TEXAS "SUBJECT TO" plan and questions

22 Replies

hello everyone,

so I've recently found a few pre-foreclosures. but looking at the comps in the area the homes have 20%-40% equity. my original plan that came to mind was to do offer a few different solutions and then push the "subject to" method.

 so i own my own home already, and it is in a decent market. 2 of the homes that are in pre-foreclosure are cheaper (principal cost but not in value). i plan to rent my existing home out and cashflow $200-$400 every month. my plan is to hopefully agree on a subject to and if the monthly payment is cheaper than that of my existing mortgage payment, i will just move me and my family into the subject to home and refinance after about a year or so after paying the principal down with a heloc on my existing home to extinguish the mortgage on the subject to home.

 i know the lender has every right to call the loan once the deed to the property has been played with and from what i have read its rarely heard of, but I am not one to say that it wont or cant happen to me. with the home having quite a bit of equity does that put me at higher risk with the lender to call the loan? what are some things that i could do to possibly keep my risk at bay with the lender of the pre-foreclosure? would it be possible to talk to the lender before an agreement is signed to for the subject to? 

thank you,

Justin Cortez

Originally posted by @Justin Cortez:

hello everyone,

so I've recently found a few pre-foreclosures. but looking at the comps in the area the homes have 20%-40% equity. my original plan that came to mind was to do offer a few different solutions and then push the "subject to" method.

 so i own my own home already, and it is in a decent market. 2 of the homes that are in pre-foreclosure are cheaper (principal cost but not in value). i plan to rent my existing home out and cashflow $200-$400 every month. my plan is to hopefully agree on a subject to and if the monthly payment is cheaper than that of my existing mortgage payment, i will just move me and my family into the subject to home and refinance after about a year or so after paying the principal down with a heloc on my existing home to extinguish the mortgage on the subject to home.

 i know the lender has every right to call the loan once the deed to the property has been played with and from what i have read its rarely heard of, but I am not one to say that it wont or cant happen to me. with the home having quite a bit of equity does that put me at higher risk with the lender to call the loan? what are some things that i could do to possibly keep my risk at bay with the lender of the pre-foreclosure? would it be possible to talk to the lender before an agreement is signed to for the subject to? 

thank you,

Justin Cortez

I would absolutely not contact the lender ahead of time because you're calling attention to the situation unless you're trying to assume the loan. Although it's rare these days, I would check the note to see if assuming the loan is a possibility. I believe it's a lot easier and quicker to foreclose in TX so you need to be ready to payoff the loan quickly in case it happens. If the lender is a big bank they will most likely accept your payments and do nothing. They might send you a letter to accelerate the loan but that doesn't mean that they will. The bank has to push the foreclosure forward. I've received an acceleration letter before and the bank did nothing after that. I held that rental for another year before selling it with no issues.

If the lender is a private investor, however, there is a greater chance that they will accelerate the loan as soon as they find out about the transfer. 

To mitigate your risk with this plan, find out who the lender is. If it's a big bank, you're probably ok to carry out your plan. If it's a private investor, be aware that there's a much higher chance of having the loan accelerated. In either case, have plans to quickly refinance or payoff the loan. If I were moving my family, I'd want those back up plans to be rock solid.
 

I agree with Andy. Do your due diligence beforehand on who owns the note. If it is a large institution, you are most likely going to be fine. 

I work in the financial markets full-time, and I see it as equivalent to a callable bond - a bond that the borrower has the right to retire at any time. Investors usually sell down the price of callable bonds because they are in the business of lending their money out, not holding cash that just inflates away over time. Plus, it takes time and money to reallocate those resources.

Bottom line is that lenders are obviously in the business of profiting off of interest over time. Why would they want to call the loan due when it is highly likely that they will now be turning a non-performing asset into a performing one? I would imagine if they even notice, they will run a credit check on you - so as long as your credit is decent, it's just business as usual. 

However, moving your family into that house would be a risk I wouldn't personally take. I would want to hold the subject-to property as an investment instead. 

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Originally posted by @Dylan Barnard:

I agree with Andy. Do your due diligence beforehand on who owns the note. If it is a large institution, you are most likely going to be fine. 

I work in the financial markets full-time, and I see it as equivalent to a callable bond - a bond that the borrower has the right to retire at any time. Investors usually sell down the price of callable bonds because they are in the business of lending their money out, not holding cash that just inflates away over time. Plus, it takes time and money to reallocate those resources.

Bottom line is that lenders are obviously in the business of profiting off of interest over time. Why would they want to call the loan due when it is highly likely that they will now be turning a non-performing asset into a performing one? I would imagine if they even notice, they will run a credit check on you - so as long as your credit is decent, it's just business as usual. 

However, moving your family into that house would be a risk I wouldn't personally take. I would want to hold the subject-to property as an investment instead. 

That's great in theory, not so much in practice though, at least with FDIC regulated financial institutions. If a lender becomes aware of a "subject to", payments do not turn it in to a performing asset. It's an impaired asset and must be classified as such to auditors and regulators, because of the transfer. Liability goes up as a non obligor has taken control of a property that is held as security for the lender's note, to a completely different entity. The lender has no obligation to the new owner. The new owner has no obligation to the lender. We cannot enforce compliance with lending covenants that a non obligor did not agree to, and vice versa.

No. They will not run a credit check on you. That's absolute fantasy. You haven't applied for credit so, they have no legal right to run credit. They are subject to federal FCRA rules as well as CDIA rules. You aren't a borrower. No way on Earth a lender would subject themselves to that kind of scrutiny. I'm sure people do it all day and/or know people that do, even on this forum but that doesn't make it legal and doesn't mean that its actually done.

If the lender becomes aware and does not take appropriate steps with the homeowner to right the wrong, the lender can be scrutinized by their internal and external auditors and/or regulatory agency. If a pattern of looking the other way becomes evident, i'm confident that lender will be eventually working under a cease and desist order or worse, boxing up their belongings for their next gig.

A subject to is not business as usual for a lender.

Originally posted by @Ron S.:
Originally posted by @Dylan Barnard:

I agree with Andy. Do your due diligence beforehand on who owns the note. If it is a large institution, you are most likely going to be fine. 

I work in the financial markets full-time, and I see it as equivalent to a callable bond - a bond that the borrower has the right to retire at any time. Investors usually sell down the price of callable bonds because they are in the business of lending their money out, not holding cash that just inflates away over time. Plus, it takes time and money to reallocate those resources.

