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AndrewSoss
906 Posts |
 Posted - 11/02/2009 : 8:00:09 PM
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Odd situation.
Borrower A (Andy) and Borrowers B and C (Betty and Chaz) purchase a duplex 3 years ago for $825k w/ 20% down. Betty and Chaz were married and they are 50/50 owners as Tenants in Common with Andy who owns the other 50%. They each put half of the 20% down payment and Andy lives in one side and BnC in the other.
Fast forward 3 years and Betty and Chaz are going through a bad divorce. The duplex was just appraised by an independent appraisal for the divorce proceedings at $660k.
Chaz is moved out and hasn't made any payments for a year.
Andy and Betty were approached by mutual friend (Mary) from the midwest who wants to purchase 50% of the duplex for $320,000 cash.
Mary doesn't want to be on the loan, but will own 50% as TIC with Andy and Betty, who will own 25% each and live together in Andy's side (I'm not sure if this last little detail has anything to do with the bitter divorce...I didn't ask).
Andy was laid off a year ago and has done contract work since, so we can't count his income. Betty has some income, but not enough to qualify, but Betty's Dad will co-sign as a non-occupant coborrower and he has a ton of money and good income.
How the heck do I structure this deal and is it even possible? Is it a purchase? Is it a refinance? |
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visionmtg
590 Posts |
Posted - 11/02/2009 : 8:49:02 PM
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IMO I'd leave Mary out for the time being since she doesn't want to share any contractual interest & or liability towards the new loan. And being a cash buyer of equity she'll be the easy part. Now you have to deal with the ex (Chaz) & new vested title owner (daddy).
What interest does Chaz still have in the property while the divorce proceedings are going on? What will he demand, get or receive afterwards? What will daddy want for his help? I think these 2 will create the greatest havoc in the deal. Chaz may come back & still want some equity somehow someway.
If you can accomplish a refi with daddy coming aboard then you can get Mary to enter into a 50% equity buyout in the property after daddy does his part in the original bailout. Sorry I keep saying bailout but I'm gathering thats exactly what it is.
It could probably be done but it's going to be a serious, serious headache. |
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AndrewSoss
906 Posts |
Posted - 11/02/2009 : 8:59:54 PM
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| Sorry..should have clarified, that the soon to be ex-husband (Chaz) has agreed to be cooperative with the refinance as this is part of the settlement. |
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AndrewSoss
906 Posts |
Posted - 11/02/2009 : 9:03:22 PM
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I suppose I can see if the Dad has $320k liquid and have him come in with the funds to close and then they can do what they do with the cash equity post closing.
If I know that they are going to change title after we close, I think that I have an obligation to disclose this to the lender, so this probably won't work.
I need to have the lender know exactly what they are doing if it is even doable.
Thanks. |
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velecico
5311 Posts |
Posted - 11/02/2009 : 9:50:38 PM
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quote:
Originally posted by visionmtg
IMO I'd leave Mary out for the time being since she doesn't want to share any contractual interest & or liability towards the new loan. And being a cash buyer of equity she'll be the easy part. Now you have to deal with the ex (Chaz) & new vested title owner (daddy).
What interest does Chaz still have in the property while the divorce proceedings are going on? What will he demand, get or receive afterwards? What will daddy want for his help? I think these 2 will create the greatest havoc in the deal. Chaz may come back & still want some equity somehow someway.
If you can accomplish a refi with daddy coming aboard then you can get Mary to enter into a 50% equity buyout in the property after daddy does his part in the original bailout. Sorry I keep saying bailout but I'm gathering thats exactly what it is.
It could probably be done but it's going to be a serious, serious headache.
Are you with Vision Mortgage out of PA ? |
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crankyusi
848 Posts |
Posted - 11/03/2009 : 07:00:47 AM
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1. how much is the existing lender owed?
2. Mary expecting to make monthly payments after this closes?
3. how much are monthly payments now to the existing lender, and if there's a $320k principal reduction, how much will new payments be? |
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AndrewSoss
906 Posts |
Posted - 11/03/2009 : 07:23:31 AM
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Existing loan is 670k
Mary is not expecting to make any payments (except taxes and ins)
Monthly payments now are irrelevant since we need to refi to get the ex off the loan.
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crankyusi
848 Posts |
Posted - 11/03/2009 : 09:08:45 AM
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quote:
Originally posted by AndrewSoss
Chaz is moved out and hasn't made any payments for a year.
Is the existing loan delinquent, or NOD\trustee sale scheduled and is Betty's credit ok to qualify for a new loan?
