Comments on: How To Throw Away Your Hard Earned Investment Capital

By: BawldGuy

BawldGuy — Sat, 26 Dec 2009 21:27:58 +0000

Hey Ron — You and I are in complete agreement. The lone part of this post in which I said anything about ‘criminal’ was the following:

Depending upon how you handled it, and what you knew during the transaction, it COULD indeed become a criminal matter. (Fraud is the most obvious example.)

I’ve never ever said taking title subject to is criminal in and of itself. As you so correctly say in your comment, “…lying, FRAUD….” are exactly what I’ve personally seen in times exactly as you later refer to, i.e., high interest rate times, with low interest rate loans being taken ‘subject to’.

There is no ‘due on sale jail’. Love it, and it is of course, true.

What most don’t wanna talk about, when it comes right down to it, is that the seller is, at the behest of the buyer, breaching his written contract with the lender. That’s a civil, not a criminal matter. Well intentioned investors if pressed by an unexpected called loan, will not only cause themselves problems, but will also be trashing the credit rating of the seller when the property is subsequently foreclosed upon.

Banks are facing tough times, mostly due to their own actions, but because of this, when they deem it to their benefit to call loans, you can bet they will.

Though I am conservative, I think some folks read more into what I say than what’s actually there. As long as they realize what could happen, it’s their money and their business. More power to ‘em. It’s mostly a matter of perceived risk. Those younger folks who’ve yet to see subject to investors get spanked by a lender, don’t perceive the level of risk others might. Again, live and let live.

There are obviously two schools of thought on this topic. If some investors choose to go the ‘subject to’ route, it ain’t my money, so it’s fine with me.

Make sense?

Don’t be a stranger, OK?

By: Ron

Ron — Sat, 26 Dec 2009 20:00:13 +0000

Bawldguy love your posts but this one seems a little on the extremely conservative side. I say that because the last time I checked there is no “Due on sale jail” at least not in texas. I am confused on how taking a loan subject too becomes “criminal”. Please elaborate on how taking over a loan becomes a criminal act. Lying, fraud, theft and other criminal things I completly understand but taking over a loan = crime that one is a stretch. Are you at risk of the bank calling the loan? Sure, but the last time I checked the banks had a little problem. ((People giving them the keys)) So why would they call a perfectly good loan? No motivation that I can see today. If interest rates go sky high and a loan has a very low rate and it is taken over sure I could see it then but that is not the case today and has not been since the 70′s or 80′s. I am not debating what the due on sale clause says in any way! I completely agree with you that the bank can call the loan any time they want when you violate any of the terms, but come on they are letting people go for months with out paying, they are begging people to participate in the restructing of the loans doing anything they can to avoid taking this house back. They are even stalling taking peoples houses until the new year. Yet your position is that it is ultra risky even criminal to take a loan subject to. I just dont get it. I still love your posts, but just think that this position is ultra-conservative.

By: BawldGuy

BawldGuy — Thu, 24 Dec 2009 22:10:25 +0000

You make some good points. Most lenders, almost all in fact, will not have a problem with the homeowner who’s proven to be a reliable borrower and lived in the home, who eventually rents it out. Adding a spouse is done all the time, and again, lenders generally don’t have a problem.

Still, your points are valid, as the contract does cover those events.

Don’t be a stranger, Ash.

By: Ash

Ash — Thu, 24 Dec 2009 22:06:03 +0000

And for home owners, don’t forget that the lender may have an opinion on whether it’s OK to rent your property out when you’ve been living there as owner-occupied and whether it’s OK to add your newly-acquired spouse to the title. People tend to do a lot of things without reading their loan paperwork first.