I bought a house SUB2 with an FHA loan. The seller went to a mortgage broker and got a new FHA loan. The mortgage broker, who does not even hold the loan anymore, just called the seller and he had her call me. Apparently FHA has a problem with him having two loans secured by them and is threatening to drop the FHA insurance on the one that I now own.
She asked me to provide a listing contract to make this go away. The problem is that it is no longer his property, so doing so is fraudulent. I did not tell her that I OWN the property, but did tell her that I have an equitable interest in it.
What is the worst case scenario with this?
The way I see it, if FHA drops their insurance then countrywide is going to scrutinize this loan and find out that it was sold. They will either call the loan due ot try to raise the interest rate since it is no longer FHA insured.
The woman who called me arranged for the new loan, knowing full well that he had a current FHA loan. When questioned by FHA, she told them that he was moving closer to his job; about 25 miles. They don’t feel that is legit.
Before she closed the loan, she told the seller that she needed a lease, which we provided. After leasing the property for 3 months I excersized my option by buying sub2. For me, the lease option wasn’t worthwhile.
OK, I see what happened here. Sounds like the Mortgage Broker has a serious problem, asking you for a Lease so her clients Debt to Income ratio fell in line for purchasing the second property.
I would think that your seller in this case hopefully moved 25 miles, but if they are questioning if he did, sounds like they know something and Mortgage Fraud is very serious. What I also do not know is whether the FHA waives the one property rule if a person moves closer to their job. Does not sound like they would waive this for 25 miles, however. This is why I concluded the Mortgage Broker has a problem and for other reasons.
Here is a site that you can check out and ask questions:
Hopefully you where not involved in areas that could be considered Grey on this one, as if you had knowledge that the Lease was only written for financing purposes, when your intentions where to actually purchase the property, well I would get this thing straightened out with advice from an attorney quickly.
The reason I say this is because I was asked several times through the years to give the seller a lease to help their Debt to Income ratios, what I told the Mortgage Broker was show the Underwriter that the Deed was no longer in the borrowers name, which was the truth and I am making the payments. This worked for me, only it was never done for an FHA loan because of the one loan rule.
That is why I buy on Owner Financing and give them deed of trust, not just get the deed. I have had 2 in a row try to refinance and all I had to do is fax over the note and deed of trust showing me paying same amount as their payments and has not been questioned.
Do not provide a lease if you already own the house, and definitely not this late in the game because that would be considered fraud and the seller’s lawyer could get you for this if it ever goes that route.
Give them HUD1 and copy of the deed, ask them if that would be sufficient. I got a seller refinanced using HUD1 statement.
From the discussion, I gather that MoneyPit started with a lease option on the property, then exercised his option by purchasing SubjectTo. It would seem that for a short period of time, MoneyPit was a legitimate tenant in this property.
My caution here is be very careful if a Mortgage Broker asks you for a Lease so they can finance the property when purchasing Sub 2. I have been asked many times to provide a lease only because the Mortgage Broker did not know how to handle the situation and having a Lease drawn up was the easiest way.
“Before she closed the loan, she told the seller that she needed a lease, which we provided.” If this was done because there already was a lease option then no problem. It is just the way I was reading the post, where two FHA loans were given, did not seem that everything was on the up and up on this deal.