I NEED YOUR HELP ON OWNER FINACE CONTRACTS...

Hi Luiz,
You have one of two choices:

You can try and do a short sale with the bank but would need to negotiate with the bank. (read Deans book and reference the short sales paragraphs.)
(This would be the preferred deal as your monthly payments will most probably turn out to be less than the current monthly payment.)

Or do as your landlord proposed. This is called a "subject to". Again read Deans book. Also the title must be deeded to you immediately. Payments of the mortgage must go through an escrow account for your safety. If paid directly to owner, who says that the owner will pay the bank. (This is what caused the problems in the first place.)

It is not the promissory note, but the title deed that the owner has to transfer to you. Since the loan is in arrears any title change could invoke the "due on sales clause" in the owners mortgage contract.

For homesteading, the title would have to be in your name. To deduct any mortgage interest payments, the note holder (the owner as he would be financing the deal technically) would have to complete a 1098 Mortgage Interest payment at the end of each year.

The owner must add you to the insurance policy so that you have the right to discuss insurance. Also the address for all mail must also be changed to the property address. The owner must provide you with a power of attorney to discuss with the bank any issues relating to the mortgage.

What would be the benefit for the owner in this deal?

I have a deed of Trust and promissory note that I could send you. You will have to add an addition/change the payment clause that the monthly mortgage amount is to be paid into an escrow account and that the mortgage, insurance and taxes will be paid from that account.

Drop me a Private Mail with your email address and I'll send you the two documents. Also have a real estate attorney review the documents. No two deals are the same.

Best regards,

Fanbot

i have a few questions...
I am going with option 2 "subject to"

remember i am new at this lol so when you say "It is not the promissory note, but the title deed that the owner has to transfer to you. Since the loan is in arrears any title change could invoke the "due on sales clause" in the owners mortgage contract."

what does that mean?? I have read the book and still do however it is not DETAILED as far as to, where to go, or who to talk to, or what to write in the contracts etc. how and who do we call to transfer the title deed? or is that some sort of contract? and if he does that will i have rights to Homestead the house?
and about the 1098 form that needs to be filled up every year does that go in the contract also as some sort of seller's dues?

the benifit for the owner would be that he will save part of his credit, you see i have been at this house for 9 months now and i am on a contract, i have never missed a beat as far as payments go, and yet he chose not to pay the bank with the money i was giving him for rent, the funny thing is that i had previously about 3 and 1/2 months ago proposed to him to do this and he declined and now he is in a binder and i am the only one willing to come to the rescue,LOL. he got it for a great price and the house is worth alot more than what he payed, he lost 3 properties in Texas they were jst land but i guess this was one of the reasons he did not qualify for the loan mod.

oh by the way Fanbot thank you soooooooooooooooo much for your input

Hu Luiz,

In most mortgage contracts (99.9%) there is an article that if the title is no longer in the name of the borrower, they have the right to call the mortgage due immediately.

By Robin Paul
Due-on-Sale-Clause - A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

One trend in the mortgage industry has been the virtual disappearance of assumable mortgages. This is unfortunate for homebuyers, since an assumable mortgage allows them to retain a below-market interest rate and avoid many closing costs, such as a credit check and appraisal. Except for certain FHA and VA loans, almost all mortgages now contain a �due-on-sale� clause which require that the mortgage be paid if there is a change in ownership.

Typical �due-on-sale� language states that, �the Lender may, at its option, declare immediately due and payable all sums secured by the Mortgage upon the sale or transfer, without the Lender�s prior written consent, of all or any part of the Real Property, or any interest in the Real Property.� A reading of the language shows that the term, �due-on-sale� is misleading. In fact, the mortgage may be called in if there is any transfer of any interest in the real estate, and not just a sale of the property.

Some examples may show how far reaching the �due-on-sale� clause can be. The most obvious example is a land contract, also known as a Contract for Deed. Since a Contract for Deed passes equitable title to a potential buyer, such a contract is a violation of the �due-on-sale" clause, even though the seller retains legal title. This entitles the Lender to call in their mortgage and demand payment in full.

It is possible that even a long term Lease will allow the Lender to accelerate their mortgage, especially if the Lease contains an option to purchase. There is some case law indicating that any lease longer than three years will trigger the �due-on-sale� clause. But any Lease that contains an option to purchase will be sufficient to call in the loan if it contains an option to purchase the property, regardless of the length of the Lease.

For tax and probate purposes, some people transfer their property into a Land Trust, also know as a Living Trust. These Trusts do not trigger the �due-on-sale� clause, if the current owners are also the sole beneficiaries of the trust. However, if you transfer your home into a Land Trust with your children as beneficiaries, the Lender may call in the loan. Also, the exemption for Land Trust only applies to owner-occupied homes, and no investment property.

What if one spouse signs a Quit Claim Deed to remove their name from the Deed as the result of a divorce settlement? This is certainly a transfer in ownership. However, federal law prevents the Lender from demanding immediate repayment of their loan simply because two joint co-signors get a divorce. However, the spouse who signs the Quit Claim Deed still remains liable on the Mortgage, even though their name is no longer on the Deed.

Lenders are entitled to know to whom they are loaning money, and to set terms and conditions. Moreover, the �due-on-sale� clause is now required by various federal agencies. While such a clause may hinder some real estate deals, they makes solid business sense.

Basically the due on sale clause is a statement within the deed of trust or mortgage depending of the state you reside that says that if the the person who takes out the mortgage decides to sell the house then the mortgage or deed of trust given for collateral has to be paid in full. Note the due on sale clause is rarely called into play when transfering title or ownership by mortgage companies.

Due On Sale Clause is on almost every mortgage note.

According to Title 12 of the US Code 1701-j-3, a federally enacted law (the Garn-St. Germain Act, aka: the Federal Depository Regulations Institutions Act of 1982), there is no due-on-sale violation when a property is placed into a legitimate inter-vivos trust by a borrower who is a natural person, so long as the borrower is, and remains, a beneficiary of the trust; so long as the trust is revocable and does not confer occupancy rights to another

Luiz,

Also read the following information. Good advice by William Bronchick, JD

http://www.creonline.com/articles/art-071.html

Luiz,

Also check out the site by John T Reed.

http://www.johntreed.com/dueonsale.html

Hi Luiz,

Some additional reading from William.

http://www.reiclub.com/articles/due-on-sale-clause-2