Newest Scam: Assignment of Mortgage Payment System
I have received several emails from confused loan originators and Realtors wondering if this “Assignment of Mortgage Payment” system is real or just another scam.
There will always be a get-rich-quick scheme and people willing to take your money to sell you a system. The people who are really making the money are the ones selling the system.
The idea behind an Assignment of Mortgage Payments is nothing more complicated than ABC. That’s right. A sells to C…and B collects a fee as the middleman. Except Homeowner A is still in title to the property and Homeowner A’s name is still on the Deed of Trust owed to the bank.
For a fee, B acts as a middleman and finds C who will “take over” the monthly payments. In the typical scenario C is a homebuyer who is unable to obtain a loan from a traditional bank or lender for various reasons such as poor credit or undocumented income. Homeowners considering selling using one of these systems might want to consider that a person with poor credit and undocumented income is an extremely high credit risk. Read: Assume Homebuyer C WILL default.
For homeowners considering this type of scenario, get out your deed of trust and note and READ the whole thing. In there, I will bet you’ll find something called a “due on sale” clause which pretty much means that if you sell the home your lender can call the note due immediately. The people behind the Assignment of Mortgage Payment System will tell you that this rarely happens and not to worry. That’s exactly what the subprime mortgage loan originators said to their clients, too: “don’t worry, we can refinance you out of this loan.” And that’s where these people come from….Subprimers went from there to predatory loan mods to being short sale negotiators to selling forensic loan audits to this. Next year it will be something else.
Predatory loan mod salesmen and predatory short sale negotiators also like to use phrases like “this is perfectly legal.” That’s the same thing the AMPS salesmen will say and a dead give-away that this is a scam. Loan originators and Realtors: Do NOT pay the $900 (and monthly fee) to buy into this system.
Is there a method of helping distressed homeowners and poor-credit homebuyers that’s legit? Yes, you could do lease-purchases and have a local attorney help draw up the paperwork. However, I don’t know why a poor credit homebuyer would want to buy a home that’s worth less than what is owed. With so many bank-owned REOs hitting the market and with FHA/USDA/VA guidelines still flexible, there is no reason to buy a home that’s worth more than what is owed unless you are unable to use the logical side of your brain due to being under the influence of a sociopathic salesman.
Another legitimate way of selling an underwater home to a homebuyer with less than perfect credit is to have the homebuyer go through a formal assumption with the lender’s loan servicing department. This can work with an FHA and also a VA loan (though I don’t recommend VA assumptions unless the new buyer is also a Veteran.) But again, why would a homebuyer want to buy a home where the mortgage is higher than the value? There is NO good reason for doing so unless you’re the middleman making a fee out of putting this deal together. With a lender approved assumption, typically there is no fee paid to a middleman and that’s why nobody will try and help sellers and buyers come together this way.
Avoid Assignment of Mortgage Payment System Scams. And realize that the people behind these scams are trying very hard to get their name at the top of the google search index by simply posting lots of articles with the word “scam” in them. In their article they try to explain why their system is not a scam.
Category: Ethics
“…trying very hard to get their name at the top of the google search index by simply posting lots of articles with the word ‘scam’ in them.”
You mean just like THIS ONE ?? Get the facts straight, Realtors are using this everywhere and it’s legal in all 50 States.
These kinds of commentaries & articles make me nauseous.
It’s always some ‘mortgage professional’ or (typically) a licensed agent who is quick to jump the gun and call a perfectly legit strategy a ‘scam’ or ‘illegal.’
Really? A scam? Perhaps it may be in some cases, where everything is not fully disclosed (such as the due-on-sale clause or the true value of the home), but in MY experience and everyone that I know, we fully disclose everything to all parties, so that they know everything that is involved.
The result? Yeah, we might lose a couple people here & there, but by & large, the majority of people that we HELP are excited by the prospect of getting their goals accomplished and selling or buying their home…
WHEN NO ONE ELSE could or would help them.
Including these so-called ‘professionals.’
That’s right – I mean, why would a Realtor help
a seller when there’s not enough equity in the house to cover their commission or closing costs, and the seller can’t afford to come out of pocket to pay them?
(Gasp!)
Why would a mortgage broker help a buyer to buy a house when they don’t have the credit or verifiable income and/or 20% downpayment required to buy a house… but can STILL definitely make the payments?
(Gasp!)
Let’s get real and see the truth.
People like the author of this article want to call something like this strategy a ‘scam’ to de-bunk it.
Why? Not to truly help or enlighten people, but because it potentially takes away from their commissions & fees that they make on mortgage origination!!
And I can see why their tiny minds might not understand the potential complexities of such a transaction… after all, it’s ‘creative real estate,’ so therefore, it ‘must be illegal,’ right?
Pathetic.
Want proof?
Ok…Here’s a sure-fire way to call them on their bullshit next time you hear something like that:
Just ask them to show you the LAW that states that it’s illegal.
They won’t be able to, so they’ll have to…
Shut the Front Door! (You can translate the real meaning of that)
Here’s another point for you:
Sure, there may be (and probably is) a clause buried deep within most mortgage notes originated after 1988 that says that the lender ‘has the right’ to call the loan due if the title should transfer names (I believe it’s paragraph or clause 17).