Bottom line is that lenders are obviously in the business of profiting off of interest over time. Why would they want to call the loan due when it is highly likely that they will now be turning a non-performing asset into a performing one? I would imagine if they even notice, they will run a credit check on you - so as long as your credit is decent, it's just business as usual. 

However, moving your family into that house would be a risk I wouldn't personally take. I would want to hold the subject-to property as an investment instead. 

That's great in theory, not so much in practice though, at least with FDIC regulated financial institutions. If a lender becomes aware of a "subject to", payments do not turn it in to a performing asset. It's an impaired asset and must be classified as such to auditors and regulators, because of the transfer. Liability goes up as a non obligor has taken control of a property that is held as security for the lender's note, to a completely different entity. The lender has no obligation to the new owner. The new owner has no obligation to the lender. We cannot enforce compliance with lending covenants that a non obligor did not agree to, and vice versa.

No. They will not run a credit check on you. That's absolute fantasy. You haven't applied for credit so, they have no legal right to run credit. They are subject to federal FCRA rules as well as CDIA rules. You aren't a borrower. No way on Earth a lender would subject themselves to that kind of scrutiny. I'm sure people do it all day and/or know people that do, even on this forum but that doesn't make it legal and doesn't mean that its actually done.

If the lender becomes aware and does not take appropriate steps with the homeowner to right the wrong, the lender can be scrutinized by their internal and external auditors and/or regulatory agency. If a pattern of looking the other way becomes evident, i'm confident that lender will be eventually working under a cease and desist order or worse, boxing up their belongings for their next gig.

A subject to is not business as usual for a lender.

Thanks for correcting me. I didn't realize I was off-base there. 

Are you a lender yourself? And if so, do you see a lot of subject-to activity in your market? Here in Texas it seems like a lot of people were looking into subject-to strategies when the Fed was expected to be raising rates mid-to-late last year, but I've read some articles about how Texas was starting to pass some legislation to make it more difficult to pursue that type of strategy. I'm interested if you see any of these situations a lot in California. 

Originally posted by @Dylan Barnard:
Originally posted by @Ron S.:
Originally posted by @Dylan Barnard:

I agree with Andy. Do your due diligence beforehand on who owns the note. If it is a large institution, you are most likely going to be fine. 

I work in the financial markets full-time, and I see it as equivalent to a callable bond - a bond that the borrower has the right to retire at any time. Investors usually sell down the price of callable bonds because they are in the business of lending their money out, not holding cash that just inflates away over time. Plus, it takes time and money to reallocate those resources.

Bottom line is that lenders are obviously in the business of profiting off of interest over time. Why would they want to call the loan due when it is highly likely that they will now be turning a non-performing asset into a performing one? I would imagine if they even notice, they will run a credit check on you - so as long as your credit is decent, it's just business as usual. 

However, moving your family into that house would be a risk I wouldn't personally take. I would want to hold the subject-to property as an investment instead. 

That's great in theory, not so much in practice though, at least with FDIC regulated financial institutions. If a lender becomes aware of a "subject to", payments do not turn it in to a performing asset. It's an impaired asset and must be classified as such to auditors and regulators, because of the transfer. Liability goes up as a non obligor has taken control of a property that is held as security for the lender's note, to a completely different entity. The lender has no obligation to the new owner. The new owner has no obligation to the lender. We cannot enforce compliance with lending covenants that a non obligor did not agree to, and vice versa.

No. They will not run a credit check on you. That's absolute fantasy. You haven't applied for credit so, they have no legal right to run credit. They are subject to federal FCRA rules as well as CDIA rules. You aren't a borrower. No way on Earth a lender would subject themselves to that kind of scrutiny. I'm sure people do it all day and/or know people that do, even on this forum but that doesn't make it legal and doesn't mean that its actually done.

If the lender becomes aware and does not take appropriate steps with the homeowner to right the wrong, the lender can be scrutinized by their internal and external auditors and/or regulatory agency. If a pattern of looking the other way becomes evident, i'm confident that lender will be eventually working under a cease and desist order or worse, boxing up their belongings for their next gig.

A subject to is not business as usual for a lender.

Thanks for correcting me. I didn't realize I was off-base there. 

Are you a lender yourself? And if so, do you see a lot of subject-to activity in your market? Here in Texas it seems like a lot of people were looking into subject-to strategies when the Fed was expected to be raising rates mid-to-late last year, but I've read some articles about how Texas was starting to pass some legislation to make it more difficult to pursue that type of strategy. I'm interested if you see any of these situations a lot in California. 

I am a lender and do see a lot of subject to activity, nationwide. I concentrate in California but have a national portfolio (acquired loans, not originated by us). 

Texas also has foreclosure consultant registration rules. I would pay attention to Texas Business and Commerce code, title 2, chapter 21, section 21.001(1)(a), (c), (f), and (h). Section 21.102(2) is where this scenario is going to nail someone in my opinion.  

Violation of the rule is a criminal offense. I'm not an attorney but, would not want to be defending myself from an allegation that i took advantage of someone in foreclosure.

The registration would be applicable to all but a very specific, small group of entities/people.

Originally posted by @Ron S.:
Originally posted by @Dylan Barnard:
Originally posted by @Ron S.:
Originally posted by @Dylan Barnard:

I agree with Andy. Do your due diligence beforehand on who owns the note. If it is a large institution, you are most likely going to be fine. 

I work in the financial markets full-time, and I see it as equivalent to a callable bond - a bond that the borrower has the right to retire at any time. Investors usually sell down the price of callable bonds because they are in the business of lending their money out, not holding cash that just inflates away over time. Plus, it takes time and money to reallocate those resources.

Bottom line is that lenders are obviously in the business of profiting off of interest over time. Why would they want to call the loan due when it is highly likely that they will now be turning a non-performing asset into a performing one? I would imagine if they even notice, they will run a credit check on you - so as long as your credit is decent, it's just business as usual. 

However, moving your family into that house would be a risk I wouldn't personally take. I would want to hold the subject-to property as an investment instead. 

That's great in theory, not so much in practice though, at least with FDIC regulated financial institutions. If a lender becomes aware of a "subject to", payments do not turn it in to a performing asset. It's an impaired asset and must be classified as such to auditors and regulators, because of the transfer. Liability goes up as a non obligor has taken control of a property that is held as security for the lender's note, to a completely different entity. The lender has no obligation to the new owner. The new owner has no obligation to the lender. We cannot enforce compliance with lending covenants that a non obligor did not agree to, and vice versa.

