigic Default
- 1.44 Jumbo Modification
- 1.45 What Caused the 2007 Crash
- 1.46 Strategic Defaulters – To Jail With You
- 1.47 Still No Justice for Mortgage Abuses
- 1.48 Modifying Loans on Rental and Commercial Property
- 1.49 Successful Citi Modification
- 1.50 Midland Mortgage Modification
CREATIVE FINANCING OVERVIEW
In 2008 it became difficult to get financing. In the last few years, lending standards have been relaxed, but it is still harder to get financing than it was before 2008. The FHA loan is sometimes the best and only option for those with less than perfect credit and less than huge income.
A possible solution is not to get new financing at all, instead to get the seller to carry a balance.
If the seller owns the property free and clear, the process is a lot easier.
If the seller owes a balance to an existing lender, that financing is called and assumption or wrap-around.
You can do a lease-option or a lease with commitment to purchase, which are almost always unrecorded. You could do a deed of trust back to the seller, which may be a wrap-around deed of trust transaction, and these are generally recorded but they do not have to be recorded.
I must stop here and say that anyone buying or selling creatively should consult with legal counsel. It is not for everyone.
Bear in mind that you must comply with Dodd Frank restrictions on seller financing. These restrictions apply whether the deal is a recorded wrap-around deal or an unrecorded lease option deal. To be on the safe side, consult with an attorney who has studied Dodd Frank and a mortgage broker.
in 1980, when interest rates were the highest ever. Vietnam War deficit financing had pumped up the economy. Nixon had taken the country off the gold standard in 1971. The price of oil had gone through the roof. There was inflation at 13.5% per year and recession at the same time. It was called “stagflation.” Paul Volker took a sledge hammer to the economy, raising interest rates to the point where Jimmy Carter lost the election and home mortgage rates were in the teens.
People wanted to sell their homes, but buyers either could not qualify for mortgages at such high interest rates or were not willing to do so. Millions of sellers had old 3%, 4%, and 5% mortgages, and inventive real estate agents and lawyers figured out ways for buyers to assume sellers’ mortgages formally or informally. In some cases the mortgages had due-on-sale clauses in Paragraph 17 (renumbered today to Paragraph 18). A due-on-sale clause says that if the seller sells the property the bank can call the loan due. However, many state cases around the country held that due-on-sale clauses were void as restraints on alienation because they were practical impediments to resale.
I went into partnership with a Seattle attorney in 1980, and we were very busy rewriting and closing seller-financing transactions. Title companies and escrow companies were unwilling to close the transactions, and so we escrowed them ourselves.
Assume a $100,000 property (typical price back then) with a $60,000 deed of trust against it and a buyer with $30,000 in cash. The buyer would pay $30,000 down and give the seller an all-inclusive, wrap-around deed of trust for $70,000 that wrapped around and included the underlying $60,000 deed of trust. The buyer would make payments to the seller, and the seller would make payments to the lender. There would be a cash out in five years. Often we set up a collection account to handle the money, hold the original note and reconveyance, and give the seller notice if the buyer was not paying on time. Sometimes we got consent from the lenders. Sometimes we did not even ask for consent.
Then in 1984 Congress federalized the law of due-on-sale and preempted all state cases and statutes on the subject. Banks could enforce their Paragraph 17 or 18 due-on-sale clauses and call loans due if there was a change in ownership. The bank had to give 30 days notice, and if the balance was not paid in full or the property was not deeded back to the seller, then the bank could conduct a foreclosure, a process that typically takes six or seven months. In the agreements we wrote, the buyer and seller agreed what they would do if the lender called in the loan.
There were exceptions to the new rule: The bank could not call in the loan if a parent deeded to a child, or a spouse deeded to a spouse, or if a borrower put title into the name of a trust and there was no change in possession.
How does this relate to the present? Although interest rates are relatively low, it is still difficult for borrowers to get financing. That difficulty has had a significant impact on the current stagnation in sales and the drop in property values.
