Servicing Companies wiping out 100% DTI in 1 year -Pace Morby Pod

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Servicing Companies wiping out 100% DTI in 1 year -Pace Morby Pod

Frank Watts
Rental Property Investor · Dallas, TX · Member since 2020 · 8 posts · 6 votes

Hi, I heard Pace Morby on BP Podcast talk about wiping a person's DTI 100% after 1 year simply by using a servicing company. This scenario would be if I took over a mortgage via subject to and the seller would not have to wait years to go get another one. I reached out to my REI lender about this. She has not heard of this being used to wipe out the DTI so the seller can then get a 2nd mortgage. Does anyone have any Feedback on this.

Pace mentions this in the Podcast around the 33 minute 

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y

@Ben Lockspeiser

I own a servicing company licensed in 20+ states

Feel free to send me a PM

7e investments53 Reviews
WebsiteView Page
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  • Aaron Kerwin
    Member since 2020 · 4 posts · 7 votes
    4y

    After hearing the same podcast, I have been hunting to find a company that will service an existing loan already with another servicing company. Looking at the bigger loan servicing/subservicing companies I haven't found one yet. They want to work with mortgage lenders and brokers. I am starting to wonder if some boutique companies are out there offering subservicing services, but I haven't found them yet. 

    Really the angle Pace is talking about is that the loan is being contractually paid by someone else, not too different than having your rentals leased and still qualifying for additional loans because those mortgages are paid.

    Maybe another approach here is to have the Subto contract be offered to the lender as proof that the prior/existing loan is being contractually paid by someone else.

    I am curious if anyone else has done Subto and has solved the problem of how the seller can get another loan.

    0Reply
  • Frank Watts
    OP
    Rental Property Investor · Dallas, TX · Member since 2020 · 8 posts · 6 votes
    4y

    @Aaron Kerwin - I know AugustREI will do the servicing and I actually spoke with them about this. She said that they will provide all the documentation for this. I haven't used them yet but I know a lot of people who have used them for Subto's and Owner Financing deals. Yes, the subto contract is also provided to the mortgage lender to show it's being paid by someone else.  Thanks for the response. 

    2Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    4y
    Quote from @Frank Watts:

    @Aaron Kerwin - I know AugustREI will do the servicing and I actually spoke with them about this. She said that they will provide all the documentation for this. I haven't used them yet but I know a lot of people who have used them for Subto's and Owner Financing deals. Yes, the subto contract is also provided to the mortgage lender to show it's being paid by someone else.  Thanks for the response. 

     The issue is not necessarily with the Note Servicing company making payments on the underlining loan. The issue is finding a lender/mortgage broker that knows how to package it in such a way that it gets through underwriting. I have had investors tell me for years it was no big deal etc. I asked them what lender they used to help their original sellers get a new loan and all of a sudden they look like a deer in the headlights. A year or so back I even ask if there were any lenders that knew how to package such a loan so that the old seller could get a new loan and nobody came forward. 

    4Reply
  • Frank Watts
    OP
    Rental Property Investor · Dallas, TX · Member since 2020 · 8 posts · 6 votes
    4y

    https://www.instagram.com/p/Ca... 

    1Reply
  • Frank Watts
    OP
    Rental Property Investor · Dallas, TX · Member since 2020 · 8 posts · 6 votes
    4y
    Quote from @Joe S.:
    Quote from @Frank Watts:

    @Aaron Kerwin - I know AugustREI will do the servicing and I actually spoke with them about this. She said that they will provide all the documentation for this. I haven't used them yet but I know a lot of people who have used them for Subto's and Owner Financing deals. Yes, the subto contract is also provided to the mortgage lender to show it's being paid by someone else.  Thanks for the response. 

     The issue is not necessarily with the Note Servicing company making payments on the underlining loan. The issue is finding a lender/mortgage broker that knows how to package it in such a way that it gets through underwriting. I have had investors tell me for years it was no big deal etc. I asked them what lender they used to help their original sellers get a new loan and all of a sudden they look like a deer in the headlights. A year or so back I even ask if there were any lenders that knew how to package such a loan so that the old seller could get a new loan and nobody came forward. 

    Love Pace! His students have always been eager to help me with anything I post in the creative financing group. 

    https://www.instagram.com/p/Ca...
    1Reply
  • Ben Lockspeiser
    Investor · CT · Member since 2017 · 30 posts · 12 votes
    3y

    Has anyone found a viable company on the east coast, I've called about 6 different companies, AugustREI included and nothing. 

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Ben Lockspeiser

    I own a servicing company licensed in 20+ states

    Feel free to send me a PM

    7e investments53 Reviews
    WebsiteView Page
    6Reply
  • Aaron Kerwin
    Member since 2020 · 4 posts · 7 votes
    3y

    I talked to my lender at Castle & Cooke in Denver, CO and for them, the seller now turned buyer would just have to show that the existing loan was being paid by someone else for 12 mths and they won't count it against their DTI. I think the servicing company helps by providing easy & verifiable proof of this. However, it was not required with this lender.