Wondering if existing lender would cooperate in a minor short sale.... ($670k owed versus gross sales value of $660k which is maybe $600Kish on a net basis). Mary is expecting to buy at $640k value. |
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AndrewSoss
906 Posts |
Posted - 11/03/2009 : 09:34:36 AM
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quote:
Originally posted by crankyusi
quote:
Originally posted by AndrewSoss
Chaz is moved out and hasn't made any payments for a year.
Is the existing loan delinquent, or NOD\trustee sale scheduled and is Betty's credit ok to qualify for a new loan?
Wondering if existing lender would cooperate in a minor short sale.... ($670k owed versus gross sales value of $660k which is maybe $600Kish on a net basis). Mary is expecting to buy at $640k value.
Loan is current, Andy and Betty's credit are fine. |
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crankyusi
848 Posts |
Posted - 11/03/2009 : 12:04:41 PM
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| Is this deal at least $30k short to close, whether structured as a purchase or refi? Existing lender wants $670k payoff, Mary brings $320k but wants only $320k senior financing which is $640k, thus $670k less $640k equals $30k short? |
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AndrewSoss
906 Posts |
Posted - 11/03/2009 : 12:12:47 PM
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quote:
Originally posted by crankyusi
Is this deal at least $30k short to close, whether structured as a purchase or refi? Existing lender wants $670k payoff, Mary brings $320k but wants only $320k senior financing which is $640k, thus $670k less $640k equals $30k short?
Mary is fine with having up to $360k financed. |
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crankyusi
848 Posts |
Posted - 11/03/2009 : 1:08:46 PM
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At this point, I'd probably structure this as a concurrent close with a new $360Kish first DT with Mary bringing her $320k cash to close. Andy and Betty would sign the $360K note and DT, Mary would execute only the DT (I've seen Wells and Countrywide accept this format in the past and explicitly state that non-execution of note means no liability for the note), and then Betty's dad sign whatever he needs to sign. Wouldn't need to worry about Mary coming on title after this closes and thereby triggering a due-on-sale clause, which may be a possibility if the new lender sees how low their LTV would be.
Guess this would be up to the title company and new lender to determine if this is refinance (could be since 2 of the original 3 parties remain and the new party isn't signing the note) which is a positive since no transfer taxes involved, or if this is a "purchase" deal since Mary is a new party to the deal.
But it sounds like you got something that could be a deal....income qualifying Dad as a borrower, enough dollars to close, and a low ltv. Hopefully others can add an opinion. |
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AndrewSoss
906 Posts |
Posted - 11/03/2009 : 1:12:56 PM
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quote:
Originally posted by crankyusi
At this point, I'd probably structure this as a concurrent close with a new $360Kish first DT with Mary bringing her $320k cash to close. Andy and Betty would sign the $360K note and DT, Mary would execute only the DT (I've seen Wells and Countrywide accept this format in the past and explicitly state that non-execution of note means no liability for the note), and then Betty's dad sign whatever he needs to sign. Wouldn't need to worry about Mary coming on title after this closes and thereby triggering a due-on-sale clause, which may be a possibility if the new lender sees how low their LTV would be.
Guess this would be up to the title company and new lender to determine if this is refinance (could be since 2 of the original 3 parties remain and the new party isn't signing the note) which is a positive since no transfer taxes involved, or if this is a "purchase" deal since Mary is a new party to the deal.
But it sounds like you got something that could be a deal....income qualifying Dad as a borrower, enough dollars to close, and a low ltv. Hopefully others can add an opinion.
yeah, that's kind of where I'm at. Where I get stuck is Mary bringing in the cash to close but not being on the loan. |
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crankyusi
848 Posts |
Posted - 11/03/2009 : 1:17:51 PM
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quote:
Originally posted by AndrewSoss
yeah, that's kind of where I'm at. Where I get stuck is Mary bringing in the cash to close but not being on the loan.
Why is that an issue? Mary said she doesn't want her name on the loan, lenders have seemed to be ok with that in the past..... |
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crankyusi
848 Posts |
Posted - 11/03/2009 : 6:00:35 PM
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quote:
Originally posted by AndrewSoss
Where I get stuck is Mary bringing in the cash to close but not being on the loan.
Are you somewhat concerned about Mary possibly being up the deep creek should Andy\Betty\Dad decide to bail on the property, especially since Mary has essentially prepaid in full her share of the mortgage? Perhaps record a new 2nd after COE in favor of Mary for the full $320k just in case so she doesn't lose it all at a trustee sale..... |
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