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Author Topic: 80/20 loan  (Read 23481 times)

Offline Infowell

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Re:80/20 loan
« Reply #15 on: April 01, 2006, 09:43:08 pm »
I'm sorry...I just gotta ask...are some of you guyz drinking heavily before you sit down to write? Are you typing with your nose?

I can't understand some of you. Spelling, sentence structure, basic comprehension of the English language seems to have flown right out the window here.

How can you expect to be taken seriously, when you can't express yourselves in writing?

And to think...Scalder claims Real Estate Agents aren't edumacated. Woh Sidiculour!!!

-Infowell
Reality is for those with no imagination

Offline christopher w

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Re:80/20 loan
« Reply #16 on: April 02, 2006, 05:33:56 pm »
Info,

I know I probably live in a glass house and should keep my mouth shut but... for someone who is complaining about grammer you seem to be have no problem throwing commas around like they grow on trees.  Chill out and lighten up.
Christopher W
C-214.923.5781

Offline Infowell

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Re:80/20 loan
« Reply #17 on: April 02, 2006, 06:35:39 pm »
"... for someone who is complaining about grammer (glass house) you seem to be have no problem throwing commas around like they grow on trees."

C'mon Christopher...lighten up yourself! I think it's both funny, and ironic that someone with a third grade writing level is giving advice on an investment message board. Especially when they attack another industry as being "uneducated."

It's just hilarious!!! We gotta be able to poke fun @ that...and loan officers!!!  ;D

-Infowell
« Last Edit: April 11, 2006, 02:49:45 pm by Infowell »
Reality is for those with no imagination

Offline christopher w

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Re:80/20 loan
« Reply #18 on: April 03, 2006, 09:02:02 am »
Infowell,

Why do you think I prefaced my statement with the glass houses comment. I hear ya though. If we can't laugh at ourselves who can we laugh at.  ;D
Christopher W
C-214.923.5781

Offline 4EEM

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Re:80/20 loan
« Reply #19 on: April 03, 2006, 11:02:13 am »
If we can't laugh at ourselves who can we laugh at.  ;D

...real estate agents. :hammerhead:
Patrick S. Lawson
Highland Lending, Inc.
Phone  (407) 877-0093
Fax      (866) 476-1133

Offline christopher w

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Re:80/20 loan
« Reply #20 on: April 03, 2006, 12:29:56 pm »
ouch...true, but ouch.
Christopher W
C-214.923.5781

Offline Lendinghand

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Re:80/20 loan
« Reply #21 on: April 06, 2006, 08:35:22 pm »
Wow,

I'm going to have to disagree with those of you who think this is fraud and here's why:

First, let's keep in mind that a seller second is just that... a seller second.  They are in no connection (in this case)with the first lien holder... and when the owner chooses to pay this off, it is up to them not the 1rst lien holder.

Second, to make an agreement with a buyer to allow the terms of a seller second to expire after a period of time whether it is one day, 6 months or a year is a seperate agreement and is considered to be between the buyer and seller...  a contract which is known to be considered "legal" by any terms does not have to be conveyed to the lender of the first lien holder unless requested or stipulated... in which case, I would find another loan officer and lender...

I have closed many a deals where the seller and buyer have agreed on a "forgivable" seller second and the 1rst lien holder/lender never asked to see there seperate contract, because it was not an issue.  

Of course, the title company needs to record the agreement for there purposes... but the first lien holder doesn't or shouldn't even really care.

The legality of the issue lies in the contracts... not whether the lender will allow a forgivable seller second or not..  The lender does not make laws...  and should not be advising loan fraud as such...  They are in the business to approve loans... that's it.. Underwriters are underwiters, Account Executives are Account Executives and Attorneys are Attorneys... Be clear on who knows what in this business.

Now, If the lender feels that you need to have a solid contract between the seller and the buyer and that you have to keep the note on the second for "x" amount of days, then call me... I'd like to ask why this particular lender has made a law on how long should carry a second note with an entirely different entity..  This does not make sense...  a prep-pay penalty on the second when they don't even carry the second?

