All Forum Posts by: Dion DePaoli

This simply is not true. The fact the mortgage is upside down is a major factor. It changes the disposition.

When a mortgaged property has equity, there are options for the borrower which can be initiated by the borrower on their own accord. For instance, when a borrower has equity they can sell the property to pay of the lien. Additionally, to some extent, with equity comes the possibility to refinance. More equity is better than less and affects qualification.

If the property had negative equity, the borrower can not direct a resolution on their own, as the Mortgagee would not be paid in full. So, dispositions are controlled by the Mortgagee. A short can't take place unless a Mortgagee approves taking less for a lien.

In addition to disposition, the mentality of a borrower is different. When a borrower believes they have equity, they will be more apt to preserve and protect said equity. When negative equity is present they are less likely. To some extent, the greater the negative equity the higher the default risk. The borrower is in a 'first loss equity position', that is the borrower earns equity through principal paydown and through appreciation, when present. When value drops the first person to hit zero is the borrower. BTW, once the borrower hits zero, the mortgagee begins to erode too.

If the above statement were true, then 2007 crash would not have been had the impact it did. We saw the public reaction. Strategic default. Walk away.

So "NO" you don't treat underwater mortgages the same as mortgages with equity. They are not the same.

There might be a confusion on what functions are taking place. It sounds like the Mortgagee recorded the lien against the wrong parcel of land. That is not a Survey error. That is more of a recording error.

Look at the actual security instrument that was recorded. Check the legal description in the security instrument. Should show as a separate line item on your closing statement. The legal on the Survey and the legal on the Security Instrument and the legal description in the title policy should all be the same. Survey endorsements are somewhat state specific. Usually if you obtain a Survey you also get a Survey Endorsement from the Title Company. The insurance covers issues that arise from inaccurate surveys.

The lender requiring an updated survey is not all that uncommon and less uncommon when you have a set of adjacent property where some is encumbered and some is not. It is also pretty common when you have a piece of commercial land/property which is what the 10 acres is being treated like, I presume. The survey requirement is its own stipulation to the loan. Likely the same condition no matter who the lender is. The new Mortgagee might be looking at a lien to encumber more than just the 10 acres for their own underwriting reasons. All of the answers to this are at the new lender's office.

It seems like you might be making more out of this than it probably is. You may not be able to get out of having to get a survey. Survey's cost a couple thousand dollars depending on several factors. As mentioned, you might be able to ask for the old surveyor to use the old survey to updated it this could save some money but certainly will not be a massive discount.

The idea that a survey requirement has extended the underwriting timeline and thus any favorable loan terms is an issue you can speak to your new Lender about. Usually they will order a survey if one is required, sometimes through the title agent. Usually the borrower is made aware of this cost and many times the survey might have to be paid for upfront. Any failure to inform you of this requirement is a customer service issue with your new lender. I wouldn't throw the baby out with the bathwater becuase of this.

Barry it sounds like you have your ducks in a row. You have a POA. The bank sounds like they have been recognizing that and has been corresponding with you in the past. This included mail correspondence, if I am reading your post right.

When a loan is sold, a Servicing Transfer will take place. Regulation demands that a borrower is given proper by both the outgoing servicer and the incoming servicer. The outgoing servicer will have to send you a formal letter which informs you of the transfer and who the transfer is going to at least 15 days prior to any required change. This is what is known as a 'Goodbye Letter'. In addition, the incoming servicer will send a letter out within 30 days welcoming the new borrower, which is a 'Hello Letter'.

Typically in a loan sale contract, there are provisions which cover a borrower being able to make a payment to the old servicer for up to 90 days. The old servicer accepts the payment and remits to the new servicer. After the time elapse, the old servicer has no requirement to accept the payment.

One final detail behind the curtain. We do not know if BOA is simply your mortgage servicer or if BOA is also the actual investor who owns the loan. We do know that BOA Servicing was your servicer as that is who you made the old payments to.

Triggering the Due on Sale and Acceleration Clause is not a one step legal process. The demand will be made and the borrower would be given at least 20 days to cure before any additional action by the Mortgagee would occur. Usually, you would really end up with a couple notices. During which time, the account is not 'cancelled' or deleted as they are trying to collect the money owed on the account.

