In Subject To Deals, Wont The Bank Notice New Payor?
I just ordered John Locke's book, but I havent received it yet.
Dont even know if this is mentioned.
Wont the bank notice that I am now paying the loan and NOT Mr. Smith who borrowed the money and in whose name they recorded the mortgage?
Could this cause them to trigger DOS clause?
What if they do, do I have to find other financing very fast?
Neill7,
Between the manual, subto web site, e-mail one on one with me and my cell phone number I can assure you that you will have the answer to all you questions very soon as I ship Express Mail.
John $Cash$ Locke
I posted this on the Sub to net a few days ago, but since you asked, I'll share the info here.
I just spent the weekend with my brother who is a Vice-President of a major bank in the Southeast. He happens to be in-charge of the Mortgage end of the bank.
I decided to pick his brain a little bit and asked him this very question. I had no idea what his answer might be and he has never read any of $Cash's$ nor my material on any board.
His answer turned out to be the same as ours "as long as the payments are made on time...no flags or problems".
There are too many loans and it takes too much time, expense and energy to put every house and loan under a microscope, so as long as the loan is current, they don't care who is making the payment.
Best of luck
John (LV)
Thanks for the answer JohnLV.
Not to be contrary however, I just realized that you will have to give the bank an address change to send the monthly invoice.
Having the billing address be different from the home address HAS TO BE A FLAG.
No?
N.
Hi Neill
I have even physically gone into a bank to make the address change.
Here is what I did:
When I went into the bank, I had the payment coupon, filled out with the new mailing address (PO Box) and a check for that month's payment. I handed the teller the check and the coupon, she entered the information into the computer and noticed the address change. She handed me a receipt and told me that she entered in the address change in the computer.
I thanked her and left the bank.
Here is the key, by making a payment at the same time you are making the address change, you are verifying that the address change is correct. Now all future mail will be sent out to the new mailing address by the bank's computers.
Best of luck,
John(LV)
That's not bad. Can't always be done that way, but that's not bad at all!
thanks,
Neill
John,
When you changed the address, didn't the teller notice that the name on the payment coupon did not match with the check?
Thanks
Housebyr
housebyr,
Thank goodness for the TCI forums, sometimes I really get a kick out of the questions however, I realize they are sincere so here goes.
The teller probably handles 400-500 transactions per day, I doubt her job is to see who paid the note on any loan only that it got paid by check or cash.
What was left out of this post is using a Loan Servicing Company which I highly recommend. This is a 3rd party who receives hundreds to thousands of lender statements every month and sends out hundreds to thousands of payments per month, they normally send the address change to the lender with the payment this is not an uncommon occurance.
Now we can talk about the clerk who sets at the lenders office and receives thousands of payments every month and who knows how many address changes. Do your really think that part of this clerks job is to investigate every single address change?
Of course then again the lender could hire thousands of people to set at the recorders office every day to check out if the deed has been changed. Of course thier profit and loss statements might take a big dip, then the investors would be upset, so the lender could find themselves without investors and have to close down.
Now, if I were a lender I would be more concerned with the Mortage Bankers Association report showing that there were 400,000 households in foreclosure in the second quarter of 2003.
Looking for Subject To investors would be pretty low on the totem pole I would think for any lender.
John $Cash$ Locke
housebyr,
Didn't notice or didn't care.
A few years ago I made a house payment for my sister out of my checking account (completely different names) and there was no problem as I wrote the account number on the check.
You have to remember these banks only care about getting the money and not where they are getting it from.
THE BOTTOM LINE IS THE $$$$$
John (LV)
you have to understand that it is a normal question that the banks try to invoke DOS.
Other people ask the question and I consistently hear "banks dont care".
Could you please just answer what happens IF THEY DO find out?
If Super Teller happens to notice?
The bank computer cross checks addresses?
What if they do care?
John Locke has done 500 properties. Has this NEVER occurred? Then I feel more comfortable.
N.
Neill,
I can assure you that I have nerver had the DOS clause envoked on any of my properties.
I kept the property payments current.
I think you should read this link from a very knowledgeable investor and attorney.
http://www.legalwiz.com/dueonsale.htm
You can what if till your mind is fuzzy, remember real estate investing is a risk vs reward industry. There are no gurantees you could be a re-habber spend thousands of dollars on a property and no one is interested in your house.
