I am a principal in a 100+ unit multifamily deal where we're assuming a Fannie Mae Non-Recourse loan. Two days before closing the lender's attorney wants us to sign docs waiving any benefit of discharge under Chapter 43 of the Texas Civil Practice and Remedies code and waive all rights to contest deficiency under Texas Property Code 51.003, 51.004 and 51.005. The latter basically says we can't contest the value if the property is sold at auction, and offset any deficiency if the property is proved to be worth more under the law.
I realize this is NR, and it's not like we're going to violate any of the bad boy carveouts, I just don't like waiving rights afforded by law or otherwise.
Has anyone that assumed a FNMA NR MF loan ever waived similar rights?
Not this specifically but I have had other clients that bought a bunch of apartments during the boom times which I wasn't a part of but they contacted me to sell. A few sold but others were foreclosed on due to time constraints when they first made contact with me.
This is in GA. At foreclosure bank sold at a cheap price below market and then tried to seek a large deficiency and go after their other assets. It went to court with the attorneys for the bank and the past owners. The appraiser who had given the values didn't want to get involved in it.
The former owners argued that the banks undersold the properties compared to market value therefore the deficiency should be eliminated or at worst reduced by XX percent. What ultimately happened is the attorneys went back and forth and a much smaller amount was settled on and a payment plan was worked out over a period of time. I wasn't involved in this but just kept up to date as to what was going on. They also had some refi's coming due and the bank would not re-up and was harder to find new loans.
No legal advice.
Turns out that it's a Fannie Mae requirement and part of one of their standard legal docs. I still don't like giving up rights but we do what we have to do to get the deals done.
@Joel Owens The unedited doc from FNMA shows the following for Georgia, "Section 8 of the Guaranty is hereby amended by adding the following new language to the end thereof: (e) In addition, Guarantor waives the benefit of O.C.G.A. Section 10-7-24." Whatever that is.
Something else I learned in this syndicated deal. No more than of 25% equity could be from passives using SDIRA funds.
That section is in relation to a time limit to be able to pursue action against a defaulted borrower in GA.
Fannie Mae is saying they will not agree to this for GA.
The word ALL means everything. Maybe you can negotiate parts of that wording to minimize what you are giving up.
If you are on a closing for a time sensitive issue you might just let this go in favor of your other benefits.
No legal advice.
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!