OK, so based on the above. You can see there are really plenty of safety nets to make sure the borrower knows what happens in a transfer. In addition, the old Servicer and the old Mortgagee generally do not delete an account or file information. Especially BOA, who is one of the big boys and suffers from plenty of legal battles.

So my first reaction is the automatic system simply screwed up. Not sure if you tried the website portal too. Either way, now the weekend is over and you can call customer servicer and they will have to tell you what is happening. When you speak to the CS agent, if the account was transferred, they will be able to tell where it went and should be able to forward a copy of the Goodbye letter at the least. If there is an action starting against the loan, then you can ask for the Demand Letter for said action.

If they struggle to figure out what is happening. The question becomes can they pull up any portion of your account. If they can and they can not figure out what the deal is either, you can simply ask them about making a payment to the account so you are not late and suffer the penalties. They may consider putting the payment in a suspense account for the borrower account which means they collected the money but didn't apply it to principal and interest yet. As they sort out what took place, that money will either be applied or returned to the borrower.

I see. That is not really a 'combo', it would just be two different loans.

One of the properties would be designated your primary residence (the one you plan on living it) and the other an investment property (the one you plan to rent out).

The pre-approval you have is for two separate loans on a primary residence, I assume. So the loan terms would change when you update the property designation to investment property. You will need a larger down payment, like 25% and the rate will be higher. You will also need to have 6 months reserves in the bank, amongst other qualifying criteria.

If you pursue both loans, you will want to let both loan officers know. This will affect your credit during the origination process as you will have two lenders pulling credit. You might be able to get them to compete over the second loan for each lender once you tell, which could be to your advantage on terms.

It is obvious the loan on the $50k townhome would be best suited in terms of capital demands for the investment property.

You will have to be able to support both loans in your debt to income ratios as well.

Steve did you manage to place this yet?

If not...

1. Where is the property, in what state?
2. What type of property is it?
3. What are the note terms currently? (rate, amort, term)
   
4. Any known discount on the balance yet?
5. Who is the proposed Seller, you or the current Mortgagee?

I am assuming the property is in your state. The state offers some consumer guidance on the matter HERE

I guess you have to address the idea of 'who's risk', the borrower or the mortgagee.

A simple way and highly suggested by those in the 'know' is have the seller agree to let the loan be serviced by a licensed Mortgage Servicing Company. There are several out there and many will work with single loan owners. They are affordable and help cure much of the heavy lifting for the Mortgagee in administration of the loan.

I suppose either way from a borrower credit for payment perspective, always have some type of receipt for payment whether a cancelled check or statement from a bank regarding the draft. If the Mortgagee receives the funds, they must be applied properly to interest, principal and advances and fees.

You can simply ask the banker about a fixed rate loan. The bank is trying to limit their extension risk by giving you a 5 year fixed and then adjust that rate back to market for the next 5 years.

It is not too common to have a 5 year adjustable period. So in 5 years it will adjust, then every 5 years after that. Usually the adjustment term is more like 6 months or 1 year. You will have some interest rate risk, as it is not too far fetched that rates continue to tick upward over the next 5 or 10 years.

All of that said, since this is an investment property with cash out, this may be the only terms the bank is willing to offer. Again, simply ask the LO if he has a fixed rate program which will likely carry a higher rate than what they just offered you.

"Combo Loan" is not clear on what you mean. What do you expect the loan to do or what makes the "Combo" concept in your mind?

Combo Loans could mean, that a first and second are originated at the same time by the same lender. For instance, like a 80% first and 10% second for a total finance of 90%.

Or you could have something else in mind like cross collateral, etc.

It can vary slightly amongst lenders. The idea is you will live in your primary residence for the majority of the year. So you personally only being there on the weekends is what seems to trigger them wanting to treat the home as a second home instead of a primary.

I suppose they may be treating this like an investment property for a similar reason. It's not clear in the post.

You may want to ask the loan officer about an execption on this designation which the lender may be willing to work with if you can prove to their liking it is indeed going to house your family most of the year.