Maybe it is time for buyers and sellers to rebel. My experience is that lenders do not want to take properties back and will consent to wrap-around sales, provided that the seller is not released from liability. The banks have too many properties in their portfolios and mortgage insurance companies are being stretched financially.
I am ready and willing to set up and close wrap-around deed of trust transactions. The method I use is this: I either get the lender to agree to waive enforcement of the due-on-sale clause, or I get buyer and seller to acknowledge there is a risk, and I define the risk. I get the buyer to agree that if the lender calls the loan due, that the buyer will either refinance or resell the property.
What kind of buyer would be a likely candidate for a wrap-around sale? If I can get the lender to consent to the wrap-around, then any buyer would be a likely candidate.
If I cannot get a response from the lender or if the lender refuses to give consent, then the buyer candidate would be an investor or a person who could tolerate a certain level of risk, perhaps a person with sufficient assets who could refinance or re-sell the property if necessary. Every transaction would be handled differently.
If the parties have some concern about the bank possibly foreclosing, the deal can be structured on a lease-option basis.
Bank regulators should require banks to allow buyers to take over sellers’ existing mortgages in order to spur home sales. Due-on-sale clauses should be disregarded and assumptions and wrap-around sales should be allowed until the housing and mortgage markets return to normal. Click here to read the letter I wrote President Obama regarding this issue.
Until such change is made, buyers and sellers can be creative and “go around” due-on-sale clauses.
James Robert Deal, Broker and Attorney
Broker with Agency One Realty LLC
WSBA # 8103, DOL # 39666
James at James Deal dot com
I am a real estate attorney serving Bothell, Washington. Contact me at 425-771-1110 or 888-999-2022.
James Robert Deal is both a real estate agent and a real estate attorney practicing in Lynnwood Washington. If He is your broker, he does not charge extra for legal work related to your transaction.
What To Serve A Goddess When She Comes For Dinner Welcome To My Book I highly recommend it. I had a lot of fun writing it. My book has 464 page book. It is 8.5″ x 11″ in size. It weighs three pounds. It is a beautiful book. It comes autographed. I can autograph it...
If you are a would-be buyer who has a good down payment and good income but poor credit, I am willing to help you buy property on a lease-option or contract basis. James Robert Deal, attorney and broker. 425-771-1110
Seeking Lease-Option and Seller Contract Sellers Open Phone Line to Brokers, Buyers, Sellers 425-774-6611 - 888-999-2022 I am working with several buyers who have strong income and good down payments but who have bad credit and cannot get financing. These buyers...
Let Freedom Ring – a song by vaccine rights attorney Allan Phillips.
James Robert Deal, real estate attorney and real estate agent, handles mortgage modifications and short sales.
Deal with unpaid condo dues by short selling the condo and going through Chapter 7 bankruptcy.
James Robert Deal, Attorney and Broker, in Lynnwood Washington
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Republicans want to put an end to HAMP and Making Home Affordable.
We have an open telephone line to brokers, buyers, sellers, and clients in general who may need help with buying or selling real estate or who may need help with mortgage modification. Services we offer: Help to Brokers, Co-Brokering Escrow Setup Lease Option Deals...
Door-To-Door Transit: The Only Solution To Our Traffic Nightmare by James Robert Deal, Attorney Traffic is bad and getting worse, and there is no solution in sight, as one would conclude from reading Eli Sanders’ “Welcome to Town, Here’s Why You’re Stuck in Traffic”...
AN ABBREVIATED HISTORY OF CREATIVE FINANCING The first forms of financing was seller financing. The buyer would buy personal property or real property and pay the seller on an installment basis. Over time lending houses grew up, and purchase mortgages developed....
Attorney James Robert Deal helps brokers structure seller financed real estate transactions.
LEASE-OPTION AND LEASE PURCHASE DEALS A lease-option or lease-purchase deal is a form of seller financing. With the lease-option deal, title stays in the seller until the buyer refinances or resells or otherwise pays off the seller. The wrap-around deed of trust deal...