Quote
Wouldn't that note sale be considered something the lender should be made aware of?  I can't imagine most lenders being ok with it.
 So Ben, If this 2nd had been paid off say six months down the road, Is it the responsibility of the owner to call the first lien holder and ask them if this is ok?

Quote
My question is what happens to the other 20% that I forgave and am I taxed on it or do I write it off ?

write it off.  you didn't profit from this..  Your net profit is what counts to a cpa.

If the second is recorded with the title company, then this is not fraud...  

Does the first lien holder like this type of purchase....  Well probably not...  but that's business.. and if I needed to sell a property to someone and they needed help getting into it... a forgivable seller second would be a nice way to go.

Quote
Please tell us what banks you have discussed this issue with.  Was your conversations with an account executive or their compliance department?
Ben, it doesn't matter...  With all of the posts you ahve here, I would expect a greater depth of knowledge from you.  Your inexperience shines.

Lscalder is correct.

Quote
You may have been able to get away with what you were doing but the investors on this board are smarter than you presume.  Do you really think that you will be able to mislead them into thinking it's ok to "rip it up"?
Ben, what are you saying here?  Are you suggesting that it is illegal to a make an agreement between the buyer and seller without confirming it with the first lien holder?  How long have you been in this business?

Quote
If the bank does not care, then there should be no problem disclosing to them what the intentions of both are.  So the conversation would go something like this.
"Hello Ms. Underwriter.  I'd like to originate a loan where in the seller will hold a note for 20%.  After the sale takes place the seller will disregard the note."  "OK, sure Mr. Loan Officer.  We'll let you create this 2nd loan for the purposes of getting your client in with no money down."

Is it likely this is going to happen? Maybe a 1% possability.

Is it loan fraud if you failed to disclose the info upfront?  Absolutely.

Wrong.  You're not going to have a conversation with your underwriter... You're are going to have a sales contract that is structured for a seller second... and then you're going to have a seperate contract between the buyer and the seller agreeing on their terms, which does not have to be disclosed to the lender.

Again, a buyer named "Jim" wants to borrow money to pay for a home.  He borrows money from a guy named "Tom" and borrows the rest from a guy named "Scott".  If Scott and Jim go off and decide to payoff the note one day after the recorded agreement, do you think they by law should go ask "Tom" if they can do this?  No.  Tom doesn't have a contract with "Jim" and "Scott". :banghead:

If what you are saying is fraud here, then we would see pre-payment penalties on seller seconds... which don't exist.

This type of deal happens all the time and is not fraud if the contracts are structured correctly.
Business Law 101. Contract Law.


Jason Vogler
Realtor - Ex Loan Guru
314-566-0919 direct

Offline Mdhaas

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Re:80/20 loan
« Reply #22 on: April 11, 2006, 02:02:07 pm »
Nice post Jason!
If at first you don't succeed.....................skydiving is not for you

Offline Investment Loans

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Re:80/20 loan
« Reply #23 on: April 19, 2006, 10:44:48 pm »
Wow,

I'm going to have to disagree with those of you who think this is fraud and here's why:

First, let's keep in mind that a seller second is just that... a seller second.  They are in no connection (in this case)with the first lien holder... and when the owner chooses to pay this off, it is up to them not the 1rst lien holder.

Second, to make an agreement with a buyer to allow the terms of a seller second to expire after a period of time whether it is one day, 6 months or a year is a seperate agreement and is considered to be between the buyer and seller...  a contract which is known to be considered "legal" by any terms does not have to be conveyed to the lender of the first lien holder unless requested or stipulated... in which case, I would find another loan officer and lender...

I have closed many a deals where the seller and buyer have agreed on a "forgivable" seller second and the 1rst lien holder/lender never asked to see there seperate contract, because it was not an issue.  

Of course, the title company needs to record the agreement for there purposes... but the first lien holder doesn't or shouldn't even really care.

The legality of the issue lies in the contracts... not whether the lender will allow a forgivable seller second or not..  The lender does not make laws...  and should not be advising loan fraud as such...  They are in the business to approve loans... that's it.. Underwriters are underwiters, Account Executives are Account Executives and Attorneys are Attorneys... Be clear on who knows what in this business.

