Has anyone had the DOSC exercised on them?

Just out of curiosity, with all of the GURUS and experts on this site that claim to never had the DOSC called, I wonderd if there was anyone who actually did, and what did you do about it?

Yes, I have had the DOSC exercised on two properties.

Both were Subject to the existing loan staying in place.

All documents were properly processed, the buyers were paying with automatic drafts from their bank accounts to the Loan Servicing Co, which in turn payed the lenders.

The lenders were: Wells Fargo and BOC.

After 3 months and after 4 months the other one, the lenders refused to cash the checks!, then they proceeded to start foreclosure.

Now, with the first one, the sellers filed for bankruptcy and included the mortgage of the property they had sold to my LLC, and after that the lender didn’t cash the checks anymore.

I got served with foreclosure papers that mentioned that they had not received payments since X month, because I have an interest in the property; the deed was recorded in my LLC’s name.
.
I talled with the lender’s attorney and had the loan servicing company fax him proof of payment. He received those and did not contact me back. They just proceeded with the foreclosure.
My buyer kept paying to the loan servicing company till 2 months ago when he stopped the automatic draft.

The money he paid is sitting in the loan servicing company’s account, waiting to see what to do with the money.

BTW, who does the money belong to now?

The buyer is leaving the property and acquired another one.

The other one has the same history, except that the sellers did not file bankruptcy. The lender just stopped cashing the checks and proceeded to foreclose because of “non-payment”.

For the time being I have ceased to buy and sell using Subjet to, because 2 going into foreclosure for no apparent reason. It is distressing.

Restart, being as these were already foreclosed, and therefore are public record, how about posting some pertinent facts, such as loan numbers, property address, etc, so the things you stated above can be verified. Since it already happened, there is no harm in doing this.

We get a lot of posts about this and nobody ever posts anything so people can look further into it, for educational reasons. Since it has already been foreclosed, and is public record, there is no reason to not show the pertinent facts.

I don’t think I want to do that because that would not reveal the whole story, only the public records.

You would want to see the papers served by the attorneys for the lender starting the foreclosure, the records from the loan servicing company with the payments by the buyer and the checks sent to the lender.

This would reveal private information about the buyers, which I want to keep private.

Believe me, it did happen and I am not pleased with it.

I would not be able to invent a story like that. I was totally taken aback when this happened, especially since the payments were made on time both by the buyer and the loan servicing company.

I can see why other who had this happen to them did not give any more information than I did, it would reveal private information that I don’t think would be ethical for me to disclose.

Now, why this would happen if there is no default, is a big question mark!

Maybe because interest rates are on the rise?, that could be the only think I can think of.

I do know that I lost quite some money! no back end profit and a blemish on my reputation.

I can say that there is ZERO chance that I believe that the servicers refused to cash the checks being sent in for the loans in question.

First, the servicer is required to post the ‘pass thru’ income from the loan onto the MBS (mortgage backed security) pool that the loan belongs to.

Second, no lender, of any kind, cares about who pays the mortgage. The lender does not want to foreclose on the property. Even if there is theoretical equity in the property the property condition and legal fees mean that a lender is destined to make very little money (most likely they will lose money) on the property itself if foreclosed upon. The servicer makes the money from the servicing premium on the loan in addition to interest on the escrow accounts held.

Third, the instant a loan enters into ‘non-performing’ status the loan hurts the lender’s books. As with any other company, lenders have debt and creditors. The worse the balance sheet becomes the more costly all borrowing becomes for that lender. From a business stand point it makes ZERO sense to deliberately stop taking payments.

The DOSC does get invoked, but not for the reasons you mentioned.

Besides what DFW has mentioned, IF (a big if, btw) a lender does choose to invoke it’s right to call the loan due, that is NOT how they handle it. They don’t simply choose to stop taking your payments. They will notify you that they are enforcing the DOS clause and that you will have x number of days (usually a minimum of 30) to refinance before they start any foreclosure proceedings.

