This question is for any of the investors that have been doing sub2 and owner finance deals for a long time? Have you ever had a bank call the note or evoke the due on sale clause?
I haven’t. I should have; the way I did business many years ago. However, I do know others who have. They’re the same ones that flagged the $6.25/hour bank employee with change in insurance coverage and beneficiary; were 30 days late making a payment; called the bank and started asking questions about the loan without properly authorizing themselves, and in the process informed them they bought ‘their house’; or had a lot of equity and did one, or more, of the above.
Now, that doesn’t necessarily translate into a full-on foreclosure. It just means that the bank will attempt to get you to either assume the loan (which is possible in many situations), or simply refinance the loan, and pay the related fees and costs (and/or higher interest rate).
Or it could mean deeding the property back to the original seller. The latter is always an option. However, late payments represent the bee-hive-stirring stick, as it were. So, the first way to avoid a problem is not to flag the entry-level bank employees with changes to the insurance or pay the mortgage late. Otherwise the bank doesn’t really care who pays the mortgage as long as the property, the insurance and the payments are maintained.
Moreover, the DOS is about lenders making more money off their loans, not trying to keep properties from changing hands.
Thank you. Very informative.
Agreed! Thank you Javi for that post. I had actually stopped researching Sub2s because I had heard that the DOS was a major set-back. I had assumed from all the nay-sayers that the chances of the bank calling the loan due was extremely high. Scared the hell out of me really.
You’re welcome. You know you’re listening to a dumb butt that doesn’t understand the purpose of the bank’s DOSC if/when they suggest sub2’s are dangerous or illegal. It’s amazing how many attorneys are dumb butts in this regard. I mean it’s amazing…