Ethical Question
I recently bought a 3 family house that needed repair with an owner occupied mortgage. Once I repaired the house, I refinanced the loan, and pulled out all of the money I put into the house. I recently rented out all 3 units. When I bought the house, I fully intended on moving in once I completed the rehab job. Things have changed since I bought the house; I am not able to move from my current home to this 3 family house; probably ever.
1: Should I inform the bank that I have not moved in and will never be moving in to the 3 family house which I bought and refinanced with an owner occupied loan, or should I just let things be?
2: Am I also in violation of law since I have an owner occupied loan and will not be living in the house, even though I fully intended on moving in?
Well, you've got two scenarios to consider here:
1. Tell the lender it is n/o/o, as opposed to owner occupied, which was a condition of underwriting the loan
2. Let it be, and hope they never find out
Honestly, you could be in big trouble if they find out, and if you tell them, my concern is that you would accelerate your problems.
I would re-post this in both the Legal Forum and the Mortgage Investing Forum. It is not really appropriate for beginners forum.
Good luck to you, Dave
First of all I am not a big fan of people lying when getting a loan to say that it is owner occupied when it is not. However this is not the case here.
Secondly--this issue will probably never come up unless you default on the loan.
You had the intent to move into the property and that is all that technically matters. I don't think this case would go to court but if it did you may lose unless you can somehow show the court proof that you intended to move in and couldn't. It could be a change of job, marrying, having kids, etc. Anything that a resonable person would understand. If the 3plex has 3 1br units and you just had a kid, then that would show a reason why you didn't move in.
There may be somone on here with more experience than me. My thoughts as a layman and not as an attorney would be to let things be. Don't notify the bank. You aren't in violation of any law. The only thing relating to this that is illegal is frauduly obtaining a loan. That is what is illegal. Your intent was to move in. You didn't lie when you got the loan. No worries.
I would consult an attorney because professional advise is worth it's weight in gold.
GOOD LUCK
Don't default and nobody's going to care. I wouldn't notify the lender but if you want to I'd send a letter outlining the circumstances regular mail along with your next payment. I'd keep a copy of the letter and, when your check clears, attach a copy of the cashed check to your file copy of the letter along with a note that you'd sent both of them in the same envelope. Odds of the check processing arm forwarding the letter to the underwriting arm?--- damn close to zero but if it ever comes up you can show that you gave them notice and the cashed check is evidence that they got it.
At the time you signed those loan docs, were you still intending to move in? If yes, then your intent at that time is what matters. Your circumstances can change, which does not mean you defrauded your lender.
Practically speaking, I don't think you have anything to worry about.