Ami, Real Estate Pro in Calabasas, CA

as a loan broker, what if you can not buy back a loan that the bank ask you becouse of early default?

Asked by Ami, Calabasas, CA Mon Oct 20, 2008

We made a home loan to a person that was in default in the early stage of the payments and he stop making them. The bank ask us to buy the loan back which we can not do so .What can the bank do to us if we do not have the funds to do so?

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No disrespect to Mr. Minor, but trying to become judgment proof in the manner he suggested ("Put all rentals into LLC's and all liquid investments into family member's names and they can't get anything") could be considered fraud and likely only would compound your problems (at best, the transfers to LLCs or family members would be voidable). Hoping the lender goes into bankruptcy probably won't be of much help either as the BK trustee can and presumably will pursue repurchase claims against brokers such as yourself. E&O insurance, assuming you had it, is unlikely to help you for a variety of reasons -- but is probably your best bet for a way out. In any event, you probably need to talk to a bankruptcy attorney and/or an insurance coverage attorney who represents policyholders.
0 votes Thank Flag Link Sat Nov 1, 2008
Tough spot to be in, my former employer had it happen. In the end, they never paid the lender anything and the lender collapsed anyway and went out of business so they got lucky. What would probably happen is that the lender would probably sue for the difference in the amount that the loan was funded for and the property sold for at REO auction. If you don't want to go down the road of hiring attorneys and paying $10000 retainers to have them charge you $75 for answering your emails, then either represent yourself in court and lose or just don't show up and get a judgment against the business. It will take a very long time for them to come around and actually collect. If the judgment is against the broker or owner individually you would probably have some more problems based on whatever assets they own. Put all rentals into LLC's and all liquid investments into family member's names and they can't get anything. This is California, the wild litagious west.
0 votes Thank Flag Link Tue Oct 28, 2008
The lenders know that you don't have the money. I have never seen a lender as a broker to buy it back. I do hope you had E and O insurance.

I am a broker and know some things about this. Call me at 215-852-4469 and I can talk to you about it.
Web Reference: http://fredglick.com
0 votes Thank Flag Link Tue Oct 21, 2008
Daniel,

First thing you need to do is secure every record you have regarding the loan in default.

Second thing you will need is an attorney who specializes in broker-lender contract law. I can recommend one if you shoot me an e-mail.

This is a serious issue. I have heard through the Grapevine of at least three brokers sued into BK over repurchase demands. Hopefully, this was a full doc loan...
0 votes Thank Flag Link Mon Oct 20, 2008
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