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#2114574 - 01/18/17 05:13 PM One guy as an NBFI
McGruff Offline
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McGruff
Joined: Feb 2004
Posts: 262
Texas
Bill and Betty Smith live in a home and a have an adjustable rate mortgage with a bank. Three years in, their rate adjusts. Bill has lost his job, and the local market has turned down. So they don’t have the income to support their payments anymore, and they don’t have enough value in the home to sell it for what they owe. A realtor is involved who is trying to sell the home on behalf of the Smiths, and help John Doe – who cannot qualify for traditional financing – to purchase it. The realtor calls THE GUY, and he comes in and purchases the property for what is owed on the existing note, getting the Smiths out of the house. Then he sells it to John Doe for more than that amount, and essentially becomes the bank to John Doe. THE GUY collects a monthly payment from John Doe, which is in excess of what is owed on the Smith’s original mortgage – which is still in place. THE GUY applies part of those proceeds toward making the monthly payment on the original note, and makes a profit on the difference. In addition, THE GUY holds the deed on a property that is appreciating in an improving market, and part of the loan documents with John Doe includes a covenant requiring him to refinance the note with a bank within either 2 or 3 years. When that refinance takes place, based on the appraised value of the house, THE GUY makes a profit on the difference between what is owed on the original note and the refinance amount.

Aaaannd.....Discuss. Where can I find some ammo to shut THE GUY down?

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#2114584 - 01/18/17 05:55 PM Re: One guy as an NBFI McGruff
RockChucker, CAMS Offline
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Joined: Jul 2013
Posts: 1,561
The Country
You should have an acceleration clause in your mortgage documents. I would be very very surprised if this circumstance does not give you reason to accelerate the mortgage and make the outstanding balance due.
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#2114628 - 01/18/17 08:24 PM Re: One guy as an NBFI McGruff
bcompliance Offline
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Joined: Sep 2014
Posts: 1,224
It appears as if THE GUY has assumed the mortgage. Many notes have a clause that RockChucker mentions in them that if the mortgage is assumed, the note can be called.
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#2114637 - 01/18/17 09:03 PM Re: One guy as an NBFI McGruff
Docs Offline
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Posts: 241
As noted above, you will need to read the documents (note and security instrument, and any riders) to see if they contain any due on sale and/or assumption rules and requirements.

Uniform covenant number 18 in the standard Fannie and Freddie security instrument would allow the lender to call the loan if they are not willing to approve the transfer of the property to THE GUY. That covenant is modified somewhat on Fannie/Freddie ARM programs by the ARM Rider, but it still gives the lender room to call the loan in such circumstances, subject to certain conditions.
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#2114641 - 01/18/17 09:19 PM Re: One guy as an NBFI McGruff
McGruff Offline
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McGruff
Joined: Feb 2004
Posts: 262
Texas
My bigger worry is who is buying the property from THE GUY? If the purchaser can't qualify for traditional financing, how can he afford to buy a property where the asking price almost has to be more it's current value? Who in their right mind would do that, and where is the money coming from?

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#2114642 - 01/18/17 09:24 PM Re: One guy as an NBFI McGruff
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 76,988
Galveston, TX
Sounds a lot like an "equity skimming" fraud scheme. If he bought the property and sold the property, how can the Smith's note and mortgage still be in place??

Examples of Equity Skimming Equity involves a home owner who has defaulted on their mortgage and whose property may be facing foreclosure. Another party, who is usually an investor, comes in and proposes to help the homeowner out by buying the home before it gets foreclosed. The investor may ask the homeowner to convey title to them as security on a new loan. The investor “promises” that they will return the property to them after everything has cleared. However, what usually happens is that the investor will get the title then refinance the property and take out all the equity. They may simply “skip out” or leave the situation, often physically leaving the town or county. The original homeowner is then left with a new foreclosure situation on their hands. In other examples, the new investor may keep the original homeowner as a tenant in the home. They may then eventually evict the original owner if the original owner does not pay and then gain access to title in that way. Here, the investor may charge much higher rent, forcing the original owner to go into more debt, and thus “skimming” off equity from the home. There are many other variations to these schemes. Many of them have to do with the way that the “investor” obtains title or in the way that they gain access to the home equity.
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#2114696 - 01/19/17 03:40 PM Re: One guy as an NBFI McGruff
NotDoneYet Offline
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NotDoneYet
Joined: Jul 2010
Posts: 482
PA
Sounds similar to something an ex-customer used to do. He is in prison.

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#2114700 - 01/19/17 03:46 PM Re: One guy as an NBFI McGruff
Skittles Offline
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Skittles
Joined: Sep 2002
Posts: 13,935
TN
I'm hoping you have BSA involved with this, too.
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