Bank recalling a loan

39 Replies

What are the questions I should be asking the lenders. I’ve herd of people getting their loans recalled back at a moments notice.I’m just very cautious. I am going too the closing table next week.

A traditional loan can not be called for no reason.....you’d have the breach the loan agreement.......transfer title, not pay the mtg, not pay the taxes/insurance.

@Eric Veronica

Thanks Eric, I just posted a similar question a few minutes ago.

Originally posted by @Mark Perea :

What are the questions I should be asking the lenders. I’ve herd of people getting their loans recalled back at a moments notice.I’m just very cautious. I am going too the closing table next week.

Who has told you they are getting their loans recalled at a moment's notice?    Lenders are in the business of making loans and getting a margin on those loans.  If you pay your mortgage on time and don't commit fraud, your loan won't be "recalled".

@Stephanie P. I was discussing a deal I just done and a guy had said be careful don’t go too fast. Some banks can just recall your loan at a moments notice. I was like WHAT YOU TALKING BOUT WILLIS!

Originally posted by @Mark Perea :

@Stephanie P. I was discussing a deal I just done and a guy had said be careful don’t go too fast. Some banks can just recall your loan at a moments notice. I was like WHAT YOU TALKING BOUT WILLIS!

Your friend is uninformed.  Once your loan is closed, if you're making your payments on time and you didn't commit fraud when the loan was originated, you will not have your loan recalled and even if you aren't making your payments on time, your loan will most certainly not be "recalled" at a "moment's notice."  

Totally ridiculous and patently false. 

Now, if your loan is in process and you're going along as pretty as you please and the underwriter finds something is not right or the loan falls outside their guidelines, the underwriter can issue an adverse action action lender and kill it.  Having said that, once it's closed, it's done.

Updated 29 days ago

meant to write letter instead of "lender"

Originally posted by @Stephanie P. :
Originally posted by @Mark Perea:

@Stephanie P. I was discussing a deal I just done and a guy had said be careful don’t go too fast. Some banks can just recall your loan at a moments notice. I was like WHAT YOU TALKING BOUT WILLIS!

Your friend is uninformed.  Once your loan is closed, if you're making your payments on time and you didn't commit fraud when the loan was originated, you will not have your loan recalled and even if you aren't making your payments on time, your loan will most certainly not be "recalled" at a "moment's notice."  

Totally ridiculous and patently false. 

Now, if your loan is in process and you're going along as pretty as you please and the underwriter finds something is not right or the loan falls outside their guidelines, the underwriter can issue an adverse action action lender and kill it.  Having said that, once it's closed, it's done.

 I suspect he may have been referring to a Heloc.. those can get frozen and called.. happened big time in the GFC .. I bailed out a bunch of flippers who relied on those to do rehab .. and they got frozen.. even happened to my personal banker on his heloc with a national bank. 

read the fine print on those.. not saying its going to happen in todays environment as long as your making payments.. don't alienate the mortgage etc.. they are not being called..  A lender decides their collateral is in danger because of some event then for sure helocs can get frozen and called.

30 year fixed mortgages though no they only call those if there has been and event of default. which I described as generally.

1. excessive waste.

2. Alienation

3. failure to pay as agreed

4. failure to pay property tax's

5. failure to provide insurance.

those are the common ones.. 

In a commercial loan you can have loan covenants.. that required DCR to be meet.. they could require annual financial statements and Net worth covenant. that you must maintain.

@Jay Hinrichs

Jay, I agree completely. I didn't consider HELOC's in the conversation.

Originally posted by @Stephanie P. :

@Jay Hinrichs

Jay, I agree completely. I didn't consider HELOC's in the conversation.

I know the description of the question was not crystal clear.. I just was making an assumption.. reason being you see so many on BP who think its wise to borrow from their helocs for down payment on rentals..  And what they don't know the risk associated with those and have never read the fine print of the mortgage provisions.. when you get a 10 page mortgage written in 8 font not many read every line. 

I am not predicting this will occur again but one should be aware of the fact and READ your Heloc mortgage in detail.. and same with any mortgage.. I suspect 99% of those that are not in the business have no clue as to what an event of default is or how many there are :) 

@Stephanie P.   plus I bet a lot of mortgage brokers don't know what all constitutes an event of default.. as there job is to sell mortgages not prosecute foreclosures..

however myself being a HML who has had to foreclose many times in many different markets we get schooled out of necessity.. LOL..

Originally posted by @Jay Hinrichs :

@Stephanie P.  plus I bet a lot of mortgage brokers don't know what all constitutes an event of default.. as there job is to sell mortgages not prosecute foreclosures..

however myself being a HML who has had to foreclose many times in many different markets we get schooled out of necessity.. LOL..

Experience can give you a great education, but the tuition can be expensive.  Not sure who said that, but whoever it was, they're right.

@Mark Perea I have heard of this being a potential issue when discussing Subject-To real estate purchases.

@Jay Hinrichs the real interesting trend is HELOCs as a form of refi; regional banks are basically pitching the old 5-year interest-only ARMs as HELOCs to wrap up 1st and 2nd mortgages.

So this is from my lender. Is there anything too be worried about here.

Good morning guys,

The loan is approved on a 20 year term, fixed for 5 years at 5.5%. A loan amount of $64,600 is a payment around $445. On $50,000, it’s $345.

I ask what it will go too after 5 years.

Her response : It will go to the market rate at that time. Right now, prime rate is 5.5%.

So is this an Arm?

@Mark Perea   Any reason you're not going with a 30-year fixed rate loan?

@Kyle J. I’m doing a burrrr

I paid 28 cash and refinancing to get all my money back and pay for renovations

Originally posted by @Mark Perea :

So this is from my lender. Is there anything too be worried about here.

Good morning guys,

The loan is approved on a 20 year term, fixed for 5 years at 5.5%. A loan amount of $64,600 is a payment around $445. On $50,000, it’s $345.

I ask what it will go too after 5 years.

Her response : It will go to the market rate at that time. Right now, prime rate is 5.5%.

So is this an Arm?

Yes, this is an ARM. Her response is not really sufficient. She should be able to tell you the index (I'm assuming it's prime rate), the margin and the adjustments (initial adjustment, periodic adjustment and maximum adjustment). The loan amount is pretty small, so I wouldn't sweat the 20 year vs a 30 year term, but if you can get a 30 year fixed, it would be better (although more than likely a higher interest rate).

Do you know if this is a 5/1 ARM or a 5/5 or when the adjustment periods are etc...?

@Stephanie P. For my own knowledge, why would someone in his situation NOT get a 30 yr fixed (more so for the fixed rate)? It seems super risky right now to do an ARM but I'm new to this so I'd love to learn something new today!

@Mark Perea the previous comments are so right- definitely read the fine print of your mortgage. And if you don't understand something- ASK. One thing to note is that- Another time a mortgage can be called is if the individual buys the property in their personal name and then "gifts" it to their own LLC. A lot of people do this for protection purposes- and just assume that their mortgage won't get called. Technically this violates the terms of most common mortgages and the lender CAN call the mortgage back. It's not happening much these days because the economy is doing well- but if we had another downturn you could see this happening a lot. This may be what happened to you friend..?

Good luck to you in your purchase!!

@Mark Perea @Jessica G. @Stephanie P.

The lenders email started with "good morning guys" which sounds like a partnership/LLC.

A bank isn’t going to do a 30-yr fixed commercial loan. Nor will they typically amortize commercial loans more than 20 years.

From the lenders comments, sounds like a standard 5/1 arm.

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