Has anyone personally/directly (or had confirmation that someone they knew) had a bank call a note/mortgage due if title is transferred w/pymts?

Asked by Jim, Mon Apr 11, 2011

I get the disclaimers (seriously, I do): the bank COULD do that, at any moment, if they choose to, and the investor is screwed if so, but trying to get some firsthand stories of it occurring.

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Jim, ,
Thu Apr 14, 2011
Excellent: thanks to all for their answers!
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, ,
Mon Apr 11, 2011
Great recommendation from Shel-lee! I've never understood why inexperienced investors jumped into these wrap deals. My assumption is that an investment "guru" has pitched the idea without explaining the potential consequences.

Yes, it can work. However, both the previous owner is at risk (the person whose name remains on the loan) as is the new occupant.

Can you imagine making 3 years of payments on that note only to have the lender call the note and you can't refinance for some reason?
0 votes
Shel-lee Dav…, Agent, Rolling Hills Estates, CA
Mon Apr 11, 2011

The answer is YES! This happened to a friend of mine. I was able to help him out of the foreclosure by hooking him up with a hard money lender who refinanced his property. The kicker was, the interest rate on the loan he assumed and had been paying was almost twice the current mortgage interest rate (which means the bank was making a ton of money on this loan) and the property had equity, so the bank was fully secured in case he defaulted on the loan. So, caveat emptor, you take a risk when buying subject to existing financing with a due on sale clause.

If you decide to enter into this type of transaction, make sure you have an exit plan in case the lender calls the loan. Dare to Dream.

Shel-lee Davis, QSC®
Certified Distressed Property Expert – CDPE®
Short Sale & Foreclosure Resource – SFR®
Certified HAFA Specialist – CHS®
SSG Pro®
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
424-2HELP12 (424-243-5712)
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David Tansey, Agent, Houston, TX
Mon Apr 11, 2011
Most loans have an acceleration clause that prevent exactly what you describe. Your realtor should have advised you to check before selling the home.
Web Reference:  http://www.DaveRealty.com
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Sharon Smoot, Agent, Atlanta, GA
Mon Apr 11, 2011
Most mortgage loans have a due on sale clause which requires that the loan be paid in full when title is transferred from the owner/borrower to a third party. In my 15+ years as a real estate attorney, I heard of this happening only one time and their were some other factors which came into play (i.e. accusations of mortgage fraud).
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