Quote from @Jay Hinrichs:
Quote from @James Hamling:
Quote from @Don Konipol:
.... If I were to sell the property, and merely not inform the lien holder, I’ve committed no fraud....
So an action by two working together to convey real estate, and pass-on a mortgage to a person who never was qualified or received such is a-ok huh??? Google took about 1.7 seconds to sort this out....
James, major difference here is sub to almost always the mortgage has been in effect for many months or years.. Straw buyers are doing things to acquire the asset at the same time they acquire the mortgage.. I have been approached my many who thought the straw buyer concept was great but of course I would not participate.. loan fraud like that is 5 years in federal prison and they will come after you years after the fact.. I have seen it happen and have been interviewed by the FBI twice on this by clients of mine who went to the dark side..
As a HML for a long time started in the late 80s.. I am very familiar with the small print and the covenants Don is talking about and he is absolutely correct.. Alienation of title gives the beneficiary of the loan the Right but not the obligation to accelerate the note and call it due.
Where the abuse is going to come into play with this is many of these so called sub 2 buyers will take their play book from the wholesaler world IE hide everything no disclosure of anything just get them to the closing table and off you go.. Whereas, Don mentions are we talking home owner with zero sophistication or A deal between Don and Me or Me and You..
I can see a potential gate keeper like we are seeing a little bit in wholesaling out here on the west coast where the title companies are making the wholesaler disclose all aspects of the transaction to the seller before they will issue a new policy. Maybe on Sub 2 they can do something similar or at least have a disclosure document like we see in all the 50 disclosure docs RE agents have to use to sell houses. ??? Maybe ??
Can SubTo be done legally, Yes 100% as we both know. But, and it's a HUGE but; it requires doing things in a correct manner. A manner which is NOT being touted far FAR too often and which the vast majority are completely violating.
The vast majority I have heard anything around promote, encourage, even celebrate the actions that would enact various degrees of fraud. namely, the #1 I hear is some narrative of "no no no, don't worry about your lender, we will just keep this quiet and between us alone, they don't need to know, all they care about is getting there payments, nothing will happen, let's just keep this quiet". And when look at all things on Straw-buyer, it fit's that mold perfectly EXCEPT it's on conveyance and not origination. That is a differentiator I don't see saving persons from penalties as it's the exact same intent, same mechanisms, just different in time.
Be honest, how often do we see anything on SubTo speaking of disclosing and all that? All but never. UNLESS it's a headline of how SubTo is fine, a-ok, legal, and then details buried way down into text.
The vast majority doing SubTo are doing it illegally. I have seen it, I know many others who have as well. Rarely, less than 1% rarely have I ever seen a fully legal legit one. I only know of 1 ever that was fully legit.
I know of dozens upon dozens where it is the "sshhh, let's keep this quiet and the bank shouldn't find out" and the buyer has no capacity to actually purchase them if/when it comes unraveled, none. And I know of a few dozen that have come unraveled.
Finance starts getting burned on these, it starts hitting a certain "temperature" level, I assure the criminal charges will start happening. And when they start, you know how this song goes, it's all the look-backs and all of a sudden an avalanche of "stings" and what-not.
