All Forum Posts by: Mike Mazzucco

Mike,

I am currently looking into this exact situation on a home and lot attached to an FHA loan. This house is on the MLS and has been for about 6 months, but has not had any success in going under contract. I know that this home is also has absent owners, as they have moved to another city.

I will preface this information with the fact that I do not have the exact answer as I have not completed this transaction, nor have I ever attempted this type of transaction, yet.
First off, it is my understanding that all FHA, VA, and USDA (Fannie and Freddie MBS) loans are considered assumable with "appropriate buyer qualifications" by the lender. Second, in what I have researched specifically on FHA loan assumption, someone looking to "assume a loan" MUST BE INTENDING TO LIVE IN THE PROPERTY (with the exception of loan originating prior to Dec 1, 1986) in order to assume the loan, with some considerations/restrictions:
     "Mortgages originated before December 1, 1986 generally contained no restrictions on assumability, while those originated after that date have certain restrictions."
     "...the lender may require a creditworthiness review of the assumptor["buyer"]."
     "Lenders should note that some mortgages executed from 1986 through 1989 contain language that is not enforced, due to later Congressional action. Mortgages from that period are now freely assumable, despite any restrictions stated in the mortgage."
     "This requirement applies to both those borrowers who
      take title to a property subject to the mortgage without assuming personal liability for the debt, and
      assume and agree to pay the mortgage."
****PLEASE NOTE******* :
     "An assumption solely in the name of a corporation, partnership, sole proprietorship or trust is not acceptable if creditworthiness review is required."
    "private investors are prohibited from assuming insured mortgages that are subject to the restrictions of the 1989 act. This restriction applies whether or not there is a release from liability by the lender of the selling mortgagor"
     "Mortgages subject to the 1989 Act require that the lender automatically prepare the release from liability, thereby releasing the original owner, when he/she sells by assumption to a creditworthy assumptor, who executes an agreement to assume and to pay the debt, thus becoming the substitute borrower."

This information seems to say that if the loan was originated prior to Dec 1, 1986, which should not be the case as this is greater than 30 years, then the loan is automatically assumable with no stipulations. However, if you are assuming a loan that originated post Dec 1, 1986, then you must have intention to live in the property. Also note that in the event that you are assuming a loan as an investor, the loan must be originated prior to December 1, 1986, and you must have no greater than a 75% LTV either of the original appraised value or the current appraised value (which should never be the case since, again, the loan is greater than 30 years old).

PLEASE REFERENCE: HUD.gov website, for HUD 4155.1 Chapter 7 Assumptions: https://www.hud.gov/sites/docu...

Hey Mike - Did you end up dividing the lot?

@Mike Mazzucco

Have you tried speaking with the Town of Gilbert regarding this prior to submitting the request? 

I often find the Cities to be pretty helpful and knowledgeable regarding what is possible.