No. They will not run a credit check on you. That's absolute fantasy. You haven't applied for credit so, they have no legal right to run credit. They are subject to federal FCRA rules as well as CDIA rules. You aren't a borrower. No way on Earth a lender would subject themselves to that kind of scrutiny. I'm sure people do it all day and/or know people that do, even on this forum but that doesn't make it legal and doesn't mean that its actually done.

If the lender becomes aware and does not take appropriate steps with the homeowner to right the wrong, the lender can be scrutinized by their internal and external auditors and/or regulatory agency. If a pattern of looking the other way becomes evident, i'm confident that lender will be eventually working under a cease and desist order or worse, boxing up their belongings for their next gig.

A subject to is not business as usual for a lender.

Thanks for correcting me. I didn't realize I was off-base there. 

Are you a lender yourself? And if so, do you see a lot of subject-to activity in your market? Here in Texas it seems like a lot of people were looking into subject-to strategies when the Fed was expected to be raising rates mid-to-late last year, but I've read some articles about how Texas was starting to pass some legislation to make it more difficult to pursue that type of strategy. I'm interested if you see any of these situations a lot in California. 

I am a lender and do see a lot of subject to activity, nationwide. I concentrate in California but have a national portfolio (acquired loans, not originated by us). 

Texas also has foreclosure consultant registration rules. I would pay attention to Texas Business and Commerce code, title 2, chapter 21, section 21.001(1)(a), (c), (f), and (h). Section 21.102(2) is where this scenario is going to nail someone in my opinion.  

Violation of the rule is a criminal offense. I'm not an attorney but, would not want to be defending myself from an allegation that i took advantage of someone in foreclosure.

The registration would be applicable to all but a very specific, small group of entities/people.

 You sure are precise for not being an attorney.. Lol but thank you for the info. I will be doing some more research for sure to avoid misconceptions in the future.

Also, one more question if you don't mind. My wife is a licensed agent in Texas, and she thinks it would be a good idea for us to get an SFR certification through the National Association of Realtors. Are you familiar with this certification and do you think it would be worth pursuing? It seems like at least a great starting point for working with sellers of distressed property.

Originally posted by @Dylan Barnard:
Originally posted by @Ron S.:
Originally posted by @Dylan Barnard:
Originally posted by @Ron S.:
Originally posted by @Dylan Barnard:

I agree with Andy. Do your due diligence beforehand on who owns the note. If it is a large institution, you are most likely going to be fine. 

I work in the financial markets full-time, and I see it as equivalent to a callable bond - a bond that the borrower has the right to retire at any time. Investors usually sell down the price of callable bonds because they are in the business of lending their money out, not holding cash that just inflates away over time. Plus, it takes time and money to reallocate those resources.

Bottom line is that lenders are obviously in the business of profiting off of interest over time. Why would they want to call the loan due when it is highly likely that they will now be turning a non-performing asset into a performing one? I would imagine if they even notice, they will run a credit check on you - so as long as your credit is decent, it's just business as usual. 

However, moving your family into that house would be a risk I wouldn't personally take. I would want to hold the subject-to property as an investment instead. 

That's great in theory, not so much in practice though, at least with FDIC regulated financial institutions. If a lender becomes aware of a "subject to", payments do not turn it in to a performing asset. It's an impaired asset and must be classified as such to auditors and regulators, because of the transfer. Liability goes up as a non obligor has taken control of a property that is held as security for the lender's note, to a completely different entity. The lender has no obligation to the new owner. The new owner has no obligation to the lender. We cannot enforce compliance with lending covenants that a non obligor did not agree to, and vice versa.

No. They will not run a credit check on you. That's absolute fantasy. You haven't applied for credit so, they have no legal right to run credit. They are subject to federal FCRA rules as well as CDIA rules. You aren't a borrower. No way on Earth a lender would subject themselves to that kind of scrutiny. I'm sure people do it all day and/or know people that do, even on this forum but that doesn't make it legal and doesn't mean that its actually done.

If the lender becomes aware and does not take appropriate steps with the homeowner to right the wrong, the lender can be scrutinized by their internal and external auditors and/or regulatory agency. If a pattern of looking the other way becomes evident, i'm confident that lender will be eventually working under a cease and desist order or worse, boxing up their belongings for their next gig.

A subject to is not business as usual for a lender.

Thanks for correcting me. I didn't realize I was off-base there. 

Are you a lender yourself? And if so, do you see a lot of subject-to activity in your market? Here in Texas it seems like a lot of people were looking into subject-to strategies when the Fed was expected to be raising rates mid-to-late last year, but I've read some articles about how Texas was starting to pass some legislation to make it more difficult to pursue that type of strategy. I'm interested if you see any of these situations a lot in California. 

I am a lender and do see a lot of subject to activity, nationwide. I concentrate in California but have a national portfolio (acquired loans, not originated by us). 

Texas also has foreclosure consultant registration rules. I would pay attention to Texas Business and Commerce code, title 2, chapter 21, section 21.001(1)(a), (c), (f), and (h). Section 21.102(2) is where this scenario is going to nail someone in my opinion.  

Violation of the rule is a criminal offense. I'm not an attorney but, would not want to be defending myself from an allegation that i took advantage of someone in foreclosure.

The registration would be applicable to all but a very specific, small group of entities/people.

 You sure are precise for not being an attorney.. Lol but thank you for the info. I will be doing some more research for sure to avoid misconceptions in the future.

Also, one more question if you don't mind. My wife is a licensed agent in Texas, and she thinks it would be a good idea for us to get an SFR certification through the National Association of Realtors. Are you familiar with this certification and do you think it would be worth pursuing? It seems like at least a great starting point for working with sellers of distressed property.

 My own two cents is I think that would be a waste of time, energy, and money. Short sales are few and far between now and for the foreseeable future. You want it to hang on your wall? Great but, do I think you'll use it any time soon? No.

@Ron S. Thank you very much for this information! I will definitely be looking more into this. So basically I will be rethinking a strategy that will not keep me on the burner! and it sounds like I need to do more research on the laws on foreclosures. Not by any means would I want to be looked at like i'm taking advantage of someone. My whole theory was to be helping them out, not get marked with a foreclosure and keep a little bit of freedom intact for themselves. But i'm very glad I got this information before I made the phone call to the owner to offer some solutions. @Dylan Barnard I know you and your wife are looking into foreclosures, do the two of you have any advice on how to handle them from an investors point of view?

Originally posted by @Ron S. :
Originally posted by @Dylan Barnard:

I agree with Andy. Do your due diligence beforehand on who owns the note. If it is a large institution, you are most likely going to be fine. 