Now, If the lender feels that you need to have a solid contract between the seller and the buyer and that you have to keep the note on the second for "x" amount of days, then call me... I'd like to ask why this particular lender has made a law on how long should carry a second note with an entirely different entity..  This does not make sense...  a prep-pay penalty on the second when they don't even carry the second?  So Ben, If this 2nd had been paid off say six months down the road, Is it the responsibility of the owner to call the first lien holder and ask them if this is ok?
write it off.  you didn't profit from this..  Your net profit is what counts to a cpa.

If the second is recorded with the title company, then this is not fraud...  

Does the first lien holder like this type of purchase....  Well probably not...  but that's business.. and if I needed to sell a property to someone and they needed help getting into it... a forgivable seller second would be a nice way to go. Ben, it doesn't matter...  With all of the posts you ahve here, I would expect a greater depth of knowledge from you.  Your inexperience shines.

Lscalder is correct.Ben, what are you saying here?  Are you suggesting that it is illegal to a make an agreement between the buyer and seller without confirming it with the first lien holder?  How long have you been in this business?Wrong.  You're not going to have a conversation with your underwriter... You're are going to have a sales contract that is structured for a seller second... and then you're going to have a seperate contract between the buyer and the seller agreeing on their terms, which does not have to be disclosed to the lender.

Again, a buyer named "Jim" wants to borrow money to pay for a home.  He borrows money from a guy named "Tom" and borrows the rest from a guy named "Scott".  If Scott and Jim go off and decide to payoff the note one day after the recorded agreement, do you think they by law should go ask "Tom" if they can do this?  No.  Tom doesn't have a contract with "Jim" and "Scott". :banghead:

If what you are saying is fraud here, then we would see pre-payment penalties on seller seconds... which don't exist.

This type of deal happens all the time and is not fraud if the contracts are structured correctly.
Business Law 101. Contract Law.





This is something I wanted to take a little more time with in responding to as the readers on this board are entitled to hear different opinions.  So what I've done was contacted a few mortgage fraud experts and showed them the correspondence from this thread.  These were individuals found by simply Googling "mortgage fraud".  In addition to them I brought this up with Fannie Mae and the FBI.  The FBI didn't have much to comment on and directed me to speak to somebody at the state level.  I'm not sure who that would be as this topic isn't related to one state in particular.  

There is a quote though on one site in which the FBI assistant director talks about the ommission of material needed by underwriters and lenders to fund, purchase, or insure a loan.  

Fannie Mae (who set guidelines for most A paper lenders) noted that a throw away second was absoultely illegal.  



Here was the reply from one of the experts.

I wouldn’t reply to this.  I find that arguing with folks who are stuck on their opinions (especially these types of opinions) is usually a lot like hitting one’s head repeatedly against a brick wall.  It doesn’t change anything and after a while it gives you a headache.
 
As for a substantive reply to you – if you’re asking for one – discounted buyback seconds are no different than forgiven seconds.  The issue has to do with the intent – the same reason that forgiven seconds will get you in trouble.

If a seller takes back a second and intends at that time that the borrower pays him but later decides that to forgive it, there is nothing wrong (of course, it might be difficult to prove that this was a later decision!)  When the seller and borrower go into the transaction knowing that the second will be forgiven, it really isn’t a second at all.  It’s just a sham to get the lender to accept the transaction.

So, in this case, it’s just another fiction that someone has created in order to get around the problem of forgiven seconds.  Now they are fabricating a second with the intent that the borrower not pay it off.  This is no different than the forgiven second.  They’ve just created another lie around the whole transaction.  While your ‘adversary’ is correct that lenders can’t (and don’t) control the future dealings of the parties, this isn’t a future dealing that is being discussed.  It’s a present condition that exists at the time of funding as is known to all the parties.  In other words, they are just lying to the lender.
 
You’re right – if this is so above board, why not just tell the lender?  Why not give the lender a copy of the discount agreement?  It’s because the lender wouldn’t fund the transaction!!!  Any time you’re in a position when you’re making up facts or documents in order to get around a lender’s requirements, you’re treading on slippery ground.  If the transaction is above board, disclose it.  If it isn’t, don’t do it.  