That clause exists because the greedy lenders saw how much money they were potentially losing in origination fees when notes were assumed or freely transferred a while ago, and they tried to close that loophole up by inserting this stupid clause.
HOWEVER, with several millions of homes in foreclosure these days, payments in severe default, banks not getting paid (I have NO sympathy for them whatsoever), and our economy still in shambles, do you REALLY, HONESTLY THINK THAT FOR ONE MICROSECOND that these banks would be THAT FUC*** STUPID TO CALL A LOAN DUE WHEN THEY’RE GETTING TIMELY PAYMENTS????
Shut the front door!
Now, I DO agree that IF the seller is savvy enough & insists that the buyer try to qualify to assume the note to buy the house thru the lender (and the buyer is stupid enough to do that), then go right ahead!
FINAL Note to Author:
Just be wary of calling something a ‘Scam.’
Were the subprime mortgages a ‘scam?’ Yeah.
But they were widely accepted & encouraged by agents & mortgage brokers all throughout the land.
And stop trying to condemn people who are looking for creative ways of doing things. Try to understand that there’s always ‘more than one way to skin a cat.’
Unfortunately, there ARE bad & stupid people out there that try to take advantage of people or mess things up for the rest of us by screwing it up.
That’s why we have lawyers & politicians! lol
Ok, end of rant. Thanks for reading & good luck!
-T
The author of this article is not a person who earns a commission on real estate transactions as either a Realtor or loan originator.
I am located in WA State.
We do have a pretty strict law called the Distressed Property Law.
http://apps.leg.wa.gov/rcw/default.aspx?cite=61.34
Hi E. Overn,
Please do post a link that visitors can read showing evidence that this firm has conducted the legal research….in all 50 states. I’m sure web visitors would like to read what you have to show us.
I am not a member of AMPS nor am I a Mortgage Professional(A person w/o conscious). I have be doing research on AMPS and I do not find it to be a scam. However, I do know this the people in this discussion who are calling the AMPS scammers are the ones who are part of the system who brought this real estate industry down. Thats all I will say:)
Hi Massood,
I work in the mortgage industry as an educator and come into contact with thousands of people every year. One of the classes I teach is Ethics. People in the mortgage industry do have a conscience and many were horrified at what was going on during the real estate bubble.
Many of the people who were in the mortgage industry just to make money left the industry after originating a loan became too difficult meaning, you had to really know what you were doing and not just be a salesman. Those folks are gone or they’re working at Quicken Loans or other radio-ad generated sweat shops.
Your comment shows how far the mortgage industry has to go to rebuild its reputation.
Thanks for stopping by.
Here is the legal opinion and other info with links that I found regarding the Amps program:
AMPS – Legal Opinion (taken from http://toroklaw.com/index-p.php?mod=show&id_pag=14)
Please click this link for the complete revised opinion letter: http://toroklaw.com/pdf/torok-law-revised-opinion-letter.pdf
Below you will also find the applicable provisions of the federal law, the federal regulations, HUD regulations and instructions.
Code of Federal Regulations Title 12: http://toroklaw.com/pdf/code-of-federal-regulations-title-12.pdf
US Code 12 US 13.1701j-3: http://toroklaw.com/pdf/us-code-12-us-121701j3.pdf
Part 3500 – Instructions for copmleting HUD 1: http://toroklaw.com/pdf/part-3500-instructions-for-completing-hud-1.pdf
Additonally, the entire text of the regulations for the Real Estate Settlement Procedures Act can be found at: http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&tpl=/ecfrbrowse/Title24/24cfr3500_main_02.tpl
And the complete text of the Administration of Insured Home Mortgages (4330.1) can be found on the HUD website at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh/4330.1
My mother in law has deeded her house over to me and I’m making her mortgage payments. I guess you will call that a scam as well? I’ve had a close look at this AMPS program, and all it is, is someone deeds their house to me and I make their payments, and everything is disclosed disclosed disclosed. It seems a far better alternative than the latest unethical foreclosure scams that we are all hearing about.
It just makes me sick when people like you, use all these scary words, such as scam, and some use the word cult etc etc., without proper knowledge of the situation, and which are said in a way to put a false fear into people. These people are losing their homes and are already paralyzed, not knowing what way to turn. How about we just leave them, and let them have the ATOMIC BOMB hit their credit score…. and let them get foreclosed on…. ANY alternative to a foreclosure is good for the homeowner. Realtors typically have a one track mind, and that is, that they stick to exactly what they were taught while learning to be a Realtor.
Realtors do transactions that investors ( like me) cannot do, on the other hand, myself as an investor, can do transactions that you cannot do. Education is key in understanding how anything works, obviously some people have not been educated on the subject of assigning of mortgage payments.
I understand and respect the point of view of the writer, but there comes a time when you have to look at the traditional means of doing business and just admit it’s not working. There comes a time when you must try a different solution because the problem in the housing industry is just getting worse.
I am not a member of AMPS but I’ve researched it, it seems logical, and I fail to see how it is a ‘scam’. The same banks that got us into this mess by loaning to everyone are the same banks keeping us in this mess by not loaning to anyone.