Thanks to Martin Andleman and Mandleman Matters Why Does Ocwen Want to Modify Loans? Answer: Because they profit by doing so. In case you haven’t noticed, over the last month or so there’s been an ongoing debate of sorts happening on Mandelman Matters as to...
CFPB: Zombie foreclosures hurt borrowers The Consumer Financial Protection Bureau is keeping an eye on “zombie” foreclosures, which it worries cause “direct borrower harm,” according to a CFPB executive. Zombie foreclosures occur when a bank starts the foreclosure...
New Federal Rules on Foreclosure —By Erika Eichelberger - Thanks to Mother Jones On Thursday, the Consumer Financial Protection Bureau, the federal consumer watchdog set up by the Dodd-Frank financial reform bill, announced a new set of foreclosure-prevention...
Judges Dismiss MERS Suits By Evan Nemeroff Two borrower-initiated lawsuits alleging that the Mortgage Electronic Registration Systems role in the plaintiffs' deeds of trust caused them injury were both dismissed by federal judges in the Western District of Washington...
It is harder to get a mortgage modification on a rental property than it is on an owner occupied property. The rules are not as clear. You need a higher income to qualify for a rental modification because you have to be able to cover your home mortgage. Nevertheless,...
HAMP continues aiding borrowers Three firms still fall short in meeting servicing goals. Thanks to Housing Wire. Kerri Ann Panchuk December 9, 2013 4:48PM Bank of AmericaCitiTreasuryHome Affordable Modification ProgramHAMPhomeownersObama AdministrationHousing...
This is a rental property modification. Ocwen was the servicer, and the investor was Washington Mutual and now Chase. The owner quit paying for 20 months, and the balance rose to $254,000. The interest rate was already under 3.0%, because this was an adjustable rate...
JS is a hard working taxi driver. He came to us after a financial hardship, including a divorce. Ocwen is his servicer, however, the important fact is that Wells Fargo is the investor, the owner of his mortgage. Wells Fargo gives principal reductions because it was...
It is a long story, which I will tell later. For now I will just share the link with you and tell you that this modification took three years to complete. Here is the link:...
We just negotiated this excellent modification with Bank of America. The interest rate was reduced to 2.0%. The principal balance was reduced by $131,000.
Deceptive Practices in Foreclosures Thanks to the New York Times September 13, 2013 In early 2012 when five big banks settled with state and federal officials over widespread foreclosure abuses, flagrant violations — including the seizure of homes without due process...
This post comes from Martin Andelman. The low approval rate on modifications Martin discusses is the main reason why you should hire an attorney to do your modification. Our success rate on modifications is much higher, around 80%. Of course, part of the reason why...
Renters in Foreclosure: What Are Their Rights? Federal law gives important rights to tenants whose landlords have lost their properties through foreclosure. Renters and tenants are now being affected by foreclosures almost as often as homeowners. The financial...
A City Invokes Seizure Laws to Save Homes Peter DaSilva for The New York Times Thanks to New York Times. Robert and Patricia Castillo paid $420,000 for a three-bedroom, one-bathroom home in Richmond, Calif., in 2005. It is now worth $125,000. By SHAILA DEWAN...
FHFA expands suite of loan mod tools By Kerri Ann Panchuk • March 27, 2013 • 9:00am Servicers dealing with loans guaranteed or owned by Fannie Mae and Freddie Mac will soon be required to offer eligible distressed borrowers ways to lower their monthly payments if the...
We have found that Lenders often take advantage of those who apply for modification on their own. Lenders tell them they have not received certain documents and say their documents have "expired". Often lenders decline modification and do not make the reason clear....
HMH came to me following a financial hardship. He faced high payments on his Bank of America serviced loan, with a rate of 5.625. The investor is Fannie Mae. HMH is self-employed as a taxi driver. He also owns a rental house in Brooklyn, which breaks even or makes a...
The Second-Mortgage Shell Game By ELIZABETH M. LYNCH Thanks to the New York Times IN January, federal regulators announced an $8.5 billion agreement with 10 mortgage servicers to settle claims of foreclosure abuses, including bungled loan modifications and the...
