Posted by Steve (Ca) on February 05, 2003 at 23:38:03:
Sean,
Owner in default, but moved out of property in October and now lives in an apartment. Place has been vacant since then. Was one of those restraining order, hide from the husband type deals.
If I understand Civil Code 1695 correctly, it doesn’t apply if the property is not being used as the borrower’s principal residence. What do you think?
-Steve
How to deal with city’s second loan? - Posted by Steve (CA)
Posted by Steve (CA) on February 05, 2003 at 01:07:12:
Have opportunity to pick up following deal:
3br, 1ba single fam
FMV: 115K-120K
first loan: 64K principal, 7K in arrears, 7.125% interest
second loan: 21K
Second loan is city sponsored “down pmt assistance” program; no pmts for 5 years, then paid off over the next 15 years at 5% interest. Owner has had house for 2 years, so pmts won’t start for another 3.
Problem: second becomes automatically due at any time original borrower stops using house as principal residence.
Owner already moved out, is leaving state. Has deeded me the property, but I?m not sure whether to record, given that the second could be called any time.
Do you have any experience with these kinds of programs? How aggressive are they about tracking the properties? Any hints about how to placate them?
Seems like the back door is a wrap with balloon in three years, with full disclosure to buyer that the city could call the 2nd at any time.
Opinions wecome!
Re: How to deal with city’s second loan? - Posted by Sean
Posted by Sean on February 05, 2003 at 20:51:14:
Steve,
Is the owner of the property in default right now? If so, I would return the Deed to the owner, now. If you did not follow Civil Code 1695, it could come back to haunt you 4 years from now. With someone in foreclosure, you need to follow the process outlined in the code. Otherwise, the owner could come back to claim the property in which you would owe substantial fees 3x the equity, a $10,000 fine and a possible year in prison. If you want to continue with the deal, just follow the code and the time allotments and you should be O.K.
Re: How to deal with city’s second loan? - Posted by frank
Posted by frank on February 05, 2003 at 18:02:45:
About a year ago I had the same situation and in talking to the cities headhoncha(AKA “person in a position to know”)she said they will foreclose in a New York Minute
because they want that $$$$ back to use again in the program. I don’t know how good they are at find out what happened but if I can knock on the door and ask who lives here, I guess they can.
Re: How to deal with city’s second loan? - Posted by phil fernandez
Posted by phil fernandez on February 05, 2003 at 17:31:37:
I wouldn’t put a billboard in front of the house saying that the owner occupant has moved out, but I would want to have access to the $21,000 to pay off the city 2nd if it ever gets called.
I bought a house once from an owner being foreclosed with the same type of 2nd. Eventually the city called me up and I paid off the 2nd. Just have your exit plan ready when the city calls.