AMPS appears to be a reasonable and moral solution to the problems facing the industry. Bank’s stringent lending policies are making it difficult for distressed homeowners who cannot find a job and cannot afford their mortgage anymore to sell their houses, leading to more foreclosures. More foreclosures are dropping the housing prices, thus creating more distressed homeowners. Continuing this same process and hoping for a different outcome is insanity.
I fail to find any immoral behavior with the AMPS product or investors who utilize it. It seems to be helping people avoid foreclosure and helping further decrease prices.
I’ve found only a handful of people who are opposed to this strategy. One person, Duncan Weirman, is an Internet Marketer leeching on to the AMPS publicity by bashing it so he can sell his product. I actually find Duncan’s dirty marketing tactics more immoral than the perceived ‘scam’ he discusses when talking about AMPS. I guess Duncan’s okay with people losing their homes as long as he can sell a book about wholesaling.
In the end, both the mortgage industry and the real estate industry have got to think outside the box to correct the real estate problem. The government can’t fix it. Banks aren’t going to fix it. Conventional real estate transactions won’t fix it. Doing the same thing and waiting for the market to correct can’t fix the problem.
Instead of two tired, traditional, and closed minded industries desperately clinging on to a process that is no longer effective, and bashing every new idea that can solve problems so they can try to keep their stronghold on a dying industry, let’s try a new approach. Let’s have real estate investors, Realtors, and mortgage brokers work together to create a better product, like AMPS, that can help return this market to normalcy.
Once the market improves, then there is no need for AMPS and traditional real estate methods will work again.
Thanks!
Hi Lee,
Regarding fucking over the banks because they fucked with everyone else, how exactly does that translate into a “moral” solution? Please provide details.
Regarding the bank’s underwriting guidelines being too strict….Really? REALLY? Clearly you’re not in the mortgage lending industry where banks are still making 3.5% down FHA loans (and the entire downpayment can be a gift from a relative.) Further, VA loans still offer the opportunity for Veterans to buy a home with ZERO DOWN. USDA Loans in rural areas are another zero down option for folks who live in small, rural areas.
Back-end debt-to-income ratios can go as high as 50% which is horrifyingly high.
Lending standards are not strict. They’re just normalizing from the anything goes days of the bubble.
I’m all for new ideas, but let’s all work within the bounds of state and federal law, and let’s all work within the terms of the contract that the home seller has already agreed to.
Hi Paul,
“My mother in law has deeded her house over to me and I’m making her mortgage payments. I guess you will call that a scam as well?”
Oh boy are you going to learn a very painful lesson someday about not doing business with family members. That aside, why did you make her deed the house to you?
If you love her so much and want to help her, why not just make the payment for her???? Probably because you want something in return. So why not have her sell the house to you using a warranty deed and your own financing?
“ANY alternative to a foreclosure is good for the homeowner”
WRONG
Foreclosure is a natural part of this business cycle. Not everyone should have been given a loan and not everyone will be able to hang on to their home.
Alternatives to foreclosure that ignore the terms of the legal document the homeowner signed with the bank are not alternatives that I can support.
So do tell.
How much money are you going to make off your mother in law?
MF-
I don’t believe that selling a house keeping the existing financing in place is screwing over the banks at all. I think it’s providing a solution to the problems that both homesellers and banks are facing- foreclosures.
If you have a person that can’t afford their home any longer due to lack of income (lost employment, pay cut, new job pays less, death in family, divorce, etc…) or extra expenses (medical), they want to sell. However, by the time many people take action, they’ve wiped out their savings and can’t afford to pay commissions to sell traditionally.
If they can sell a their house to a person who is self-employed with a 620 credit score that can afford the house, then the homeowner avoids foreclosure. This is a win for the seller, the bank, and the subdivision that doesn’t see it’s value dwindle. Who’s getting screwed? Especially if the house is heading to foreclosure. It seems like a much better alternative.
Finally, regarding your ‘logic’ that getting loans is simple, then I guess the market is doing well, because loan rates are cheap and real estate is inexpensive. Obviously the traditional method is working. I guess the mortgage industry is just thriving then because it’s easy to give away loans, right? Explain why there are so many ex-mortgage brokers waiting tables now?
C’mon MF, open your eyes and stop being such a shill for the banking industry. It’s like you want to steer the Titantic into the Iceberg. If things keep going the way they are, housing values will continue to drop and more people who deserved to buy a house when they got their loans will lose it because the market value dropped so drastically.
Your complaint with AMPS is nothing about moral or ethics but everything to do with not wanting any competition for the traditional way of buying a home, which simply no longer works in today’s market place.
MF-
Regarding your smarmy little comment to Paul- how much money did you and other mortgage brokers make peddling bad mortgages to people who didn’t deserve them to create the economic fiasco that took place recently?
You glass house is wayyyy too thin to throw stones.
Oh, and when you said this: “Foreclosure is a natural part of this business cycle. Not everyone should have been given a loan and not everyone will be able to hang on to their home.” You forgot to add in the part about how all of these people should eat cake as well.
Only about 3-5% of the market were subprime loans, yet many more people have suffered through foreclosures. The tired elitist quote above fails to acknowledge the collateral damage that the banking industry caused on people who followed the rules. What if you lived in AZ, bought a house in 2005 properly, and then had to move to a different state 3 years later for a job, only to find your equity was cut in half. Was this person bad?
