beginner confused wrap vs subjectto - Posted by kaattan

Posted by becky on August 30, 2001 at 24:29:41:


beginner confused wrap vs subjectto - Posted by kaattan

Posted by kaattan on August 27, 2001 at 12:58:38:

I read several archive postings on the above topic and I’m not certain if my following conclusion is correct.

The buyer gets a deed to the property (subquestion: Is this through quit claim deed prepared by the title company?) “subject to” the existing mortgage on the property giving seller 2nd mortgage for his equity (if at all any).

Question: On the sales contract do we enter:

Seller finances a note with a face value= seller’s equity
Existing mortgage that will remain “subject to”-balance on the current mortgage
Third party financing=0

WRAP means

The buyer gives seller a second mortgage on the property “wrapping” the underlying first mortgage and seller’s equity.

Seller financing=Purchase price
Existing mortgage the will remain “subject to” = 0
3rd party financing=0

Set up escrow that will disburse payments on the first mortgage and the “spread” to the seller (if any) for protection.

Scenario 1: Motivated seller with very low equity wants immediate debt relief-JohnBoy’s example.

Consider the lender’s position in this scenario.

Even if interest rates in the market are higher than the rate on the existing mortgage, why should a lender enforce DOS and foreclose in case investor is unable to refinance? If the lender did, wouldn’t that be classified as “BAD DEBT” and jeopardize the lender’s business? So, would not the lender just pray that the investor’s payments are on time and avoid foreclosure at any cost? Does not the investor have the upper hand and can’t he get some kind of a statement from the lender that “lender is aware of the situation, elects not to impose the DOS clause and approves of the assumption”?

I am trying to understand if Bronchick’s recommendation to create a trust and letting the trustee assign the benefit of interest to the invester (by signing a “subject to” deal with the seller) who resells the house on a contract for deed, is even necessary in the above scenario

Thanks in advance for your clarifications.