I work in the financial markets full-time, and I see it as equivalent to a callable bond - a bond that the borrower has the right to retire at any time. Investors usually sell down the price of callable bonds because they are in the business of lending their money out, not holding cash that just inflates away over time. Plus, it takes time and money to reallocate those resources.

Bottom line is that lenders are obviously in the business of profiting off of interest over time. Why would they want to call the loan due when it is highly likely that they will now be turning a non-performing asset into a performing one? I would imagine if they even notice, they will run a credit check on you - so as long as your credit is decent, it's just business as usual. 

However, moving your family into that house would be a risk I wouldn't personally take. I would want to hold the subject-to property as an investment instead. 

That's great in theory, not so much in practice though, at least with FDIC regulated financial institutions. If a lender becomes aware of a "subject to", payments do not turn it in to a performing asset. It's an impaired asset and must be classified as such to auditors and regulators, because of the transfer. Liability goes up as a non obligor has taken control of a property that is held as security for the lender's note, to a completely different entity. The lender has no obligation to the new owner. The new owner has no obligation to the lender. We cannot enforce compliance with lending covenants that a non obligor did not agree to, and vice versa.

No. They will not run a credit check on you. That's absolute fantasy. You haven't applied for credit so, they have no legal right to run credit. They are subject to federal FCRA rules as well as CDIA rules. You aren't a borrower. No way on Earth a lender would subject themselves to that kind of scrutiny. I'm sure people do it all day and/or know people that do, even on this forum but that doesn't make it legal and doesn't mean that its actually done.

If the lender becomes aware and does not take appropriate steps with the homeowner to right the wrong, the lender can be scrutinized by their internal and external auditors and/or regulatory agency. If a pattern of looking the other way becomes evident, i'm confident that lender will be eventually working under a cease and desist order or worse, boxing up their belongings for their next gig.

A subject to is not business as usual for a lender.


@Justin Cortez: , @Ron is correct . . . "IF" the lender becomes aware. There is no obligation for the buyer to notify the lender that they will be making the payments on the loan. Most payments for large banks and institutions are sent to payment processing centers where people who are paid $7.25 an hour for data input are entering the payment. The people entering it into the system don't care who's writing the checks as long as the last name of the borrower and the loan number are on the check and a statement stub of the borrower is included. The stub can be a photo copy that is used again and again. You just want to make sure the payment is applied correctly, regardless of the source of the payment and never miss a payment if you choose to do Subject To.

Originally posted by @Mike M.:
Originally posted by @Ron S.:
Originally posted by @Dylan Barnard:

I agree with Andy. Do your due diligence beforehand on who owns the note. If it is a large institution, you are most likely going to be fine. 

I work in the financial markets full-time, and I see it as equivalent to a callable bond - a bond that the borrower has the right to retire at any time. Investors usually sell down the price of callable bonds because they are in the business of lending their money out, not holding cash that just inflates away over time. Plus, it takes time and money to reallocate those resources.

Bottom line is that lenders are obviously in the business of profiting off of interest over time. Why would they want to call the loan due when it is highly likely that they will now be turning a non-performing asset into a performing one? I would imagine if they even notice, they will run a credit check on you - so as long as your credit is decent, it's just business as usual. 

However, moving your family into that house would be a risk I wouldn't personally take. I would want to hold the subject-to property as an investment instead. 

That's great in theory, not so much in practice though, at least with FDIC regulated financial institutions. If a lender becomes aware of a "subject to", payments do not turn it in to a performing asset. It's an impaired asset and must be classified as such to auditors and regulators, because of the transfer. Liability goes up as a non obligor has taken control of a property that is held as security for the lender's note, to a completely different entity. The lender has no obligation to the new owner. The new owner has no obligation to the lender. We cannot enforce compliance with lending covenants that a non obligor did not agree to, and vice versa.

No. They will not run a credit check on you. That's absolute fantasy. You haven't applied for credit so, they have no legal right to run credit. They are subject to federal FCRA rules as well as CDIA rules. You aren't a borrower. No way on Earth a lender would subject themselves to that kind of scrutiny. I'm sure people do it all day and/or know people that do, even on this forum but that doesn't make it legal and doesn't mean that its actually done.

If the lender becomes aware and does not take appropriate steps with the homeowner to right the wrong, the lender can be scrutinized by their internal and external auditors and/or regulatory agency. If a pattern of looking the other way becomes evident, i'm confident that lender will be eventually working under a cease and desist order or worse, boxing up their belongings for their next gig.

A subject to is not business as usual for a lender.


@Justin Cortez: , @Ron is correct . . . "IF" the lender becomes aware. There is no obligation for the buyer to notify the lender that they will be making the payments on the loan. Most payments for large banks and institutions are sent to payment processing centers where people who are paid $7.25 an hour for data input are entering the payment. The people entering it into the system don't care who's writing the checks as long as the last name of the borrower and the loan number are on the check and a statement stub of the borrower is included. The stub can be a photo copy that is used again and again. You just want to make sure the payment is applied correctly, regardless of the source of the payment and never miss a payment if you choose to do Subject To.

I would add to Mike's "Sad but true" (meaning, sadly for my operations, Mike is right about how it works in the back office) assessment of how things work in the back office. While yes, probably 90% of payments go through a nightly processing mill (I wish we were paying $7.25 an hour), and if you are clear and succinct with the payment posting instructions, yeah, you might get away with it but...if you are a wise business person, you are going to put the property into your name for the tax benefits. You'll get nailed there for sure. The minute title transfers, we know. If you continue to be that wise business person, you will also want to protect that investment with a good insurance policy. That insurance policy will obviously be in your name as the beneficiary so you get the proceeds on any potential claim. That's were we are gonna get you again. The minute that policy cancels or gets changed.

I supposed you don't have to take title to the property. I suppose you don't have to protect your investment with insurance either but wouldn't both be a sort of prerequisite, when acquiring a new asset in your efforts to build your real estate portfolio? I could see somehow trying to talk the original owner into keeping the title in their name and the policy in their name. That would be a no brainer for original owner. Probably not so much though for the new owner? That kind of defeats the purpose of a subject to if you don't really own it on paper.

So that puts you right back where you were with taking the risk of a subject to being accelerated, and taking the risk of irking the state attorney general on a preforeclosure deal with a distressed borrower. Most risk is a decision or, a choice. Drinking and driving is a choice. MANY people get away with it. Tax evasion is a choice. I bet many more get away with that! Buying Subject to is a choice as well. You'll probably get away with it, unless you don't. Jut make sure you have an exit strategy if you don't.