Good for you Paul on doing what’s necessary to take care of your family. Lord knows the banks who got us into this mess well do whatever they can to keep us in this mess.
Hey Lee, mf is not worth talking to. Anyone with anything between their ears realizes that she is exposing herself, the more she talks. I’m getting out of this conversation. I only like talking to intelligent people. Thanks Lee for helping expose her tactics in a very nice and proper way. I would love to meet you one day.
Cheers,
Paul
Hi Lee,
I am not a Realtor nor a loan originator. I am an educator and have been in the industry for over 25 years so yes, I do make money but not by selling homes or selling loans.
And please do share a link that proves subprime was only 3% of the market. Here’s where you can start your research:
http://research.stlouisfed.org/publications/review/06/01/ChomPennCross.pdf
The mortgage lending cycle that just ended was un-sustainable. Not everyone who was given a mortgage is going to be able to remain a homeowner. I am all for sustainable homeownership but that’s not what happened during the bubble.
Foreclosures are a NATURAL part of that business cycle. Letting people with marginal credit scores OR un-documented income take over those payments will only delay the eventual foreclosure.
Interesting that Paul wants out just when I ask him some really tough questions. Thanks for stopping by, Paul.
Hey Lee, I agree with you. If a homeowner wants to sell their home to another person because they can’t afford the payment, the homeowner ought sell the home.
If they’re upside down and can’t afford the selling costs, one option is to sell via the short sale process. HAFA, the Home Affordable Foreclosure Alternative is a great program for the homeowner to at least consider because the homeowner’s debt is fully forgiven by the lender shorted.
The reason why there are so many ex-mortgage brokers waiting tables is because the number of licensed mortgage broker/LOs was completely un-sustainable. Many came from other industries such as car sales, for the easy money and no-doc type loans. Many have left the industry because they have found it “too difficult” to put loans together because they actually have to do some WORK instead of just answering the phone, and closing the customer. Others have left because they were unable to pass the new comprehensive licensing exam.
I’m no banking industry shill. Go back and read the post again. Why not just let a homebuyer go through a FORMAL ASSUMPTION with the existing lender instead of trying to do this wrap-around process?
And why would a homebuyer want to make the payments on an UNDERWATER mortgage??? The risk of default on this type of transaction is very high, leaving the original homeowner once again with a looming foreclosure.
The only type of transaction where this will work is if there is equity in the property. And if there’s equity, the the home seller can just sell via traditional methods, transferring clear title to the new buyer using a warranty deed.
The only people who are going to make money off of AMPS are going to be the people selling this program to others. And I’m sure they will make lots of money before the regulators catch up and shut them down.
I’m just learning about AMPS as a member of a new investment group and I decided to research the matter further and came across this article. I understand the process and I love the creativity, and personally do not see anything wrong with it, but as an investor for a group, I want to steer away from anything that has the appearance of wrong-doing. I understand there are lawyers often involved in these transactions as well as sellers, buyers and “brokers” if you will and it does not appear that anyone is breaking the law, however the original homeowner is breaking the contract agreement by violating the “due on sale” clause with the lender. This alone is enough for me to steer clear as I do not want ANY record of inpropriety. I would like to know what real estate attorneys have to say.
Jillayne, you have to understand our frustration with anyone associated with the Banksters, who according to the Wall Street Journal, have created as many as 65 Million FRAUDULENT Mortgage Loans.
Also… it is NOT against ANY STATE OR FEDERAL Law to Rent, Lease or Seller Carry Finance regardless of the method, even without the lenders permission. It may be a violation of the Lenders DOS provisions, but it is NOT Illegal. There is no DOS Jail. Sure, the Lender can and may call the loan due and that needs to be fully disclosed.
AMPS is nothing new. It is nothing more than arranging a seller carry deal, plain and simple. These guys have just come up with a new way to market the same old sub-to stuff. I personally don’t care for the way the market it like it’s something new and yes I do believe they are going to get a lot of Sellers, Buyers and Investors in serious trouble. I guess we’ll all see.
Hi SmartREI, Yes we are all frustrated with the banksters. If we’ve learned anything…I for sure have learned that they will never stop doing this. The bankers do it over and over and over again, collect their paycheck and leave the mess for someone else to clean up. However, that doesn’t mean we can de-fraud them because now we are no better, right?
Well I am not an attorney so regarding what’s legal/illegal in all 50 states….well we should probably have someone with a law degree and licensed in all 50 states answer that question.
The Deed of Trust is a contract and by selling the home to someone else, a homeowner would be violating the terms of the contract. I think you and I would have a hard time finding any attorney who would recommend a homeowner do this.
Hi Bob,
Thanks for all the links. I read through the attorney opinion letter and it sounds like he’s speaking on behalf of the state of Texas.
His opinion letter would not be good in all 50 states and readers should NOT rely on that opinion letter for legal advice in their state. Sellers and buyers (and ppl wanting to “buy” into this system) need to hire their own attorneys for legal advice and NEVER rely on legal advice paid for by the person trying to sell you something.
You state: “The Deed of Trust is a contract and by selling the home to someone else, a homeowner would be violating the terms of the contract. I think you and I would have a hard time finding any attorney who would recommend a homeowner do this.”
