First to Bobo:
You asked for opinions and then the only guy (me) who offers one that is contrary to what you want to believe you shoot down. I ask myself why should I even bother. If you know so much about it, why bother to ask for opinions. I work in the industry so there is a chance I may know something you don’t.
But, for your information, DOS does happen and quite frequently. the other dave mentioned Grand Junction. I was in Denver in the 80’s and lost my home during the same time Grand Junction was falling apart. They were looking for ways to avoid enforcing the DOSC but only with the borrower. They offered to let me pay $100 a month (supposed to be $1000) until I could pay more. I told them I had the property rented and they enforced the clause. Even though they already had thousands of properties they had foreclosed on. This was 1989.
Lenders DO NOT Want your property. They want you to pay. They also want to move non-performing loans from their books. It ruins their reserve ratios and forces them to up their reserves to cover for it. The best way out is to move it to the write off column. But thats not what we are talking about here.
Just because you have never seen or heard of anyone exercising a DOSC does not mean it wont happen or does not happen. If you only believe what you see there is no point in going to a discussion board to learn something new because you wont believe it until you see it.
A whole industry called the Savings and Loans went under because they were forced to keep their own paper. Interest rates went to 12% and that portolio of loans performing at 5% didnt look so hot when the costs of lending were at 9%. It showed up as losses on their balance sheets. To put it bluntly, if your income is 5% and your expenses are 9%, you go out of business. You think anyone in the banking industry remembers it? So dont believe they wont call those low rate loans. They wont even do qualifying assumptions on them now unless really backed into a corner. And then they want a sparkling clean assumption and wont budge an inch off guidelines.
Countrywide sells all their paper in the secondary market. They also service the loans for the investors. On a business basis, they could probably care less about DOSC, but they have a responsibility to their clients to do what is in the clients best interest. So selectively enforcing codes is not out of character. Just remember, it doesn’t mean they will do it on all occassions in all markets.
So in a situtation where a guy shows late payments (motivated seller perhaps?) and is paying a much lower rate than the going rate and there is equity in the property enough to cover the costs of foreclosing, I’d say you stand a pretty good chance of the loan being accelerated. A lot is going to depend on how easy they can get rid of the property. lots of equity… count on it.
But thats only my opinion and I have only been in mortgage banking since 1987.
You other two guys… well, I have been here only about a week and already its getting stale. Can’t you guys co-exist? I don’t think there is only one solution to every problem. I have my underwriter looking into refinancing a property in a trust. At first glance she says it will have to be treated as a purchase because the beneficiary was never on title and that will show up in the title report. (which means the loan would be treated as 100% financing and subject to higher rates and limited product choice) and it is not an arms length transaction since both parties were in the trust meaning again, a limited selection of financing vehicles. Mind you, she is not saying its impossible but it is not going to be as easy as stopping off at the bank during your coffee break to pick up a few hundred thousand.
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