 I'm a small bank with only a $7 billion dollar portfolio. I probably send acceleration letters to a half dozen borrowers per month. I have yet to foreclose on one. I have started foreclosure on several (That gets expensive). In every case, eventually, i either got paid off in 30 days, or the borrower had the property put back in their name, with insurance in their name. And they did it in 30 days or less. Not once has a regulator had to ask me why i have a loan transferred to a non-obligor without action on my part.

Originally posted by @Ron S.:
Originally posted by @Mike M.:
Originally posted by @Ron S.:
Originally posted by @Dylan Barnard:

I agree with Andy. Do your due diligence beforehand on who owns the note. If it is a large institution, you are most likely going to be fine. 

I work in the financial markets full-time, and I see it as equivalent to a callable bond - a bond that the borrower has the right to retire at any time. Investors usually sell down the price of callable bonds because they are in the business of lending their money out, not holding cash that just inflates away over time. Plus, it takes time and money to reallocate those resources.

Bottom line is that lenders are obviously in the business of profiting off of interest over time. Why would they want to call the loan due when it is highly likely that they will now be turning a non-performing asset into a performing one? I would imagine if they even notice, they will run a credit check on you - so as long as your credit is decent, it's just business as usual. 

However, moving your family into that house would be a risk I wouldn't personally take. I would want to hold the subject-to property as an investment instead. 

That's great in theory, not so much in practice though, at least with FDIC regulated financial institutions. If a lender becomes aware of a "subject to", payments do not turn it in to a performing asset. It's an impaired asset and must be classified as such to auditors and regulators, because of the transfer. Liability goes up as a non obligor has taken control of a property that is held as security for the lender's note, to a completely different entity. The lender has no obligation to the new owner. The new owner has no obligation to the lender. We cannot enforce compliance with lending covenants that a non obligor did not agree to, and vice versa.

No. They will not run a credit check on you. That's absolute fantasy. You haven't applied for credit so, they have no legal right to run credit. They are subject to federal FCRA rules as well as CDIA rules. You aren't a borrower. No way on Earth a lender would subject themselves to that kind of scrutiny. I'm sure people do it all day and/or know people that do, even on this forum but that doesn't make it legal and doesn't mean that its actually done.

If the lender becomes aware and does not take appropriate steps with the homeowner to right the wrong, the lender can be scrutinized by their internal and external auditors and/or regulatory agency. If a pattern of looking the other way becomes evident, i'm confident that lender will be eventually working under a cease and desist order or worse, boxing up their belongings for their next gig.

A subject to is not business as usual for a lender.


@Justin Cortez: , @Ron is correct . . . "IF" the lender becomes aware. There is no obligation for the buyer to notify the lender that they will be making the payments on the loan. Most payments for large banks and institutions are sent to payment processing centers where people who are paid $7.25 an hour for data input are entering the payment. The people entering it into the system don't care who's writing the checks as long as the last name of the borrower and the loan number are on the check and a statement stub of the borrower is included. The stub can be a photo copy that is used again and again. You just want to make sure the payment is applied correctly, regardless of the source of the payment and never miss a payment if you choose to do Subject To.

I would add to Mike's "Sad but true" (meaning, sadly for my operations, Mike is right about how it works in the back office) assessment of how things work in the back office. While yes, probably 90% of payments go through a nightly processing mill (I wish we were paying $7.25 an hour), and if you are clear and succinct with the payment posting instructions, yeah, you might get away with it but...if you are a wise business person, you are going to put the property into your name for the tax benefits. You'll get nailed there for sure. The minute title transfers, we know. If you continue to be that wise business person, you will also want to protect that investment with a good insurance policy. That insurance policy will obviously be in your name as the beneficiary so you get the proceeds on any potential claim. That's were we are gonna get you again. The minute that policy cancels or gets changed.

I supposed you don't have to take title to the property. I suppose you don't have to protect your investment with insurance either but wouldn't both be a sort of prerequisite, when acquiring a new asset in your efforts to build your real estate portfolio? I could see somehow trying to talk the original owner into keeping the title in their name and the policy in their name. That would be a no brainer for original owner. Probably not so much though for the new owner? That kind of defeats the purpose of a subject to if you don't really own it on paper.

So that puts you right back where you were with taking the risk of a subject to being accelerated, and taking the risk of irking the state attorney general on a preforeclosure deal with a distressed borrower. Most risk is a decision or, a choice. Drinking and driving is a choice. MANY people get away with it. Tax evasion is a choice. I bet many more get away with that! Buying Subject to is a choice as well. You'll probably get away with it, unless you don't. Jut make sure you have an exit strategy if you don't.

 I'm a small bank with only a $7 billion dollar portfolio. I probably send acceleration letters to a half dozen borrowers per month. I have yet to foreclose on one. I have started foreclosure on several (That gets expensive). In every case, eventually, i either got paid off in 30 days, or the borrower had the property put back in their name, with insurance in their name. And they did it in 30 days or less. Not once has a regulator had to ask me why i have a loan transferred to a non-obligor without action on my part.

I always have the title transferred into my (LLC's name) and always have an insurance policy in my and the seller's name issued. I get the tax benefits and I'm not "getting away" with anything. It is perfectly legal. If the bank is getting paid in full and on time, they are happy.

 Your Comment: "(I wish we were paying $7.25 an hour)" is a deceptive comment since you aren't paying the person at the processing center, you are paying the company that does the processing so you are paying a service fee and they are different. Please be more honest. You are proving what all of us believe about bankers and that is that they are deceptive. You could choose to have all payments sent directly to the bank but you don't want to pay the cost for that.

Originally posted by @Mike M.:
Originally posted by @Ron S.:
Originally posted by @Mike M.:
Originally posted by @Ron S.:
Originally posted by @Dylan Barnard:

I agree with Andy. Do your due diligence beforehand on who owns the note. If it is a large institution, you are most likely going to be fine. 

I work in the financial markets full-time, and I see it as equivalent to a callable bond - a bond that the borrower has the right to retire at any time. Investors usually sell down the price of callable bonds because they are in the business of lending their money out, not holding cash that just inflates away over time. Plus, it takes time and money to reallocate those resources.

Bottom line is that lenders are obviously in the business of profiting off of interest over time. Why would they want to call the loan due when it is highly likely that they will now be turning a non-performing asset into a performing one? I would imagine if they even notice, they will run a credit check on you - so as long as your credit is decent, it's just business as usual. 

However, moving your family into that house would be a risk I wouldn't personally take. I would want to hold the subject-to property as an investment instead. 