-A hard time finding an attorney recommending to violate a contract? Bankruptcy attorneys help people break legal contracts all of the time! And they are not hard to find.
“For homeowners considering this type of scenario, get out your deed of trust and note and READ the whole thing. In there, I will bet you’ll find something called a “due on sale” clause which pretty much means that if you sell the home your lender can call the note due immediately.”
-So you think a lender is going to call an upside down mortgage?
“…However, I don’t know why a poor credit homebuyer would want to buy a home that’s worth less than what is owed. With so many bank-owned REOs hitting the market and with FHA/USDA/VA guidelines still flexible, there is no reason to buy a home that’s worth more than what is owed unless you are unable to use the logical side of your brain due to being under the influence of a sociopathic salesman.
-You don’t understand why a poor credit homebuyer would want to buy a home that’s worth less than what is owed? For the same reason people go to Buy-here Pay-here car lots to buy an over priced car. Because they can’t buy one anywhere else! And you think a poor credit homebuyer can really qualify for a bank owned REO? If they could, they wouldn’t be considering any other options.
-Sociopathic Salesman? You mean like predatory lenders?
Your comments seem condescending and somewhat derogatory, leading to similar blowback, like my lender remark and others above. I am not affiliated with the product mentioned here, just studying the ideas for value in this market, for solutions, and looking for opinions on both sides. In that light, thanks for your comments, although as noted, some seem off base. I agree with you that there are dangers involved, and risks are high, but so is every purchase and sale in this economy, with prices unstable, and foreclosures still high in many parts of the country. A lease-purchase or other creative structure may be the only way to structure a deal for an un-sellable house to an un-borrowable buyer, of course each party needs to do their due diligence, hire their own attorney, etc. But there are not allot of options out there right now for people wanting to sell who are upside down on their mortgages, or for people coming out of foreclosure, bankruptcy, or starting over and wanting to buy in this economy. With a glut of inventory, high rates of foreclosure, it will be a while before the real estate market comes back. It will be those brokers and investors who understand creative structures, and those who are willing to take the risk on upside down properties, REO’s, rehabs, etc. that will help stabilize this market slump.
JC? Oh please. You think that “creative structures” like this assignment of mortgage payment systems scam is going to pull the economy out of the slump?
Aha ha ha ha ha ha. You are cracking me up.
So let me get this straight. Let’s let borrowers with reeeallly low credit scores, borrowers who would not be able to qualify for a mortgage from…a
bank
credit union
consumer finance company
or credit union
because they’re a high risk, buy a for-sale-by-owner home, presumably with very little money down, with an existing deed of trust owed to a bank?
And you think this is a good idea? Gee, didn’t we already try loaning mortgage money to high risk borrowers? I believe we did. It was called SUBPRIME lending. How’d that work out?
I wonder how many of these new scammy deals are going to perform and how many will default? Now the homeowner still owes the mortgage payment even though they’ve started a new life somewhere else.
If anything this scam keeps defaults, foreclosures, and REOs elevated for that many more years.
Homebuyers with poor credit, just coming out of bankruptcy or foreclosure should do only one thing: RENT.
There is no shame in renting. None at all. Not everyone is meant to be a homeowner. People who have fallen on hard times need to re-establish their credit record by making ontime payments for at least 18-24 months before they even consider re-entering the housing market as a buyer. By that time, they will be able to qualify for a low down FHA loan.
Wow very eye opening! The article & all the comments have my head spinning. I am a Realtor in this economy struggling to keep my head above water. I can’t understand why a less than perfect homebuyer would want to buy into an upside down property. Nor do I understand why a seller would partake in something so risky either. I guess if it has worked & will work for some then more power to them. I feel no sympathy for the banks & commend people who are trying to creatively save their homes. Personally, I had to rent my house to save it while going through a lengthy expensive divorce. The rent just about covers our 1st & 2nd loans. I have stepped down to a modest rent myself until I can get back on my feet. I just know my lender was unwilling to help us with modification or refinancing.
Wow this girl is a real ass clown. Clean the turd from between your ears idiot. People like you who are too damn lazy to get out there and do what we do every day to help people are the ones bitching. Get off your damn computer and do something productive you ass.
Hi Bob,
I have worked full time in this industry helping people for over 25 years. Thanks for stopping by and providing a demonstration of your character for our readers.
Jillayne Schlicke
the fact is there is no scam or ethics issue.
the fact is fulll discosure is what makes AMPS A reasonabe outet.
The fact is it is nothing more then a option with a dollar buy out when compliance with the the option agreement is met.thats when the name on the deed will change, and a crafty realestate contract will protect all.
Why buy a home that is upside down?????
Answer is simple, the buyer does not quaify but has the abiity to pay.
If the loan has a great rate and is 6 to 10 years along the mathmatical fact is the buyer will pay less then if they were to aquire a 30 year note with a marginal rate
as long as the home in not foolishy upside down.
Why is that? just run an amo scedule you will see the loan is front looaded with intrest ..HELLO..,WHICH MEANS ON A PAYMENT OF 1000 DOLLARS IT WAS ALL INTREST UNTI AROUND YEARS 6 TO 10 NOW WE ARE PAYING ALMOST ALL PRINCIPLE ……….SURPRISE JUST SAVED THOUSANDS!!!
