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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] What happens if the seller files bankruptcy Posted by Gary on December 11, 2003 at 12:30 AM In Reply to: No kind of monitoring is going on at the public record depositories... posted by Ward-CA- on November 19, 2003 at 8:01 PM : : Question 1: : : ============ : : I've read about the "subject to" financing proposed by Conti and Finkel. : : While they mentioned techniques to avoid the lender accelerating the mortage by a buyer accidentally notifying them thru a change in the hazard/home insurance beneficiaries, the book I read did not address the issue of property tax payments. : : Most mortgage lenders take care of paying BOTH the hazard insurance and the property taxes. : : How exactly does the lender NOT find out about the new owner's name being on the tax bill? : : I am assuming, for this question, that the "subject to" buyer is going to actually take title and register this title, as I would want to get title insurance (which I assume you need to register the title change to get?). : : Question 2: : : ============= : : If I purchase thru a land sales contract, I would set myself up as the trustee to get myself as the mortgage contact person without being the actually mortgageee. Can being the trustee be my way of also getting my name onto the property tax as contact? Even then, once I have the seller transfer all land trust beneficiary rights to me, I would have to register the title in my name to get title insurance, right? : : Question 3: : : ============== : : Don't lenders monitor the public county title records of their mortgaged properties periodically, to ensure borrowers aren't selling "subject to"? : : Does the country tax collectors or country courthouses notify the lender when a title is transferred and/or when a new taxpayer is listed on the tax bill? : : : : Brian. : =?=?=?=?=?=?=?=?=?=?= : Brian, : #1. I haven't read any materials authored by Conti/Finkel. So I'm not familiar what they are expousing regarding sidestepping the due-on-sale clause, nor am I familiar with the devices they might be using to accomplish that hat trick. : It's not my experience that most lenders impound monthly payments for their borrower's annual property tax bill or their annual liability/hazard insurance premium. Yes, very low down lenders, such as those that make FHA/VA loans do, and loans requiring PMI probably do too, but that's probably it. : We adroitly sidestep this whole issue since we cause the original borrower's name to appear on title as the trustee of their new trust. For example, let's say an owner in default, named David Finkel, transfers the title of his defaulted property out of his name and into the name of the Finkel Trust. The vesting on the transfer deed at the county recorder's office would read as follows: : David Finkel, Trustee of the Finkel Trust, dated 11-19-03. : Then a copy of the recorded transfer deed would be sent to Finkel's lender informing them, as a matter of courtesy, that said transfer took place. Also included in the letter would be a copy of Finkel's notarized Certification of Trust for the lender's records. The same correspondence would go to Finkel's insurance company. : Thereafter a private, non-recorded sale of 100% of the Finkel Trust's beneficial interest would be sold to Ward Hanigan. Now I own the Finkel Trust, and by extension, control everything in the name of the Finkel Trust. Of course, we'd cure the delinquent payments on the defaulted loan and make the monthly payments on time thereafter. : About the time I bought Finkel's beneficial interest in his trust I'd have him deed his trusteeship to my LLC in the following fashion: : Grantor: David Finkel, Trustee of the Finkel Trust, dated 11-19-03 : Grantee: Financial Fitness, LLC, Successor Trustee of the Finkel Trust, dated 11-19-03 : #2. Finkel is the initial trustee of his trust and a copy of that Certification is sent to the lender (see details in answer to #1 above). : I'd forget about getting new title insurance. It's just not that necessary, so why fuss about it? : #3. You've got to be kidding about the lenders constantly monitoring the newly recorded documents down at the recorder's office. Here in San Diego County alone there are just over one million recordings per year!! Do you honestly think the lenders would take on such an immense undertaking? And since many lenders like Washington Mutual, Bank of America, Countrywide, Wells Fargo, et al make loans in many of the 4 thousand counties in the United States, they would spend more money on such a program than they would ever make off of their loans!! : #4. No, the county tax collectors aren't about to hire hundreds of additional employees just to go through their million newly recorded records each year to notify all the local, big name lenders of ownership changes. : : Hope this helps. One follow up question. Assuming you now control the trust, what happens if the original seller files bankruptcy or has tax liens/judgements against them? How does that impact your or your new buyer's interest in the property? Thanks. Gary Follow Ups: Post a