That's great in theory, not so much in practice though, at least with FDIC regulated financial institutions. If a lender becomes aware of a "subject to", payments do not turn it in to a performing asset. It's an impaired asset and must be classified as such to auditors and regulators, because of the transfer. Liability goes up as a non obligor has taken control of a property that is held as security for the lender's note, to a completely different entity. The lender has no obligation to the new owner. The new owner has no obligation to the lender. We cannot enforce compliance with lending covenants that a non obligor did not agree to, and vice versa.

No. They will not run a credit check on you. That's absolute fantasy. You haven't applied for credit so, they have no legal right to run credit. They are subject to federal FCRA rules as well as CDIA rules. You aren't a borrower. No way on Earth a lender would subject themselves to that kind of scrutiny. I'm sure people do it all day and/or know people that do, even on this forum but that doesn't make it legal and doesn't mean that its actually done.

If the lender becomes aware and does not take appropriate steps with the homeowner to right the wrong, the lender can be scrutinized by their internal and external auditors and/or regulatory agency. If a pattern of looking the other way becomes evident, i'm confident that lender will be eventually working under a cease and desist order or worse, boxing up their belongings for their next gig.

A subject to is not business as usual for a lender.


@Justin Cortez: , @Ron is correct . . . "IF" the lender becomes aware. There is no obligation for the buyer to notify the lender that they will be making the payments on the loan. Most payments for large banks and institutions are sent to payment processing centers where people who are paid $7.25 an hour for data input are entering the payment. The people entering it into the system don't care who's writing the checks as long as the last name of the borrower and the loan number are on the check and a statement stub of the borrower is included. The stub can be a photo copy that is used again and again. You just want to make sure the payment is applied correctly, regardless of the source of the payment and never miss a payment if you choose to do Subject To.

I would add to Mike's "Sad but true" (meaning, sadly for my operations, Mike is right about how it works in the back office) assessment of how things work in the back office. While yes, probably 90% of payments go through a nightly processing mill (I wish we were paying $7.25 an hour), and if you are clear and succinct with the payment posting instructions, yeah, you might get away with it but...if you are a wise business person, you are going to put the property into your name for the tax benefits. You'll get nailed there for sure. The minute title transfers, we know. If you continue to be that wise business person, you will also want to protect that investment with a good insurance policy. That insurance policy will obviously be in your name as the beneficiary so you get the proceeds on any potential claim. That's were we are gonna get you again. The minute that policy cancels or gets changed.

I supposed you don't have to take title to the property. I suppose you don't have to protect your investment with insurance either but wouldn't both be a sort of prerequisite, when acquiring a new asset in your efforts to build your real estate portfolio? I could see somehow trying to talk the original owner into keeping the title in their name and the policy in their name. That would be a no brainer for original owner. Probably not so much though for the new owner? That kind of defeats the purpose of a subject to if you don't really own it on paper.

So that puts you right back where you were with taking the risk of a subject to being accelerated, and taking the risk of irking the state attorney general on a preforeclosure deal with a distressed borrower. Most risk is a decision or, a choice. Drinking and driving is a choice. MANY people get away with it. Tax evasion is a choice. I bet many more get away with that! Buying Subject to is a choice as well. You'll probably get away with it, unless you don't. Jut make sure you have an exit strategy if you don't.

 I'm a small bank with only a $7 billion dollar portfolio. I probably send acceleration letters to a half dozen borrowers per month. I have yet to foreclose on one. I have started foreclosure on several (That gets expensive). In every case, eventually, i either got paid off in 30 days, or the borrower had the property put back in their name, with insurance in their name. And they did it in 30 days or less. Not once has a regulator had to ask me why i have a loan transferred to a non-obligor without action on my part.

I always have the title transferred into my (LLC's name) and always have an insurance policy in my and the seller's name issued. I get the tax benefits and I'm not "getting away" with anything. It is perfectly legal. If the bank is getting paid in full and on time, they are happy.

 Your Comment: "(I wish we were paying $7.25 an hour)" is a deceptive comment since you aren't paying the person at the processing center, you are paying the company that does the processing so you are paying a service fee and they are different. Please be more honest. You are proving what all of us believe about bankers and that is that they are deceptive. You could choose to have all payments sent directly to the bank but you don't want to pay the cost for that.

You perpetuate the stereotype of the know it all. You go ahead and do it your way. I'll do it my way and wait for guys like you to come across my desk so you can be educated.

Originally posted by @Ron S.:
Originally posted by @Mike M.:
Originally posted by @Ron S.:
Originally posted by @Mike M.:
Originally posted by @Ron S.:
Originally posted by @Dylan Barnard:

I agree with Andy. Do your due diligence beforehand on who owns the note. If it is a large institution, you are most likely going to be fine. 

I work in the financial markets full-time, and I see it as equivalent to a callable bond - a bond that the borrower has the right to retire at any time. Investors usually sell down the price of callable bonds because they are in the business of lending their money out, not holding cash that just inflates away over time. Plus, it takes time and money to reallocate those resources.

Bottom line is that lenders are obviously in the business of profiting off of interest over time. Why would they want to call the loan due when it is highly likely that they will now be turning a non-performing asset into a performing one? I would imagine if they even notice, they will run a credit check on you - so as long as your credit is decent, it's just business as usual. 

However, moving your family into that house would be a risk I wouldn't personally take. I would want to hold the subject-to property as an investment instead. 

That's great in theory, not so much in practice though, at least with FDIC regulated financial institutions. If a lender becomes aware of a "subject to", payments do not turn it in to a performing asset. It's an impaired asset and must be classified as such to auditors and regulators, because of the transfer. Liability goes up as a non obligor has taken control of a property that is held as security for the lender's note, to a completely different entity. The lender has no obligation to the new owner. The new owner has no obligation to the lender. We cannot enforce compliance with lending covenants that a non obligor did not agree to, and vice versa.

No. They will not run a credit check on you. That's absolute fantasy. You haven't applied for credit so, they have no legal right to run credit. They are subject to federal FCRA rules as well as CDIA rules. You aren't a borrower. No way on Earth a lender would subject themselves to that kind of scrutiny. I'm sure people do it all day and/or know people that do, even on this forum but that doesn't make it legal and doesn't mean that its actually done.

If the lender becomes aware and does not take appropriate steps with the homeowner to right the wrong, the lender can be scrutinized by their internal and external auditors and/or regulatory agency. If a pattern of looking the other way becomes evident, i'm confident that lender will be eventually working under a cease and desist order or worse, boxing up their belongings for their next gig.

