While most folks send questions to me through the website, others comment on stories that have run in the past. Here’s a selection of recent items from my mailbox.
Q: I would just like to comment on your response to the woman who asked about the website that charged to browse their listings, and offer to put her in touch with homeowners on the brink of foreclosure, and who wanted to walk away from the situation.
She was supposed to be able to step in and take over their mortgage payment.
You were correct in telling her that this is legal. However, in my opinion you were a little off the mark when you said “As for taking over another person’s mortgage payment, that is often more difficult that it seems. In general, only FHA loans are assumable, provided that you can qualify for it, and there may be fees you’ll have to pay.”
There is a difference between assuming a mortgage, and buying a house “subject to” the existing mortgage. The second option allows you to get title to a house and take over making the payments without putting your name on the mortgage. This is legal, although a homeowner runs the risk of the lender choosing to exercise the “Due on Sale” clause if they learn of the transfer of title.
However, this risk may be small for someone who is taking a bank’s non-performing loan and bringing it current.
A: Thanks for your comment. You are correct that buying a house subject to an existing mortgage means the buyer takes the risk that the lender will pull the loan. At that time, the buyer would have to do a quick refinance of the property.
Given that lenders are extremely nervous about the market, the ability of a growing number of borrowers’ ability to repay these loans, and their concerns about the growing number of late pays and foreclosures, I’d think some lenders might jump on any opportunity to call a loan and force the borrower to repay the debt.
I’m getting a fair number of letters from readers asking about due on sale clauses. I’d welcome hearing from lenders who make these decisions and will publish future responses.
Published: Mar 24, 2007
Question… We have a home in town that we still owe just under $20K on of an initial $45K loan. We really want to sell and move to the country but our home is in need of some repairs to make it slaeable at a profit…it is an older home and needs some carpeting, bathroom updating, etc. We found the ideal property we have been looking for though the home needs some repairs (ceiling appears to have been wet and fallen though roof looks new…etc. The property turned out to be a foreclosed property. The finance company is the same as ours…Chase. They have an asking price…how solid is the asking price? More importantly, is there any chance, esp in today’s slow selling market that they might be interested in taking the (assumable??) loan on the property we want to buy and combining it with the loan we have on our current home since they are both financed thru Chase already? The asking price (or less if we could get away with a lower offer AND them allowing a mortgage combining loan) added to what we owe currently would be roughly equal to our original mortgage loan amount on our current home and rates are still pretty low so our payment should not be changed much. That would allow us to remain here until we can complete some repairs at the desired property and then move to the new property and make repairs here in order to put this home on the market or rent it in a time frame we can afford…
Sounds good but is it a realistic prospect???