I’d wager that we are definitely not hearing the whole story.

Besides that, why did you let them go into foreclosure in the first place? What prevented you from refinancing them into another loan? Formally assuming the mortgage? Releasing the property to the end buyer so that they could try to do one or the other?

Raj

For some “strange” reason, this thread reminds me of someone.

In the world of newbies to investing I doubt that many could afford to refinance a property. One of the attractions of REI is the fact that you can make money without good credit of your own.

And if a property had a new buyer and they were not in it long enough chances are they would not have the credit to buy it out right away. If they could they would not have to buy from the investor in the first place.

But to the person who had the properties called did you do a change of address?

The post made about the DOSC being called due has so many holes in it that I personally question the validity of it. I am betting it was either cut and pasted, a 3rd party story (guess who), or made up. Reading between the lines makes it pretty easy to see. Especially being posted on the same day as the membership was done.

The above is my opinion only. Just another fear tactic post.

Hey Gary if I could ask a quick question!

On these two properties how late were your payments?

The only time I ever really see the DOSC kicked in is when the payments are late then the property changes hands.

News Flash!!! - News Flash!!! - News Flash!!!

Burger King just announced and conceded that the REIClub is the new home of the “Big Whopper”

John $Cash$ Locke

In the world of newbies to investing I doubt that many could afford to refinance a property.
Then my suggestion to those newbies is to NOT get into REI as a business venture and especially not to try sub2 investing as a method. Not preparing for the worst that can happen, in any business, is foolhardy at best. In Sub2, the simplest way to solve the problem of a called loan is the ability to refinance it into another loan. If you can’t/won’t do that, then don’t do this kind of investing.

One of the attractions of REI is the fact that you can make money without good credit of your own.
Yes, this is true, though it’s more of a guru’s sales pitch than actual reality for the most part. And again, if you are going to be in REI, you need access to funds. Funds that will probably require SOMEONE’S good credit to get. That being the case, I’d say that it would be a good idea to have a backup plan in place. If you prepare for the worst, then the worst won’t happen.

And if a property had a new buyer and they were not in it long enough chances are they would not have the credit to buy it out right away. If they could they would not have to buy from the investor in the first place.

Contrary to the doom and gloom posts of DOSC violations and foreclosures, it’s simply rarely in the bank’s best interests to call a performing note due because someone else is now paying the loan payments. Even if they don’t approve of the transaction, most will prefer to work out a plan for the investor, or the end buyer to formally assume the loan (ie go on the note), along with a loan modification of terms and/or interest rates, etc.

Raj

I really don’t care about anyone’s opinion about this.

If you don’t believe the story, fine, that is your choice.

If you think there are other reasons “behind” it, you are downright wrong!

The evnts happende just as posted. More so, the buyer made all the moves to get it refinanced with the original lender, especially because it had a clause that said that you could assume the loan, if you qualify, which he did.
The attorney was a big obstacle not wanting to work out a refinance, or even the “catch up on payments” - the money was sitting in the account anyway, so no problem there.

Now, what the real reason was, I have no clue.

As I said, I don’t care if you believe it or not, as long as I know what happened, that is all that matters.

Besides, all those gurus talking about “no money down” are misleading the newbies and they should talk about the real thing, that you DO need money to back up any eventuality! They don’t, because they just want to sell their books or courses.

I have stopped for now, it has cost me money that should have been a profit.

I followed all the rules, had back up money; I still have 2 properties sold on a Contract for Deed and I am requesting them to refinance before rates go up higher and make my little profit out of them and be done with it all for a while. These are not in foreclosure, just running fine, I am just not taking any more risk, and I want these buyers to keep their homes.

The other two in the properties that foreclosed - no warning whatsoever, no late payment notices or anything at all! - had buyers that could not get a refinance in time!, they did qualify and bought a home elsewhere.

