Sub2: PennyMac Due on Sale

5 Replies

I have the opportunity to buy a house subject to existing financing. Does anyone have experience with PennyMac calling a loan due? 

As far avoiding triggering the due on sale clause, would it matter whether it's in my name or my LLC's?

Thanks!

@David Morgan oh the notorious DUE ON SALE clause.  Don't get me wrong, it is important to know all the wording of your loan documents but some people teach this clause as doom and gloom.  If you pay your mortgage on time the bank will not be calling your note due.  The bank makes TONS of money on your loan.  Banks LOSE money when they foreclose.  Banks also get bad PR when they foreclose.  Remember back when people were marching against banks and protesting against banks when they were foreclosing on people during the housing crises?  And that was when people weren't making their payments!  Could you imagine the backlash if banks starting foreclosing on people who were making their payments on time?  Yikes!  This is just not a clause you should be worried about....but just in case there are still some protections in the wording of the paragraph that still protect you.   If the bank calls the note due they have to give you a MINIMUM of 30 days to fix the situation.  But the other item is that this clause is not applicable in every state.  I've attached a copy of the paragraph here so you can view the wording.  Feel free to ask more questions if you need.  Thanks!

@Andrew Postell thanks for your reply. The seller wants to move forward, and I talked to a local banker about a collateral-based loan as Plan B, just in case the note is called. (I left my job this year and won't qualify for a conventional mortgage, but I've got a couple of rentals paid off.) The banker said sure, but he added they're highly unlikely to call the note.

What do I tell the lender? Do I just send a letter saying that due to financial hardship, the seller needed to close quickly, so the next payment will come from my LLC... and please waive the DOS clause?

What needs to be in the contract?

I'm not sure how to proceed.

Can't even find a real estate attorney who will touch this. 

@David Morgan my expertise is in the lending arena. If you need more clarification on "subject to" then try another new post about that topic.  If you need a lawyer in your state, then try posting in the Maryland forum.  Those might get you better responses on that subject.

@Andrew Postell thank you!

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