A subject to is not business as usual for a lender.


@Justin Cortez: , @Ron is correct . . . "IF" the lender becomes aware. There is no obligation for the buyer to notify the lender that they will be making the payments on the loan. Most payments for large banks and institutions are sent to payment processing centers where people who are paid $7.25 an hour for data input are entering the payment. The people entering it into the system don't care who's writing the checks as long as the last name of the borrower and the loan number are on the check and a statement stub of the borrower is included. The stub can be a photo copy that is used again and again. You just want to make sure the payment is applied correctly, regardless of the source of the payment and never miss a payment if you choose to do Subject To.

I would add to Mike's "Sad but true" (meaning, sadly for my operations, Mike is right about how it works in the back office) assessment of how things work in the back office. While yes, probably 90% of payments go through a nightly processing mill (I wish we were paying $7.25 an hour), and if you are clear and succinct with the payment posting instructions, yeah, you might get away with it but...if you are a wise business person, you are going to put the property into your name for the tax benefits. You'll get nailed there for sure. The minute title transfers, we know. If you continue to be that wise business person, you will also want to protect that investment with a good insurance policy. That insurance policy will obviously be in your name as the beneficiary so you get the proceeds on any potential claim. That's were we are gonna get you again. The minute that policy cancels or gets changed.

I supposed you don't have to take title to the property. I suppose you don't have to protect your investment with insurance either but wouldn't both be a sort of prerequisite, when acquiring a new asset in your efforts to build your real estate portfolio? I could see somehow trying to talk the original owner into keeping the title in their name and the policy in their name. That would be a no brainer for original owner. Probably not so much though for the new owner? That kind of defeats the purpose of a subject to if you don't really own it on paper.

So that puts you right back where you were with taking the risk of a subject to being accelerated, and taking the risk of irking the state attorney general on a preforeclosure deal with a distressed borrower. Most risk is a decision or, a choice. Drinking and driving is a choice. MANY people get away with it. Tax evasion is a choice. I bet many more get away with that! Buying Subject to is a choice as well. You'll probably get away with it, unless you don't. Jut make sure you have an exit strategy if you don't.

 I'm a small bank with only a $7 billion dollar portfolio. I probably send acceleration letters to a half dozen borrowers per month. I have yet to foreclose on one. I have started foreclosure on several (That gets expensive). In every case, eventually, i either got paid off in 30 days, or the borrower had the property put back in their name, with insurance in their name. And they did it in 30 days or less. Not once has a regulator had to ask me why i have a loan transferred to a non-obligor without action on my part.

I always have the title transferred into my (LLC's name) and always have an insurance policy in my and the seller's name issued. I get the tax benefits and I'm not "getting away" with anything. It is perfectly legal. If the bank is getting paid in full and on time, they are happy.

 Your Comment: "(I wish we were paying $7.25 an hour)" is a deceptive comment since you aren't paying the person at the processing center, you are paying the company that does the processing so you are paying a service fee and they are different. Please be more honest. You are proving what all of us believe about bankers and that is that they are deceptive. You could choose to have all payments sent directly to the bank but you don't want to pay the cost for that.

You perpetuate the stereotype of the know it all. You go ahead and do it your way. I'll do it my way and wait for guys like you to come across my desk so you can be educated.

 Do you have a law degree? Just askin'

@Account Closed Transferring a property from a borrower to an LLC is not illegal but may trigger an acceleration because it is a prohibited transfer. Check the specific language of the note. Most institutional notes only allow transfers that are protected by federal and state laws. Generally, indirect or direct transfers that most investors refer to when they talk about sub2 are prohibited by the note but not illegal. An indirect transfer includes changing membership in the LLC without notifying the lender.

As a practical matter, most big banks seem fine accepting on time payments since they aren't as aware or as assertive as @Ron S. and his bank. Not all lenders are happy with just getting ontime payments, though. Aside from the compliance issues that Ron brought up, a mismatch between the owner of record and the borrower is a defect and makes the loan worth less. Again, as Ron pointed out, the note is a contract between the borrower and the lender. When someone takes over sub2, the lender has no written agreement with the new payor on the loan. 

A bank selling a performing note of this kind will have to take a discount unless it can cure the defect. If I bought a loan like this (at a discount, of course), the first thing I would do is start foreclosure. I make money on the margin between the price I buy and the price at liquidation. If I buy the loan at 85 cents on the dollar, I can force the liquidation of the asset and collect 100 cents on the dollar, whether it sells at the foreclosure sale or the sub2 owner pays off the loan.

@Justin Cortez

I may be wrong. I have been before in the past and sure I will again. I understand a subject 2 as you get the property in your name. You pay for everything but the loan is still in the other person's name. If the payment isn't made and it gets put into a foreclosure, it has no effect on your credit. You would be out any money you invested in the property though. Thus the risk in your part and also why you pay the bank and not give the money to the person you bought from.

As for the bank calling the mortgage due. That used to happen a lot years ago because people were locked into a much lower interest rate. So they would call it due so they could get the bigger interest rate that you would be trying to avoid. Intrest rates are so low now that as long as they payments are mad on time (that is they keu you must do) they usually just don't care. Long as they get their money.

As the others said. If you don't want to loose your money you invest. Have 3 exit strategies. I wouldn't want to take the risk moving my family into a subject 2 house, but that is you choice.

As I said I could be wrong on some of this but, that is my understanding of it all.

@Andy Mirza Thanks, appreciate your taking the time to post. All that I do are Subject Tos and have been for 25 years. I've seen it all and one note that got called went all the way to the 9th District Appellate Court. I won. Short story is I bought the property in 2001, the seller started a lawsuit in 2007 (long after the 3 year statute of limitations, but I digress) the lender joined, I won at the state level, it went to appeal, it was remanded back to the state, I won there, it was re-appealed to the 9th where I won as well. It was final in 2011 for a property I bought in 2001. I learned a few things along the way, in the various interrogatories, depositions, filings, summary judgements, briefs and testimonies about statutory law, case law and interpretations of the various laws regarding loans, financing, title and due in sale.

Due on sale does not scare me. ;-)

@Brandon Ramsay You are generally correct on your statements. By the way, how's the fishing up your way?

@Account Closed I've only done a few sub2 deals so my experience is limited. You read so many posts here on BP about the subject but I think there's a huge gulf in knowledge between theory and practical experience.