There are a lot of opinions out there or here in the forum, they all differ and most think they know it all and doubt the validity of a person’s experience.
Wait till it happens to you! you never know when or what will happen, no matter how much diligence you put into a deal and how careful you are; just triple check everything!

Restart, the only thing misleading newbies is your post directly above…and since I got an email from “my pal” expressing this same comment about misleading newbies, I can pretty much figure out where this post came from, either directly or indirectly.

The posts you made had more holes in it than a box of donuts.

In the world of newbies to investing I doubt that many could afford to refinance a property. One of the attractions of REI is the fact that you can make money without good credit of your own.

And if a property had a new buyer and they were not in it long enough chances are they would not have the credit to buy it out right away. If they could they would not have to buy from the investor in the first place.

But to the person who had the properties called did you do a change of address?

I dunno Bobo, I don’t see any P’s h’s or D’s after the name. Are you sure?

The other two in the properties that foreclosed - no warning whatsoever, no late payment notices or anything at all! - had buyers that could not get a refinance in time!, they did qualify and bought a home elsewhere

Sorry, doesn’t happen that way. It is illegal for a lender (or a landlord) to simply foreclose/evict on a whim. They must fully notify all required parties in the formal legal manner before anything can take place.

Framer,
If he posted those, it would blow his cover!

Raj

It’s just someone cutting and pasting some “Wiz-dumb” to the rest of us.

It took me a while … but I figured it out. :-\ Thanks. ;D

Funny how my post got answered before I asked it.

But Roger, absolutely. Never invest in anything unless you can afford to take the risk. If one bought one hundred properties by subto the person doing that should have the resources to refinance all of them at the drop of a hat. Ain’t gonna happen. Of course the likely hood that they all or even a significant portion get called due is extremely remote.

However for most starting out in this, the promise of becoming Rich, a way out of a dead end job, or starting over, is a strong temptation.

As an example John “Cash” Locke to his credit, never makes the claim that this is a “No Down Payment” way to make money in real estate.

However to the majority of newbies I think there is the impression that the “Gurus” ( I hate that term even if I use it facetiously) make the promise of this. The reality is most have disclaimers in fine print.

And this attitude gets express as being indicative of all of the courses.

I was pointing out to you that your solutions while perfectly viable would not have been available to everyone doing this. This a bad reality maybe, then maybe risk taking is bad in general. However, how many here that have been investing have not on one time or risked quite a bit and lost?

Are all the experts that get into this rich well to do before they start out? Did all of them never take a gamble? Are none of them ever coming from a situation where they had to start over?

I seem to hear stories from many of the big names that made money investing in anything and most have made mistakes and many have gone belly up and even declared bankruptcy.

Sorry Roger, but this is a risky way to make money, any good way usually has some element of risk. I don’t see the risk as being bad. Nothing ventured nothing gained.

The risk is not distressing so much as the not knowing of a way out.

What might be better is to point out better exit strategies.

It always seems easy to say well just refinance.

But how about, the fact that at worst you could deed the property back to the seller and the seller could take over the tenant management. maybe you could rework the deal as a L/O and make a new deal with the seller and buyer. Maybe they could set up Land Contract with the seller that gives them the right to sell?

Maybe they could if they had a good equity position (though not always typical of the Subto, but sometimes it happens) sell their interest in a flip to another investor, or find private money to do so.

I am more interested in finding about problems before they happen to me, and what the possible solutions are. if some want to take this as a personal attack on how they do business they are free to do so.

I do not know who this Restart is, although I have a good suspicion, but for the moment let us assume that it did happen close to what he says. There are always more than one side to a story, but it is his story so he can tell it like it is. Newbies, and I am one, don’t want petty bickering, there has been to much of that in the past, we want answers, real world.

John Locke for the most part as I see has always provided solutions. Except for the occasional and well understood dig at some annoying posters that as far as I know are no longer with us?

I ask this in the same way as my Attorney asked me. If the loan was called, and they do sometimes (HIS WORDS) WHAT WOULD YOU DO?