Mortgage Wrap Question

I have never done a wrap.
Does the original mortgagee (bank) need to be involved to do a wrap on a current loan? Is this just something the seller and you can go ahead and do. Also what does this do to the DOS clause? Since there is a title transfer, what about insurance?
Details would be of great help.

Thanks to all

Any help would be appreciated.


Wraparound mortgage, also called an (A.I.T.D.) all inclusive trust deed, is a financing tool where a new mortgage is placed in a subordinate (secondary) position to the original mortgage and the new mortgage includes the unpaid balance of first.

Here’s how it works:

* The seller holds onto the existing mortgage
* The seller names the property's selling price
* The seller offers the buyer a loan at a higher interest rate than
  the existing mortgage
* The buyer pays the seller a fixed monthly amount and
* The seller uses part of this money towards the existing loan. 

** The seller’s incentive is to profit from the difference in interest in the two loans.

The wraparound mortgage is a creative way to allow a buyer to purchase property without having to qualify for a loan or to pay closing costs. The contract is made between the buyer and seller with seller remaining on the original mortgage and title.

Title does not transfer, however an interest in the property does so the DOS clause could come into play. The insurance would stay in place in the sellers name since he is still on title, you could be named as an additionaly insured.

John $Cash$ Locke

Howdy Texhanon:

I have done wraps where the deed to the property was actually transfered and everything else was pretty much the same as Mr Cash explained. Similar to the sub2 deals that he is famous for doing. Listen to his wisdom he is true professional