Who has done a Mortgage Assignment

Question

Good Afternoon,

Is a VA loan assignable? If so what are the pros and cons of assignments?

Jon Holdman · Answer

@Devin Pickett  I really recommend you use the search function on "subject to" because there is far more discussion than I can summarize.

Pros:  No qualification for the loan.  Does not appear on your credit report, though it would still be a "mortgaged property" for loan qualification purposes.

Cons:  The biggie is that the lender has the right, though not obligation, to call the loan.  That would mean you would have to pay off the loan (refi, sell, whatever) in order to keep the lender from foreclosing.  If the lender does foreclose, it affects the seller.  Some folks consider this a pro, though I think it would be an extremely sleazy thing to let this happen.  If it does foreclose, the seller is almost certain to sue you.

Some gurus advocate all sorts of complex strategies involving trusts they claim makes this OK.  It does not.  Or they say you should notify the lender of what happened and if they don't respond you're OK.  There is NO way to make this OK.  The risk of being called is still there.  It may be small.  But it is real, and you should be prepared to do something about it if it happens. Screwing the seller is, IMHO, not the right course of action.  But I have heard someone say they would do exactly that.

Another complexity is insurance.  The lender requires insurance.  But if you cancel the old insurance and get a new policy with you as beneficiary they will certainly find out about the transfer. Some folks advocate leaving the old policy in place and continuing to pay it and getting a separate policy in your name with no lender listed.  IDK if that works or not.  I have dealt with insurance claims on a mortgaged company and the lender does get involved.  The checks will be made out to you and the lender and the lender will have to endorse them to get your money.  Or, the lender may insist you endorse the checks and then they hold onto them and pay your contractors directly.  However it works out, rest assured that a claim on a subject to property will be an even bigger hassle than a claim on a property where you are the borrower.

Jon Holdman · Answer

You're talking about doing a "subject to" transaction.  That's not an assignment nor an assumption.  Assumption would be when the buyer gets the lender's approval to offical take over the loan.  Assignment is when the lender sells the mortgage to someone else.  That doesn't involve the borrower and the borrower has no control over that.  With subject to the property is sold, the loan remains in the original borrower's name and the new buyer starts making the payments.  There is risk because the lender can call the loan.

Devin Pickett · Answer

@Wayne Brooks I'm referring to making over on loan while it remains in the sellers name rather than going threw the approval process which is required when you assume a loan.

Who has done a Mortgage Assignment

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