Followup: Name : E-Mail : Subject : Comments: : : : Question 1: : : : ============ : : : I've read about the "subject to" financing proposed by Conti and Finkel. : : : While they mentioned techniques to avoid the lender accelerating the mortage by a buyer accidentally notifying them thru a change in the hazard/home insurance beneficiaries, the book I read did not address the issue of property tax payments. : : : Most mortgage lenders take care of paying BOTH the hazard insurance and the property taxes. : : : How exactly does the lender NOT find out about the new owner's name being on the tax bill? : : : I am assuming, for this question, that the "subject to" buyer is going to actually take title and register this title, as I would want to get title insurance (which I assume you need to register the title change to get?). : : : Question 2: : : : ============= : : : If I purchase thru a land sales contract, I would set myself up as the trustee to get myself as the mortgage contact person without being the actually mortgageee. Can being the trustee be my way of also getting my name onto the property tax as contact? Even then, once I have the seller transfer all land trust beneficiary rights to me, I would have to register the title in my name to get title insurance, right? : : : Question 3: : : : ============== : : : Don't lenders monitor the public county title records of their mortgaged properties periodically, to ensure borrowers aren't selling "subject to"? : : : Does the country tax collectors or country courthouses notify the lender when a title is transferred and/or when a new taxpayer is listed on the tax bill? : : : : : : Brian. : : =?=?=?=?=?=?=?=?=?=?= : : Brian, : : #1. I haven't read any materials authored by Conti/Finkel. So I'm not familiar what they are expousing regarding sidestepping the due-on-sale clause, nor am I familiar with the devices they might be using to accomplish that hat trick. : : It's not my experience that most lenders impound monthly payments for their borrower's annual property tax bill or their annual liability/hazard insurance premium. Yes, very low down lenders, such as those that make FHA/VA loans do, and loans requiring PMI probably do too, but that's probably it. : : We adroitly sidestep this whole issue since we cause the original borrower's name to appear on title as the trustee of their new trust. For example, let's say an owner in default, named David Finkel, transfers the title of his defaulted property out of his name and into the name of the Finkel Trust. The vesting on the transfer deed at the county recorder's office would read as follows: : : David Finkel, Trustee of the Finkel Trust, dated 11-19-03. : : Then a copy of the recorded transfer deed would be sent to Finkel's lender informing them, as a matter of courtesy, that said transfer took place. Also included in the letter would be a copy of Finkel's notarized Certification of Trust for the lender's records. The same correspondence would go to Finkel's insurance company. : : Thereafter a private, non-recorded sale of 100% of the Finkel Trust's beneficial interest would be sold to Ward Hanigan. Now I own the Finkel Trust, and by extension, control everything in the name of the Finkel Trust. Of course, we'd cure the delinquent payments on the defaulted loan and make the monthly payments on time thereafter. : : About the time I bought Finkel's beneficial interest in his trust I'd have him deed his trusteeship to my LLC in the following fashion: : : Grantor: David Finkel, Trustee of the Finkel Trust, dated 11-19-03 : : Grantee: Financial Fitness, LLC, Successor Trustee of the Finkel Trust, dated 11-19-03 : : #2. Finkel is the initial trustee of his trust and a copy of that Certification is sent to the lender (see details in answer to #1 above). : : I'd forget about getting new title insurance. It's just not that necessary, so why fuss about it? : : #3. You've got to be kidding about the lenders constantly monitoring the newly recorded documents down at the recorder's office. Here in San Diego County alone there are just over one million recordings per year!! Do you honestly think the lenders would take on such an immense undertaking? And since many lenders like Washington Mutual, Bank of America, Countrywide, Wells Fargo, et al make loans in many of the 4 thousand counties in the United States, they would spend more money on such a program than they would ever make off of their loans!! : : #4. No, the county tax collectors aren't about to hire hundreds of additional employees just to go through their million newly recorded records each year to notify all the local, big name lenders of ownership changes. : : : : Hope this helps. : One follow up question. Assuming you now control the trust, what happens if the original seller files bankruptcy or has tax liens/judgements against them? How does that impact your or your new buyer's interest in the property? : Thanks. : Gary Optional Link URL: Link Title: Optional Image URL: [ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] WWWAdmin 2.0a © 1997 Matt Wright and DBasics Software Company, All Rights Reserved

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