All Forum Posts by: Hal Thompson

@Jason R. It's pretty strong to say that it's certain they will have to be unwound. This is the kind of legal issue that might actually go all the way to the Supreme Court, as it implicates a number of constitutional and federal v. state power questions.

For example, Judge Navarro's ruling in the Washington & Sandhill HOA case basically said that the Property and Supremacy Clauses of the US Constitution were implicated, and so the federally insured mortgage cannot be wiped off. It should be of interest, however, that she failed to point to any act of Congress that immunizes a FHA/HUD mortgage from state law. In fact, HUDs own documents published for mortgage servicers aver that their mortgages are subject to state tax and hoa liens and need to be protected against such. In addition, protecting a property from foreclosure where neither the borrow of record or the lender of record is the federal government is a stretch of the term "property" owned by the United States. The government has offered insurance to the lender; therefore, their remedy in the event the lender loses its security should be against the lender, not the property.

In the 9th Circuit, the Stadium Apartments ruling is pointed to as controlling law with influence in this area. However, Stadium Apartments related to a borrower's right of redemption where that same borrower had specifically waived their right of redemption in the federal loan documents. This is therefore a very specific and narrow conflict between the federal contract (no redemption rights) and the state law (redemption rights), where it can properly be argued that the federal waiver takes precedence.

The Washington and Sandhill case is a huge leap from that precedent. The purchaser at foreclosure auction did not waive its right to the property to the federal government. The federal government has passed no law making the mortgage, or its insurance of the mortgage, superior to state law. The argument is simply that to subjugate a federally insured mortgage to state law would impede the ability to execute the program. However, if Congress had wanted to fashion federal mortgage supremacy laws or recording laws, it could have done so. It opted not to. So in the absence of controlling federal law, it's a pretty big leap to start protecting federal mortgages from the very state laws that the mortgages are recorded under. In some ways it is a catch-22.

Anyway, like I said, a long slog. This is probably not going to be decided for quite some time.

@Jason R. The FHFA and HUD issues in federal court currently cast a long shadow. For those who don't have these types of loans (and there are ways to find out), then you are probably good to go. However, if your mortgage is federally insured (and many are), its going to be a long slog.

@Account Closed

 I don't do wholesaling, so I can't speak from first hand knowledge. However, I don't see how it's inherently dishonest. I am looking at a wholesale deal right now as a buyer, and the wholesaler put the property under contract as "Pending Feasibility". This lets other buyers know that a deal hasn't closed, and presumably he submitted a contingent contract with an assignment clause. There is nothing dishonest if the other side is aware that you may not close the deal.

On the other hand, if you are putting property under contract without any notice to the seller that you might not close, that might cross an ethical line. It isn't fair to lock up someone's property in good faith, with the belief that you will close, and in the meantime you are just wishing and hoping to find a buyer. That would probably cross a line for me, especially because you will eventually get a reputation in the community and people may refuse to work with you.

@Ian Ian Also, presuming your rental is in Oregon, check these guys out:

https://www.rhagpforms.org/

If you become a member, they have model forms that you should use to do leases.

(You can see previews of the forms here: http://www.rentegration.com/form-list/rha-oregon)

These associations stay on top of the law and update their forms accordingly, so you don't have to. Since rental laws are state specific, it is best to use the association for the state where your rental is located.

@Ian Ian I use Adobe Echosign for e-signing, This gives everyone an incontrovertible record of what was signed. They also initial disclosures that way too (ie lead based paint) and I email them the disclosures (more record proof they got it). This way, 8 months from now, you're not frantically trying to find the copy of your lead based paint disclosure when you need it.

Yeah, why are you letting people move in before signing the lease?

step 1 - background/credit check

step 2 - sign the lease

step 3 - payment

step 4 - move-in

do it out of order at your peril...

Btw, let me just say that you would have to do a lot more research before trying to pursue the strategy I mentioned. For example, was it the legislature's intent to only have his apply to "first mortgages" literally, or was the idea all bank mortgages? You'd want some more info on what the legislature was thinking when it passed the law.

@Leo Koo 720.385 (1) and 720.385 (2c) have basically the same language, so I don't think it would make much difference if it's a COA or HOA.

@Meghan Reed I never liked the term wholesaling. I don't think it really reflects what is involved. Basically, wholesaling is just putting a property under contract, and assigning the contract to someone else. As part of the contract you sign with the seller, you have a clause that says it can be assigned to a third party, assuming that third party is willing and able to close.

The problem with wholesaling is that you are a middleman, and therefore must have both a network of interested sellers, and of interested buyers. The most successful wholesalers are generally real estate agents who already have these connections through other means.

Yes, as @Steve Babiak and others have pointed out, the key is to not rent to that kind of tenant in the first place. This is all part of proper background checking and credit screening. An interview with the tenant's former landlord would also be helpful. Always independently verify everything the tenant puts in the application with your own research; obviously don't just trust references at their word. It is likely one of the reasons your co-worker rented your unit in the first place is because he knew he couldn't get an apartment in other places.

In the event you have already rented to someone who is in default, I do think it helps to be reasonable and compassionate for their situation. People's lives have ups and downs. And remember, your life may have ups and downs. Treat other people the way you would want to be treated if you were down on your luck. OP hasn't elaborated on the process that led to this result, but in general I do think this can be avoided if you play it cool when the tenant is in default.

@Barbara G. I don't know the tenants, so I obviously can't say for sure what would have happened. It is possible that this is the way their place always was. However, I do think being understanding of the tenant's situation increases the likelihood they will clean up after themselves and leave your place in good shape. Of course there is no knowing for sure, but it certainly helps.

I also agree that judgments are a waste of time. You'll spend more on the lawyer than you'll ever get back from the judgment. Just fix the place up and screen better in the future.