I wouldn’t bet my freedom on this guy’s argument!


Investors need to use discernment in all situations.  If you're unsure of advice then consult with an attorney.

To Our Success!
Ben Carmona * Consultant * ALL STATES * www.BenCarmona.com * 314-914-6052
1-4 Unit Investment Properties
Hard Money Rehab Loans * 24hr/1 day double close funds * Portfolio/Commercial/Business Options * No Seasoning Refis

Offline hammertime

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Re:80/20 loan
« Reply #24 on: April 20, 2006, 09:04:09 am »
Wow!  I wish that I had nothing better to do than contact the FBI, Fannie Mae, CIA, etc.  ::)
« Last Edit: April 20, 2006, 09:04:56 am by hammertime »

Offline Investment Loans

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Re:80/20 loan
« Reply #25 on: April 20, 2006, 09:14:24 am »
So you don't make time to research new products, concepts, or laws for your clients and business growth?

How then do you ever stay on top of this ever changing industry?

« Last Edit: April 20, 2006, 09:15:17 am by Investment Loans »
To Our Success!
Ben Carmona * Consultant * ALL STATES * www.BenCarmona.com * 314-914-6052
1-4 Unit Investment Properties
Hard Money Rehab Loans * 24hr/1 day double close funds * Portfolio/Commercial/Business Options * No Seasoning Refis

Offline christopher w

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Re:80/20 loan
« Reply #26 on: April 20, 2006, 09:14:28 am »
Ben,

Very nice write-up. I believe that those of us in the actual business of originating mortgages all know that throw away seconds are fraud, and won't fly with any lender. I have noticed that in this line of business there are a lot of people involved in the transactions that believe "if they don't catch you, you weren't doing anything wrong", and that tends to lead to a negative image for mortgage originators. If we are not careful people are going to start grouping us together with realtors and car salesman. LOL.
Christopher W
C-214.923.5781

Offline 4EEM

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Re:80/20 loan
« Reply #27 on: April 20, 2006, 09:17:02 am »
Ben is right when he said that the issue comes down to "intent".  If you intend to 'trick' the lender into giving you a larger loan than they would if the seller financing was not an issue this would  be considered fraud.  But, it should be noted that there is no clear case law on this subject.

The way I see it if the law is looking at your "intent" and you have an uneasy feeling about what you are doing don't do it...more than likely it's fraud.  

Sometimes there is a very fine line between creative and fraudlent and the prudent investor with the best of intentions  will decide to err on the side of caution.
Patrick S. Lawson
Highland Lending, Inc.
Phone  (407) 877-0093
Fax      (866) 476-1133

Offline Lscalder

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Re:80/20 loan
« Reply #28 on: April 20, 2006, 12:04:44 pm »
wow,

you must have alot of time on your hand to call the FBI, state department and who ever else you have to call. When i state that you can throw away the seller carry second note i didnot mean for people to throw it away it depends on how the loan is structure and the seller and buyer have to agree on the terms.the bank doesnot care about an agreement between the seller and buyer. Finally someone agreed with me the fbi cannot do anything if the seller and buyer donot tell the bank the only rhing you will tell the bank is that the seller is doing a 20% the bank will not ask no more information because it has nothing to do with the bank. if the buyer doesnot pay the note the bank doenot care as long as they get their payment each month.

Offline Lscalder

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Re:80/20 loan
« Reply #29 on: April 20, 2006, 12:25:24 pm »
i know i have mispelled words but when ever i am typing i am also holding my 1 month old in my hand so i am typing with my left hand he is in my hand right now. so for those of you who are making fun i want to see you holding a one month old while typing and feeding. I work from home so i originate loan from my home office. i am a new mom 24/7 no breaks and a loan officer at the same time with no rest so i i should me resting knowing i had a c-section but bills have to be paidbeening a new mom and work from home is difficult. Who ever made jokes i am not mad i am only 22yrs old own my own home have 2 business. Brokerage firm and Home Inspection so have i alot to do during the day my eyes are always close i need rest but i am sorry for mispelling works trust me for my age and my accomplishment i am not stupid far from it. My husband does the home Inspection and i do loans.

 




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