    3Reply
  • Ben Lockspeiser
    Investor · CT · Member since 2017 · 30 posts · 12 votes
    3y

    @Aaron Kerwin what about removing a % of your DTI prior to the 12 months?

    0Reply
  • Aaron Frances
    Chicago, IL · Member since 2016 · 61 posts · 11 votes
    3y
    Quote from @Ben Lockspeiser:

    Has anyone found a viable company on the east coast, I've called about 6 different companies, AugustREI included and nothing. 


     Evergreen note servicing claims to service 23 other states. https://notecollection.com/

    AL, AK, AR, AZ, CA, CO, FL, IN, ID, LA, MI, MS, MT, NJ, MM, NV, OH, OK, OR, TX, UT, WA, WY

    2Reply
  • Ben Lockspeiser
    Investor · CT · Member since 2017 · 30 posts · 12 votes
    3y

    Thanks for the info @Aaron Frances, I need NY and CT though. 

    0Reply
  • Todd Bentley
    Philadelphia, PA · Member since 2021 · 5 posts · 0 votes
    3y
    Quote from @Aaron Kerwin:

    I talked to my lender at Castle & Cooke in Denver, CO and for them, the seller now turned buyer would just have to show that the existing loan was being paid by someone else for 12 mths and they won't count it against their DTI. I think the servicing company helps by providing easy & verifiable proof of this. However, it was not required with this lender.


    Aaron, can you connect me with this lender? I will send you a message. I am close to my first SubTo deal and the seller is only concerned about DTI. Thanks.

    0Reply
  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    3y
    Quote from @Todd Bentley:
    Quote from @Aaron Kerwin:

    I talked to my lender at Castle & Cooke in Denver, CO and for them, the seller now turned buyer would just have to show that the existing loan was being paid by someone else for 12 mths and they won't count it against their DTI. I think the servicing company helps by providing easy & verifiable proof of this. However, it was not required with this lender.


    Aaron, can you connect me with this lender? I will send you a message. I am close to my first SubTo deal and the seller is only concerned about DTI. Thanks.


     Here is the info straight from Fannie Mae, the details matter:

    https://selling-guide.fanniema...

    Hurst Real Estate, INC4.986 Reviews
    WebsiteView Page
    1Reply
  • Ryan Birge
    Fishers, IN · Member since 2017 · 4 posts · 2 votes
    2y
    Quote from @Chris Seveney:

    @Ben Lockspeiser

    I own a servicing company licensed in 20+ states

    Feel free to send me a PM


     Thanks Chris! Will shoot you a DM RE: This topic now. 

    0Reply
  • Jason BirklPro Member
    Investor · Virginia Beach · Member since 2019 · 3 posts · 0 votes
    2y
    Quote from @Jay Hurst:
    Quote from @Todd Bentley:
    Quote from @Aaron Kerwin:

    I talked to my lender at Castle & Cooke in Denver, CO and for them, the seller now turned buyer would just have to show that the existing loan was being paid by someone else for 12 mths and they won't count it against their DTI. I think the servicing company helps by providing easy & verifiable proof of this. However, it was not required with this lender.


    Aaron, can you connect me with this lender? I will send you a message. I am close to my first SubTo deal and the seller is only concerned about DTI. Thanks.


     Here is the info straight from Fannie Mae, the details matter:

    https://selling-guide.fanniema...

    Jay,

    I have a deal in VA I'd like to discuss with you. I'll send you a connection request.

    0Reply
  • Caroline Gerardo
    Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
    2y
    Quote from @Jay Hurst:
    Quote from @Todd Bentley:
    Quote from @Aaron Kerwin:

    I talked to my lender at Castle & Cooke in Denver, CO and for them, the seller now turned buyer would just have to show that the existing loan was being paid by someone else for 12 mths and they won't count it against their DTI. I think the servicing company helps by providing easy & verifiable proof of this. However, it was not required with this lender.


    Aaron, can you connect me with this lender? I will send you a message. I am close to my first SubTo deal and the seller is only concerned about DTI. Thanks.


     Here is the info straight from Fannie Mae, the details matter:

    https://selling-guide.fanniema...

     No the selling guide says: 

    • the party making the payments is obligated on the mortgage debt, 
    • The person/LLC who buys the property subject to is NOT obligated on the loan unless they have an approved assumption and the note is in their name.

    Sometimes an Underwriter might miss this and you luck out but the seller who is obligated on the note 99% of the time gets the hit to their DTI. Here is why: the loan can go into default at any moment and responsibility hits the seller. In reality the seller cannot get another conventional or government backed loan not counted in their debt to income ratio with the wrap around/subject to on their property. Seller is obligated on a note and doesn't own the subject, can't get hazard insurance coverage, and is 100% at risk of all perils.

    This is fiction: that any servicing company pays as agreed for 12 months and the existence of the loan just magically disappears. The risk exists and is real. 

    0Reply
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