Evry tranaction is different as the math spins out, how ever if the home HAS A current value of 250,000.00 and you pay 300.000.00 buyer wins all day long in regards to what they will pay overall, or should I say what they won,y pay , and the seller saves credit,no forcosure, no shortfall obigation to the lender and one less toxic loan ,
How do you like me so far??? PROVE ME WRONG!!! TIM HARRINGTON 561 929 8288 EXCUSE SPELLING ,I AM PISSED
WITH IGNORANCE THAT IS DEMONSTRATED BY NO NOTHING FOOLS.
So how does a buyer that “doesn’t qualify” have the ability to pay?
Maybe because the buyer writes off a lot of expenses so he tells the IRS he makes way less than what he really makes.
Maybe because the buyer has a poor credit history or lack of job stability or no down payment.
ANY of these reasons make this a bad decision for the home seller who needs to be able to sell the property and move on and not have this decision to come back and haunt them.
There is absolutely no reason for a home buyer to purchase a home for more than what it is worth when there are thousands of foreclosed REO homes that can be purchased for way less than the underwater home and at interest rates that are at historic lows.
If a person “doesn’t qualify” using traditional lending standards, that person needs to RENT and avoid scams like this one.
JS you choose to ignore the valid point that Tim made in the last post,mortgages are front loaded with interest, after about seven years or so into a thirty year mortgage, you then are making mostly principal payments, someone who assumes a mortgage at this point will be saving tens of thousands of dollars in interest, reducing the balance much more rapidily thus enabaling the buyer to have abetter financial future of saving, investing, planning for college educations, etc.
Allen none of that matters if the person making the payments has poor credit. The chance of default is sky high for this home seller. Now what?
Great post it was needed I will be able to relay the information too my friends they will love your artical.I will try to sell my property through any legal means available. Thank You
I am sick of hearing the insults from investors. They would like to see us return to the wild wild west days of the past in real estate. Getting rid of all regulations in banking and real estate laws is not the answer. And for the record the Realtors do not cling to past methods. Where you seek quick fix and deals that fly under the radar, we work to initiate changes legally. Thank God we have professionals who adhere to a code of ethics that protects the buyers and sellers. I have been a real estate professional for 22 years and I know a real estate scam or even the potential for scam when I smell one. Keep up the good work Jillaine.
Elaine Elliott
Elaine, as always, the people “getting rich quick” are the people who are selling the books and tapes and systems.
To the author:
I had an opportunity to read a majority the research for the subprime. However, the research concluded that subprime loans have increased substantially, but it makes no mention of how many subprimes are presently still in the market ; nor does it give estimate of what happened between 2004-2011.
How many of the people, who received a subprime or those who could not afford to pay their loans defaulted and went into short sale or foreclosure? From the original amount of Subprimes how many of these people have remained in the market since the 2007/2008 real estate crash that are NOT currently in short sale, delinquent or have been served with a notice of foreclosure? How many for lack of better words exited the market due to a default/loss of their home due to ARM increasing dramatically or their inability to pay?
Moreover, how many “responsible” loanees exist in the market who have been current on all their payments thru housing crash and now can not sell their homes unless they sell @ and more often below market value? Is it their fault that their equity, that they’ve built up over 5-10 years has been virtually erased. What if they were to sell their homes they “may” or “might” be able to sell their homes without take a large hit on whatever equity they have built up and after realtor/closing costs have to cover the difference in the remaining principle ….What do you offer them?
Note: it is very very difficult to refinance unless you submitted X papers by March/April of 2010 to qualify for mortgage modification or for that matter refinance. However, the refinance is only possible if after the property is appraised is high enough value for that refinance to take place and with the market conditions is highly UNLIKELY….unless you own an apartment/house in Manhattan or San Francisco are two places in the country where prices have rebounded. Although, this primarily has to do with tech companies setting up shop in San Fran and NYC as it’s an extremely sought after place to live and there is NOT any place to build. Manhattan doesn’t even have alleys.
Now, if you say the Obama refinance program will pass congress ……I will laugh as the republicans will attach some rider to kill the bill. So im not too concerned about such a prospect, till after the presidential election.
What then do you offer “responsible” mortgage holders who want to exit their property, who ARE NOT under water , have NOT missed a payment, and their mortgages according to their lender/bank are consider performing assets as relief?
Let me give you an example:
My father has credit of 760 and has an income of 265k a year. However, he went thru a divorce and has pay alimony to “unique” woman. His credit score went down as did his disposable income. He can’t refinance cause there’s not enough equity in the house and the house isn’t worth as much as when purchased. He doesn’t qualify for the loan modification program either as he missed the deadline.
Here are the facts:
Home purchased for 550k
Equity in the home : 80k
Current Mortgage Payment: 4200/month
Current Market Value : 495k
Current Out Standing Principle: 462k
Never missed a payment since 1983, cause his car broke down and couldnt make
it to the bank.
Reasonable sell value for the home “as is” around 470-475k.
@ 475k the realtor commission is $28.5k = $446.5k – 5k closing= 441.5k.