I'd like to learn more if you're willing to share. About how many sub2 deals do you think you've done? Of those, what percentage resulted in the bank finding out and sending any kind of letters to you regarding "due on sale" or "acceleration?" Of those, what percentage initiated foreclosure? Of those, what percentage actually were able to foreclose before you could intervene with a payoff or other solution?

Just curious, in your above example, was paying the loan off an option to avoid the lawsuit? I'm thinking that maybe not since the seller sued you. He was probably going after equity.... 

Originally posted by @Andy Mirza:

@Mike M. I've only done a few sub2 deals so my experience is limited. You read so many posts here on BP about the subject but I think there's a huge gulf in knowledge between theory and practical experience.

I'd like to learn more if you're willing to share. About how many sub2 deals do you think you've done? Of those, what percentage resulted in the bank finding out and sending any kind of letters to you regarding "due on sale" or "acceleration?" Of those, what percentage initiated foreclosure? Of those, what percentage actually were able to foreclose before you could intervene with a payoff or other solution?

Just curious, in your above example, was paying the loan off an option to avoid the lawsuit? I'm thinking that maybe not since the seller sued you. He was probably going after equity.... 

It was a foreclosure that I saved from going to sale by bringing the loan current. In the above instance the property had gone up in value substantially from the date I purchased in 2001 to the date of the initiation of the suit. The seller falsely claimed he was going through cancer treatment and asked if he could stay in the house while undergoing therapy. It was a huge mistake to let him stay in the house after the sale. The seller lied to me, imagine that. ;-) He lied in court too, contradicting his previous testimony, you should have seen the judge's face.

The other problem, which I created, was in using a Quit Claim Deed instead of a Warranty Deed and doing a "table closing" at a local notary. (I didn't use a normal escrow in those days) I learned to always use title and escrow and lawyers and disclosures and move out dates and to record and to split the seller's payment in two, first half immediately so they have money to move out, the rest when they actually move, etc. So, that particular Due on Sale could have been avoided had I known better. Years later when the suit was filed, there was a lot of increased equity (about $200,000) The seller was a minority who said I "cheated" him and that I forged the signature on the Quit Claim deed. I did no such thing. (The notary showed up to trial and showed her notary book and testified) He had found a 'social justice" lawyer. It was in a very liberal city (Seattle) who's legal system favors minorities that are or have been in foreclosure. Investors are considered to be evil. Guilty until proven innocent.

His attorney contacted the mortgage company who then had a "title insurance claim" on their hands. The lender thought a Due on Sale call and foreclosure would solve the problem. My counter suit and the facts prevented that. In the contract it says that the lender "MAY" call the loan but the lender doesn't "HAVE" to call the loan which is a key point. I produced checks proving I had been making the payments and they had been accepting the payments and since so much time had passed under this condition they couldn't foreclose. But we now had a title issue. I couldn't refinance since I didn't have clear title. Each time I won, they filed an appeal. As they say "the process is the punishment". When the judge finally gave me the "all clear" (the final court decision) I paid off the loan.

The only other one I've ever had called was last month. I bought a "hoarder house". There was a loan of $186,000 I took over, I gave the guy his $5,000 and it's worth $320,000 fixed up. There is no way they would have fixed up the house or been able to put it on the MLS in the shape it's in. It needs everything, baths, kitchen, etc. No updates in 40 years but good "bones".

During the process of them removing their "valuables" which took a few weeks, there were squatters. The squatters had the police called on them. The city got involved and sent a notice to the owner and to the bank to fix the broken windows and secure the property. When the lender found out the owner moved out they initiated the Due on Sale. Turns out it was  a Reverse mortgage and part of the deal is the loan has to be paid off if the borrower moves out or dies. So, I paid that one off and all is well. Now I'm going to flip it or sell to some investor.

Here's the property (Most just aren't this much drama) Lol

@Account Closed I love those stories and I'm glad that you prevailed. Lots of good advice: For arms length transactions, use Warranty or Grant Deeds instead of QCD's, be in a position to readily payoff the sub2 loan, not keeping sellers on as tenants. Love it!

Would you be willing to answer my questions from above? In writing the details of your stories, you may have forgotten to answer them but I'm very interested in your experience.

About how many sub2 deals do you think you've done? Of those, what percentage resulted in the bank finding out and sending any kind of letters to you regarding "due on sale" or "acceleration?" Of those, what percentage initiated foreclosure? Of those, what percentage actually were able to foreclose before you could intervene with a payoff or other solution?

Originally posted by @Andy Mirza:

@Mike M. I love those stories and I'm glad that you prevailed. Lots of good advice: For arms length transactions, use Warranty or Grant Deeds instead of QCD's, be in a position to readily payoff the sub2 loan, not keeping sellers on as tenants. Love it!

Would you be willing to answer my questions from above? In writing the details of your stories, you may have forgotten to answer them but I'm very interested in your experience.

About how many sub2 deals do you think you've done? Of those, what percentage resulted in the bank finding out and sending any kind of letters to you regarding "due on sale" or "acceleration?" Of those, what percentage initiated foreclosure? Of those, what percentage actually were able to foreclose before you could intervene with a payoff or other solution?

Hundreds over 25 years. received 2 total Due on Sale notices. of those two one started a foreclosure so 50% :-) (it was stopped by the judge) zero foreclosed. 0% 

@Account Closed @Andy Mirza @Ron S., I really appreciate all of the advice you all have given me. it has opened my eyes up to a whole new world of the sub2. I hope that others that are interested in looking into a sub2 find this post and read everything in it, as it is all really good information. 

with that being said I would still like to explore the option of doing sub2. and I was wondering (1.)what kind of exit strategies you should have in line? being a newbie, of course I don't have the capital to just pay a loan off if it where to get called due, or accelerated. (2.)when you get into a sub2 what documentation or forms do you need? (3.)who would you have on your team to help you in a sub2.?  I definitely need expand my knowledge on some of the terms and literature you all have posted. 

i'm sorry I haven't showed my appreciation to you all sooner, there is no excuse, I have just been sitting back and reading comments from you all as they come in. trying to think of the right questions to ask. or what questions I could ask. and I still feel like i'm not even close to scratching the surface on the sub2. strategy. again I thank you all for posting on here and giving me both sides of the deal.

thank you,

Justin Cortez

@Justin Cortez others that are more familiar with them might have more and better advice but if they do call the mortgage due, there isn't much you can do as far as I know. About selling it is the only thing that I know of besides paying it off.

Regardless what happens though, nothing from the deal can affect your credit because they old owner is still legally responsible for the loan.

Best advice I can give on anything is, always try to think outside the box and be creative.