Where is the housing market going in 2013? Thanks to CBS News (MoneyWatch) The housing market in 2013 stands on a precipice. While there is hope that the slow, but real, housing recovery that took hold last year will continue, fear remains that a sudden...
The latest foreclosure horror: the zombie title By Michelle Conlin Thanks to Reuters. COLUMBUS, Ohio | Thu Jan 10, 2013 1:58pm EST (Reuters) - Joseph Keller doesn't expect he'll live to see the end of 2013. He blames the house at 190 Avondale Avenue. Five years ago,...
U.S. Consumer Watchdog to Issue Mortgage Rules By EDWARD WYATT Thanks to New York Times Published: January 10, 2013 WASHINGTON — Banks and other lenders will be prohibited from making home loans that offer deceptive teaser rates or require no documentation from...
Aurora, Bank of America, Citibank, Chase, MetLife, PNC, Sovereign, SunTrust, U.S. Bank, Wells Fargo –
Independent Foreclosure Review to Provide $3.3 Billion in Payments, $5.2 Billion in Mortgage Assistance WASHINGTON--Ten mortgage servicing companies subject to enforcement actions for deficient practices in mortgage loan servicing and foreclosure processing have...
Mortgage modification is the practice of law. Dealing with Caliber Home loans is not easy. Get legal representation.
Beware of IRS Tax Whammy With Short Sales and Mortgage Modifications in 2013 Posted on Wednesday (December 26, 2012) at 6:00 pm to Mortgages & Sub-Prime Mortgage Meltdown Thanks to Long Island Bankruptcy Blog Written by Craig D. Robins, Esq. When a mortgage...
BYE-BYE DEMARCO! Obama to Replace Director of FHFA 3 You know, I was having kind of a crummy day… nothing serious, just dragging my feet a bit and grinding through some writing I’ve been working on for too long… and thinking about how nothing is changing… and then out...
California State Bar RECENT Decision to Cause More Harm to Homeowners in Foreclosure Thanks to Martin Andelman It’s hard to imagine anything gone so totally wrong as the California State Bar’s interpretation and subsequent handling of SB 94, a law passed in...
Giving Up and Getting Out Foreclosures are no longer a last resort, and a growing percentage of americans think it’s ok to strategically default LISA IANNUCCI Years ago, homeowners viewed foreclosure as a last resort – after all other means had been exhausted to save...
A residential property where the first loan was more than around $729,000 at the time of the default is not eligible for modification under the Making Home Affordable program. However, home owners with jumbo-size loans should not despair - especially if their home is...
The Trillion Dollar Mistake That Triggered the Economic Meltdown Thanks to Martin Andelman It was summer, 2006, and Fed Chair Alan Greenspan had just raised interest rates for the 17th consecutive time in an effort to cool off the over-heated U.S. housing market....
FHFA Looking to Jail Strategic Defaulters by my friend Martin Andelman The Federal Housing Finance Administration (“FHFA”), which is the agency created to oversee Fannie Mae and Freddie Mac… the one run by perhaps the least popular man in America for his...
Still No Justice for Mortgage Abuses September 1, 2012 Thanks to New York Times It has been six months since the big banks settled with state and federal officials over evidence of widespread foreclosure fraud, promising to provide $25 billion in mortgage relief in...
Under HAMP Tier 2, the Making Home Affordable program was extended to cover one to four unit residential rental properties. HAMP Tier 2 went into effect June 1, 2012. The government realized that foreclosing on a rental property was just as destructive of home values...
On this modification with Citi there was no principal reduction because the property was not underwater. However, the interest rate was reduced from 6.375% to 2.0% for five years, 3.0% for one year, and then 3.875% for the next 35 years. Read the details here:...
We negotiated a good deal for Dennis and his wife. They went from a 9.5% rate to 2.0% for five years, then 3.0% for a year, and 3.875% for the balance of the loan. They also got a $24,000 principal reduction. Read the details here:...