This means my father would have to cover the difference between the principle and costs associated with selling the house. His equity would be completely be wiped out and he would still have to pay an additional 20k to cover the spread. An MA would allow him to exit the property without having to pay any of those fees and at the same time save him $59,000 (taxes included) per year.
Although, at last minute he decided to keep his home and said he’ll just have to hang in there for the next 5-10 years. A majority of people can NOT do this.
Why should someone like my father if he were to lose his (g-d forbid) be screwed or put into horrible position if he was responsible from day 1? The words of Friedman, “there’s always a winner and there’s always a lose (absolute gains)”
Your argument is based primarily in ethics or what “ought be” the norm or “should be ” conducted as fair game. If that were the case Fannie and Freddie by middle of 2011 “ought to” have been dissolve, but due to their corporate culture / massive fraud as how they were hedged and use arbitration to mitagate those risks is apprehensible. Don’t worry Uncle Sam will give them a pass….even though they increased their systemic risk expontentially.
Another example:
What about CDS or CDOs , dervitives used and traded in completely secret way, by very limited number of market makers putting the whole financial system at risk if things go wrong? ??? It “ought to” be illegal but till congress brings down the hammer this is still kosher.
More examples:
The Fed is loaning money to banks at near 0% interest…..0.25% to be exact. The banks then turn around and lend that same money back to Uncle Sam for 3.0-3.5% interest and use collaterlized bundle debt from toxic assets/ subprimes . Thus, if interest rates go up the real estate market would experience a crash that would dwarf the 2007/2008 crash. WHy? Cause the to cover the margin requirement they would have to unload these mortgage back security bundles at massive discounted rates to in order to meet capital requirements.
…….yet this legal and is accepted as fair game.
Banks/lenders did not learn a thing from the collapse, only that they had to become more clever and hold over main street that if they don’t allow them to be more flexible with rules …the world will crash.
Now lets bring it all together. Likely hood of mortgage collapse appears much higher than a large number of soon to be deliquent or potentially non-performing assets (hurts banks), and hurting the system of the whole utilizing MA/AMPS/MAPS system is far less likely then squeeze on banks/lenders if market conditions were to change slightly against them.
note: this doesn’t include turmoil in europe surrounding the PIGS, Arab Spring, Iran or anything else. All of these factors are directly tied to the banks which is tied to the world. There are great many things that “ought to be”, that aren’t. But till there is class action or massive civil suit things will continue as they did yesterday.
Your article is based on ethics and how potentially buyers/sellers “could” be put in really bad situation. However, if you consider the position they are in before they enter the arrangement the situation is rather bleak/dire and the most powerful trait of human is self preservation. Anything is better then death and foreclosure/short sale is about as close as it gets to death. The US system runs on finance and if you can’t get any…cause your credit score went to shit
….YOU ARE DEAD.
One last thing, I promise.
There were several facts/figures/numbers/research i could not find surrounding ARM/subprime. If you could please provide me several links so that I may do my due diligence I’d a greatly appreciate it.
Good Night,
Mike
Hi Mike,
Two wrongs don’t make a right. Just because the financial system offered subprime loans and made a profit doesn’t mean that now a homeowner ought to use ONLY that reason alone for choosing an “assignment of mortgage payment” system to screw the bank.
Sorry, I can’t support that logic. Nice try, though.
At the beginning of your very long comment you say that you’ve read a majority of the research on subprime but…yet…you are asking for my help in showing you numbers that are easily available online.
I hope readers can see through Mike’s assertions.
I don’t go along with the personal attacks, but disagree also with author (BTW, I believe this is also called a ‘subject to’ transaction). Example I have: Homeowner FSBO, with some equity, wants to move out of state; I meet and recommend they utilize a realtor to sell (it was their best option). A year later they call me back- had plenty of people hoping for owner finance (they do not want to do), but no good offers. I am take title and agree to make payments (full dis with ‘due on sale’, attorney closing, etc); Note will state if I am 31 days late they can take back ownership; also gave them option to escrow payments with atty.
I find someone that for whatever reason will not qualify for loan- before we settle I meet with them and a mortgage broker to develop a plan to get them qualified, so we all understand the time frames, and I be sure I keep all my records correctly to show payment history, down payment amount, etc. I also at my cost have termite letter and inspection performed.
I have now provided a legal and ethical service to two parties who otherwise would not have been able to meet their home goals.
LJS,
A homeowner with equity ought be able to sell their house using traditional methods, either via a licensed Realtor or using a FSBO website.
A homeowner who wants to take back the paper and hold the note has a wide variety of home buyers to choose from who are qualified to repay the loan.
Why would a homeowner choose to sell/hold the note, to a buyer who is unable to qualify for traditional financing?
Right there, the homeowner is taking a tremendous risk that the likelihood of default by these buyers is very high. Contrary to popular belief underwriting guidelines for FHA lending are still way, way too loose. Someone who can’t qualify for a mortgage with a bank, broker, or lender, ought continue to be a renter until they have:
1) job stability or stable, verifiable income.
2) decent credit
3) down payment. And there are plenty of traditional loans avail for ppl with no downpayment. There are state bond programs, USDA, and FHA loan downpayment can all be in the form of a gift from a blood relative.
Why would a seller DO this? Why risk that the buyer will default? Why not just sell, especially if there’s equity?
