If you are looking for ways to stop foreclosure, one way to solve the issue is by mortgage
assumption. Not all mortgage loans can be assumed, however, but here are a few things to consider
before going through the paperwork.
What Is A Mortgage Assumption?
A mortgage assumption is when someone takes over the payments on the loan, based on the same terms
as the original loan. A loan like this has been transferred from one buyer to the other one. The
new owner will be responsible for making the payment after the mortgage assumption has been
completed.
What Type of Mortgages are Assumable?
As stated earlier, not all mortgage loans are assumable since it depends on the type of loan, the
state laws, and the situation.
For most states if it does not specifically say that the mortgage is assumable or not, it is
typically considered assumable. Many homes do have, what is called, a 'due on sale' clause. A
due on sale clause is something that if a new owner is to have the property through its sale,
then the loan is due when the transactions actually take place. In a case like this, because the
entirety of the loan is repaid, the mortgage cannot be assumed because the new owner is not able
to take over where the last owner left off.
There are exceptions to the "due on sale" clause, depending on who is involved, that allow for a
mortgage assumption even when such a clause is in place. Such exceptions have been mandated by the
federal Garn-St. Germain Depository Institutions Act of 1982. It allows for certain family members
to transfer ownership of the home by mortgage assumption. This includes an ownership transfer
from: parent to child, a dead borrower to a relative, spouse to spouse, and legal separation and
divorce.
It is also up to the discretion of the lender if they want to actually use the due on sale clause.
Sometimes lenders will see the new owner as financially stable, and in cases like this, they will
be willing to transfer the property in hopes of clearing up the debt. If a lender approves a
mortgage assumption it is likely that the new owner will go through the same process that you did
during your qualification process. The lender will verify employment, income, and credit.
What if the Mortgage is for a Distressed Property?
If the property is distressed, lenders will want the new owner to correct the debt and bring the
loan current again. There are strict rules as to how such mortgage assumption is done by the
Federal Home Affordable Modification Program (HAMP) which gives loan providers terms as to how a
home should be transferred.
If the loan was done by a government loan program, such as Fannie Mae, then the lender has to look
at several different options like HAMP, standard modification terms, and a short sale.
Is the Original Buyer Liable?
When the new owner assumes the mortgage and the ownership of the property during mortgage
assumption, they also assume the distressed debt correction and the monthly mortgage payments of
the loan. However, if the new owner also fails to make monthly payments and falls behind as well,
then the lender may have the right to go after the original owner of the loan in order to correct
the debt. Whether the original buyer is held responsible for the new owner's default is dependent
upon the terms of the mortgage assumption and state law.
Summary
If you are thinking of selling your home to a friend or relative to clear the debt, mortgage
assumption can be one of the ways to stop foreclosure.
----------------------------------------------------
Keep in mind even if you are on the verge of a foreclosure you do have options. Most of these
options you probably don't even know are out there. Check out our blog to find out how you can
avoid foreclosure and do so in the fastest time possible.
http://www.homebuyersofcalifornia.com/tag/selling-a-property/
Posted by Randy Frier
http://tallahasseebankruptcyattorney.net/
No comments:
Post a Comment