SUB 2 Deal with FHA Home Affordable Modification

I’m looking at a Sub2 deal in TX. The homeowner previously went through the FHA Home Affordable Modification in 2015. I’m not too familiar with this process but from what I can tell, JPMorgan took her 249K mortgage down to 179K and HUD has a lien for 72K. From my understanding, the 72K from HUD isn’t due unless the house is sold. Otherwise the lien is wiped when the house is paid off in 2045. Curious to know if there are any pitfalls in taking this deal sub2.

I would like to keep this as a long term rental but am also considering an owner finance exit strategy. I would have to pay the seller 5400.00 at the signing of the warranty deed and the house needs about 3K to be rent ready. (carpet, paint, new AC compressor)

Payments after loan mod are 1744.00
Rents are 2400-2600.

Please let me know if I left out any pertinent details.


What is your plan if the loan is called?

Is the property worth the $249,000 ?

You have no vacancy factor, no insurance, no taxes, no expence itesm sshown.

Looks to me like one month of vacancy and you are under water.

Check ths website out, lots of TX info.

Of course, the house remains upside down and unsalable with that stupid HUD lien. I mean it doesn’t go away until 2045? Who keeps a home that long?

These hamstringing, dysfunctional loan mods are just that. I recommend that you encourage the sellers to let the house go into foreclosure.

They can get a new mortgage with “foreclosure credit” in 24 months.

  • They should just stop making payments.
  • Stop watering the lawn.
  • Let the HOA start fining them six ways from Sunday, and see how fast the bank will foreclose on that puppy, so they can schedule a new home loan around it.

Meantime, with this HUD crap hanging on the deal like a diarrhea-induced hemorrhoid, it just makes it impossible to sell, without putting everyone involved at risk for some kind of loss. Forget it.

That all said, there’s probably a stipulation from HUD that says the house cannot be rented out, or that the original borrower must reside in the house until Moses comes back, or until Obama becomes a practicing Christian, whichever occurs first.

Meantime, you’re unlikely to rent it without being punished, or sell it without having the HUD Witch’s cold fist run up your butt first. No, thanks.

That all said, and if you can rent the house…?

Forget giving the seller any money! What’s that about? They need to give YOU money for making it possible for them to move on.

Transfer title into a Land Trust. List yourself and the seller as beneficiaries, but you as the trustee. HUD cannot call this type of transaction due.

Either YOU, or the seller continue to take the tax benefits, but NOT both of you.

Then, wait until the house will appraise for the balance of the existing loan, and the balance of the up-your-HUD lien, and refinance.

Frankly, this deal only makes sense if you can pawn it off on a buyer who needs financing, and doesn’t care about the price. The issue is, you’ve got to qualify the borrowers through a Dodd/Frank infected loan originator, AND find a buyer who’s not a bargain hunter, and finance the buyer until Moses comes back. And if there’s no spread available on the payment, and/or you cannot get 10% down from a buyer, based on the higher selling price, it will be harder to qualify the buyer, and you then literally take all the risk, and make virtually nothing. You make money when you buy, not when you sell.

Tell me what I’m missing here.

I say, “run away.” Just because you ‘can’ buy sub2, does not mean you should. This is a ‘should not’ deal. Just my opinion, without knowing any more facts.


Thanks for your input. As always, much appreciated. There isn’t much equity in the house as it sits and I’m not really too excited about putting much money into this place just to break even on a sale or refi. Thanks again for the timely response!