Quote from @Steve Smith:
Quote from @Ken M.:
Quote from @Steve Smith:
Ken,
Very good posts and I could certainly argue your points. Document, document, disclose, etc, but only to the right people, not necessarily the lender. I don't wave a red flag in front of the lender daring them to call the note. But absolutely be very clear with the seller as to what you're doing. However, I've NEVER had a note called on any properties and the vast majority were "subject too" and/or owner financing. However, don't have any of those loans anymore (most paid off).
The only thing I do that you don't, is use trusts, and love them and they have saved my bacon a number of times.
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just for clarity. I never disclose to the lender. They are not required to be notified. All disclosures are to the seller, escrow, IRS, that kind of thing.
In one lawsuit, the judge determined that the lender had constructive notice because I had recorded the warranty deed and was making payments from my business checking account. I had done nothing to hide the transfer of title. I won the case based on that.
How has using a trust benefitted you?
With a trust, no one know who owns the property. Thr trust could be in the name of the seller, and your entitty would be the trustee and beneficiary.
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I'm not sure I get the idea.
If a lender sees that the person they have on record, the borrower, is not who is currently
listed at the county as the owner, they can then look into who owns the property. That is very easy to do in today's world. In fact, a lender could do a mass cross reference of all their loans. They probably will do so in the right circumstances.
They will send a letter to the borrower. If the borrower says it's their trust, the lender asks for proof. If the borrower legally and properly put it into a trust, it shouldn't be a problem. If the letter doesn't get responded to, they will call the note due and start a foreclosure.
Lenders aren't stupid and they don't play games with their money. The property secures the loan. It's called "risk management". They do this all day long, have been to court many, many times. You haven't been, hopefully.
If the borrower says that's not their trust or they sold the property or says they don't know who owns the trust, the lender can call the note due. Or, If it becomes a legal case, under the rules of discovery, the owner of the trust has to be revealed.
If the buyer is successful in hiding his ownership, he won't get legal notices of lawsuits and bankruptcy and foreclosure and change of servicer. I would think those are pretty important notices to get. It affects ownership.
Never trust a SubTo seller (subject to an existing mortgage) to "cover" for you in the future. There is no benefit for them to lie for you. They no longer own the property, are jealous of your benefitting from their pain and now have a debt hanging around that prevents them from buying another home.
And, no, most borrowers won't transfer the deed back to the borrower to protect you. And if they do transfer the deed back, the smart ones know that you now no longer own the property. They now own it again, and you can't make them deed to back to you once the lender isn't looking.
We're not even dealing with the issues of protected classes, emotional people, pre-foreclosures, elderly and minorities. Anyone that sees you've benefitted from "their property" believes they are owed that benefit. It does not matter that it is an irrational "feeling". Some attorney will take the case.
Explain attempting to get the property deeded back to you, after hiding ownership from a lender who has the property as security for a loan, to the judge. That would be a fun one to witness.
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At some point, if you do very many, you will wind in court on one of these. Just build the credibility, in advance, so the judge will side with you. Hiding ownership doesn't build credibility, and frankly, there isn't any plausible reason to hide ownership.
