Note Buying WITH RECOURSE...legal???
Hello,
I am in the middle of closing a simultaneous closing/new note sale, and am working with a new group of note investors. Is the clause below (which is included in their purchase agreement that gets the whole thing moving to close officially) legal for them to do?
7. Notwithstanding any other provision of this Agreement, Seller will repurchase this Loan within ten (10) days of Buyer’s demand if either of the payments due Buyer, its successors and/or assigns, for the first 2 months after the Closing Date is not made by the borrower within thirty (30 days) of its due date. The repurchase price shall be an amount equal to the Purchase price for the loan. In the event of any repurchase, Seller shall pay all of Purchaser’s costs and fees associated with such loan repurchase. The parties acknowledge that the breach of this provision is not susceptible to cure.
Any help, especially from John Merchant, would be very helpful. Thanks, Dave
Yes, it is legal. From one point of view its an attempt to make you do your job and make sure the borrower will not immediately default. If it were me I'd make the borrower escrow the first two payments.