You could purchase an apartment complex what if the neighborhood fills up with meth heads and no one wants to rent from you?
What happens if you work at Mac Donalds for a living and all the cows get mad cow disease and you get laid off. Would you look for work elsewhere and go on with your life?
What if, what if, what if, the guy on the street corner with the sign that says the "World will end tomorrow" and it doesn't?
There are no obstacles that cannot be overcome when you have the right knowledge and know how to apply that knowledge.
John $Cash$ Locke
Neill-
I haven't done my first sub2 yet (got John's manual a little while ago) but I have done a lot of reading on the subject by others. Here's what I gather-
The bank's primary consideration is to make money. If the loan is being paid on time, that is exactly what's happening. If you weren't making the payment, the homeowner would probably be in default and the bank would have a non-performing loan on their hands.
Foreclosing on a property is expensive, and looks bad for the bank (they did not make a good decision with underwriting that particular loan). If they foreclose, now they have to worry about maintaining the property, etc. until they can sell it off.
The bank CAN call the loan due if they discover the house has been sold, but why would they? They are making money. Chances are, the interest rate on the loan is HIGHER than interest rates on new loans issued today. If you have to refinance the loan because of DOS, chances are the bank is going to LOSE that loan.
John,
I am not asking "What If?" and using the question as an excuse not to take action.
I am asking "What If?" so that I can prepare myself.
You said yourself "there are no obstacles that can not be overcome with the right knowledge".
I agree. I am trying to gather the knowledge so I can do prepare for anything.
I am asking what if they invoke the clause.
If you just said "find an equity partner", I say "OK"
If you said "you are going to jail" I say "Oh Sh.."
I am just trying to prepare for the worst. Statistically speaking, after 100 deals (500 for you) you may see the worst scenario anyone ever dreamed up. The very thing people say never happens in REI will actually happen to someone who has turned 500 properties.
N.
I forgot to mention- the fact that the house has been sold does not mean that it is no longer collateral for the mortgage. Until the note is paid off, the house is still collateral, no matter WHO owns it. The bank ALWAYS has the option of taking it back if the payments are not made.
Hey Arwen,
I know this to be true.
Just want to know what my options are if they get crazy and exercise theirs.
thanks,
Neill
Neill,
Worst case senerio the house goes back to the lender. If you read Bill Bronchicks article you do not go to jail or prison. If you have a corporate entity, which you should have and they sue they will sue the company not you.
Most of the people wanting out of their house and if you helped them out can't afford to pay attention let alone sue you.
The paperwork in the manual covers this senerio, so should we give away everything for free what you just paid for?
I think it would be unfair to those who made the investment in my manual to post everything covered in it, plus the mentoring you receive afterwords for just the price of the manual. Check and see what mentoring alone is going for. Does this make sense now Neill?
John $Cash$ Locke
Neill,
you answered your own question in your original post. Refinace or find another investor that has the money.
There are risks involved, but everything you invest in has some sort of risk.
You won't go to jail and it's not illegal.
The bank will call the note due on a certain date. Just have the money by then somehow. Refinance or another investor.
Thanks Batman,
I see that. I had originally asked just for that reason. But everyone was so conscientious in telling me that it is the most rare thing that the bank comes after you, and they wanted me to feel comfortable and not use the fear of DOS to avoid making deals.
That wasn't the reason for my question. Its all covered now.
thanks,
Neill
The bank does not have that nice big building by foreclosing 97% LTV loans. They make money off the loan they loose money on the house (forclosure). I tell my sellers that very thing, and they seem to understand. Just except it. It took us a few deals before I just accepted it and went on with the job.
Best to you,
Brian
Neill,
You really need to read this article, now would be a good time..
http://www.legalwiz.com/articles/dueonsale.htm
It is not against the law so no criminal liability is involved.
To foreclose, list, and sell the property will cost at least 10-15k to the bank.
The worst thing that could happen would be that they called the note due and you had to refinance or they forclosed on the property (in which case you would still have time to get alternative financing if needed.)
The links article name is: "There is no due on sale jail!"
[addsig]
Yes, I agree. Read some of bronchicks articles on the legalwiz site and that should add to the information pool. Good stuff