Maybe because there IS NO equity. And the seller thinks the home is worth way more. In that case, the seller should do a short sale and transfer title via a warranty deed to a qualified buyer using traditional financing.
The only people making money off this scam are the people SELLING the system.
I agree with you on ‘selling’ the system, it’s not that difficult or complicated, and a good RE attorney could teach someone in about an hour. To answer your question:
Why would a homeowner choose to sell/hold the note, to a buyer who is unable to qualify for traditional financing? I am the one who is taking ownership, and will take the ‘contract for deed’ risk. Again, before I do take that risk we all must sit down with the mortgage broker, and if they are too big of a risk, I will pass. There’s a lot of good people out there who got stuck and went through hard times, but are not quite at the point to qualify for a home loan, but will be able to in the next 3-12 months. I am willing to take that risk for those people, and do require a down payment, which I keep.
There is equity in the home, and the purchase price I have agreed to buy and to sell will appraise to meet the requirements.
If the buyer defaults, I will be required to make the payments and perform a foreclosure. Ultimately, the current homeowner I take ownership from gets out from another mortgage payment, maintenance, upkeep, managing from out of state, etc.
LJS,
Why would a home buyer need/want a middle man and why would they want to pay your fee?
Why couldn’t a non-qualified home buyer just find homeowners direct instead of paying your fee?
Again, I assert that if a person “isn’t ready to buy” for another 3-12 months, then the very best course of action may be for that person to wait 3-12 months to buy. Why the rush?
And what are the terms of the contract? Interest rate, downpayment, balloon?
MF,
The homebuyer isn’t paying a fee, they are purchasing the home from me since I have title. I have agreed to purchase the home from original seller for a set price delayed until I sell the home, and have a mark-up above that price to my buyer (around $5k- still has to appraise).
The non-qualified buyer certainly has the option to find a ‘owner financed’ home; however, in this situation they (the owners) did not want to do that. I’m less of a risk than someone who does not qualify for a loan, with the ‘stops’ I offer to put in place with the revert if I don’t make payments or escrow account. But to your point, if I were a (insert own adjective here), I could cause a headache to the original homeowner. But let’s look at worse case; 1) Due on Sale clause comes up- first off, chances are the new buyers have closed by the time bank finds out ownership has changed, but if not, I would revert ownership back immediately. 2) I don’t make the mortgage payments- Promissory Note states if I am 31 days late they get ownership back, and they are kind of back where they started.
As far as someone ‘isn’t ready to buy’, that’s the banks or lenders guidelines (how well has that been working?), and I believe at looking at the individual. Also, people who once were homeowners have no desire to remain tenants, and are often motivated to do what’s necessary to go back to homeownership- also part of the reason we sit down with a lender to put together a plan.
Terms are actually backed into- if mortgage and P&I are say $800, I’ll use something like $950 to allow me some extra to put away if they don’t close and move out to continue to cover the mortgage payments until I can find another buyer.
My husband and I are considering a mortgage assignment. We have been debating back and forth and trying to research as much as possible. Obviously it depends on who writes the information. Our situation is we built our home and have lived in it 4 years. My husband’s job is transferring us from Texas to Las Vegas and we are moving June 10th so we have little time to sell. Our house has been on the market since right before Easter. We are asking much lower than the house appraises for and we are about middle priced based on comparables. We have had no calls to see the house. Are we to wait till we have to move (we have already purchased a house in Vegas we close on June 15th) and default on a loan because we can’t pay 2 mortgages? This housing situation (crash) is completely caused by the greed of mortgage companies/banks. They loaned to people who couldn’t pay out of greed and they charge exhorbitant interest. Yes I understand rates have come down but when you buy a house for say $250,000 with interest if you pay the house off it’s like $750,000 and the house is not worth that so it’s a rip off. As far as real estate agents they are greedy as well. We tried to go through an agent but she wanted $16,000 in fees to sell it and we have no money to bring to closing and are only trying to get what we owe on the house so we were forced to go with a flat fee broker for $995 who has done nothing for us except put it on MLS and give us a real estate sign and lock box (will also do contracts if we sell). Sellers are forced to do the assignment of mortage or ruin their own credit and buyers are forced to do it as well because banks after having screwed everyone over NOW decides to become picky on who they lend to and asking for outlandish down payments. Not everyone especially in this economy (most people) have 20% to put down on a house. I think the government was very wrong to bail the banks out. Why should we trust banks when they can’t even handle their own money????
Wow, reasonable adults with ethics abounding from all. I have been, in my ignorance, taken advantage of by a lender, Been through foreclosure, rebuilt with the knowledge and experienced gained and through it all realized that an unworthy credit buyer can perform after a default. With an AMP I was able to purchase a terrific home and in short order will be able to refinance if needed.
Frankly, the original homeowner ( note bearer) has no desire for me to refi as their credit continues to build with every payment.
Funny, it didn’t dawn on me that I would incumber massive interest payments through refinancing a new mortgage. I guess it was worth moving through the rhetoric for that one nugget.
In the end, it is working for me and was quick, easy and painless for all involved. I would recommend it to anyone who needs to sell quick, buy easy and after I turn my first deal for one of my friends I’ll post you on how profitable it is as well.
Best regards all, James