Borrowers that do not want to close at an escrow office.

4 Replies

Hi BP, I have a borrower that is acquiring a property through a non-performing loan. They are buying the loan and foreclosing to own the property. So initially instead of giving me a deed of trust, they will give me an assignment of collateral. Once they own the property then they plan on record a deed of trust with me in 1st position. They aren't using an escrow company for the transaction, the seller's attorney has agreed to act as the intermediary so they gave me two options. One I can wire the money direct to the intermediary or two, I can wire the money directly to my borrower and they will take care of it. 

1. I don't understand what they are doing so if you can shed some light on what they are doing that would help me. 

2. I never wire money to a personal account or a business account. If the intermediary is really who they say they are then would that be ok or should I demand that they closing at an escrow office?

Any wisdom you can give, I would be very thankful.   

So, you are lending for them to buy a note, not the property......they can’t pledge the house as collateral as they don’t own it, just the mtg against the house. So you are at risk of the note being valid, enforceable, etc. I’d have an expert, like Dion DePaoli look over the file first, for $300-500, and an opinion on how the transfer should occur. I can’t tag Dion from my phone.

@Wayne....meh, doesn't work.

OP, the borrower has no idea what they are doing and are about to make a mess of things.  If they assign the deed of trust they just made you the beneficiary of the loan.  Deed would revert to you if no auction bids come through.

Addionally, a note holder is not owed the property.  They are only owed the sums due under the note.  

Generally loan sales do not use any intermediary as an escrow agent.  Complicates the trade to the nth degree.

It is possible to pledge a loan as collateral. It is not required to convert the security of that note to real property upon reverting from foreclosure. You wouldn't end up with a DOT though.

I would be willing to talk with you to help you understand it more but not so sure this is a deal for you or them.  Often times new investors enter this space and under estimate the capital demands.  That would put you in a bad spot.  Like a flipper who runs out of money only you have no right to foreclose.  (Can't foreclose an interest in a loan, Only real property )

Hope that helps.

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