Well Lorelie, your mentioning the deed-in-lieu-of-foreclosure got you a vote!
And first folks, I see I didn't mention it the first time, but what me to click this thread was "Mortgage Assignment".
Guess I can mention this, but doubt anyone will care!
A mortgage is not ASSIGNED ina sub-2 nor in any other arrangement by the seller. The seller can not ASSIGN the mortgage only a mortgage holder, note holder or the Holder in Due Course can assign the instrument and obligation that goes with it.
ASSUMPTION is the correct term. The seller allows the assumption of the debt and carries the balance, together with interest along with the covenants of the obligation by the buyer and it is done as a matter of equity as you would in a contract for deed, from a lending stand point. So, assignments are done by note holders, assumptions by sellers and buyers. If you go to a bank and say I want to assign my mortgage, the banker will look at you like you really don't know what you're talking about and if you lack the knowledge of knwing what you are really doing, what else do you not know?
So, let's impress the bank at the beginning and tell them you want to do an assumption.
Next, 36 months comes from a time frame generally accepted in banking not from any stead fast rule or law. The governing requirements will be that which are in writing in your note and security agreements. Either way, they are optional and the due on sale is not something a lender is generally required to do, unless there is an agreement between the note holder and loan servicer to follow such events of default to be cured by foreclosure without other consideration.
When you do a sub-2 you should use a deed in lieu of foreclosure agreement as a cure for events of default, if your attorney is doing it another way and it is not against state law, your attorney screwed up! A deed-in-lieu is used when funding is accomplished with amounts of equity, not a cash loan. Using a deed-in-lieu as a means to secure collateral under a cash advance loan will get you in trouble if your borrower used a different attorney than the one who thought it was acceptable.
An option can be used, and I suggest doing os as a seperate agreement always, without any problems what so ever with any due on sale provision, at a certain point in time (like at the end of the lease term and such date can be reasonably be extended under certain events). The Option can be constructed as a sale agreement, except in Texas (might be some other states too)where contracts must be drawn for no longer than six months or a year and then renewed.
Three things to remember about seller financing is that you can do anything that is not illegal, or that would put either party under circumstances that would be unfair considering the expertise and knowledge of the parties and considering who drafted the agreements. (The later is where issues of preditory lending can surface. The flip side of preditory lending is taking advantage of some little old lady who was selling her home and some slick talking investor talked her into financing the deal, we could call that preditory buying or borrowing.) Thirdly, you should know what is customary in the area you are dealing in. While you can do anything that is not illegal and does not take undue advantage, doing something so wild, so crazy, so unique or unheard of will likely (very likely) put the schemer at a disadvantage in court if it ever gets there.
So, when you go to your attorney to do your next sub-2, tell the attorney you need an assumption agreement, not an assignment agreement.....