Assuming An Un-Assumable Mortgage Using An SRS

We recently did a seminar on short sales and other alternatives to allowing your house to just go into foreclosure Many of you were shocked to discover that over 82% of short sale requests are rejected by banks in the current economy. We also spoke about other viable alternatives to just walking away from a property, including what we call a Strategic or Structured Reassignment Sale (SRS).

What’s the difference between a short sale and a Strategic Reassignment Sale?

A short sale can get you out of an upside-down or underwater mortgage situation—if you can find a qualified buyer quickly and IF the lender approves it. Keep in mind, however, that a short sale isn’t designed to benefit YOU. Your agent will still receive their 6% commission on the sale price while you walk away typically, with nothing. In addition, if your house is short sold, in many states, the lender can still sue you for the shorted amount (called a deficiency). Also, no matter what any real estate agent or advisor tells you, you are still responsible for making your mortgage payments while you sit there day after day wishing that a buyer would magically appear and choose to buy YOUR house over all the other potentially bigger, nicer, and newer foreclosures and short sales in your area. If you’ve stopped making your payments, and the short sale gets rejected (again over 82% do), most agents will simply bid you a kind, “I’m sorry,” and the lender will, in most cases, immediately continue the foreclosure process.

The basis of a Strategic Reassignment Sale is a proven way to quickly sell a house or property which, surprisingly, dates back over 150 years. It is probably one of the most relevant and efficient ways to sell an unwanted or overmortgaged property in today’s incredibly challenging and frustrating economy.

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What can you do if you can’t afford your house any longer; or you’ve tried to “short-sell” (and now realize up to 82% are rejected); or, you’ve called your lender and they have politely told you to “go pound sand?”

That’s where a Strategic Reassignment Sale can help. The one question that was asked more than anything other was, “how can I reassign a non-assumable mortgage?”

While it’s true that most non-FHA/VA loans are technically, “not assumable” you must pay attention to what “non-assumable” actually means. The wording of what is commonly known as the “Due on Sale” clause, generally reads like this:

“If all or any part of the home or an interest therein is sold or transferred by the borrower without the lender’s prior written consent…the lender may, at the lender’s option, declare all the sum secured by the mortgage to be due and immediately payable.”

There is nothing in the infamous paragraph seventeen that prevents you from selling your property without paying off the mortgage loan. Nor does it state ANYWHERE that you will get into some type of “trouble” for doing so. This paragraph simply gives the lender the right to ask the new buyer to pay the entire loan off in full if you transfer the loan to a new buyer without “Lender’s prior written consent.” It then would be the sole responsibility of the new buyer to pay off that loan, through negotiation, modification, or refinance.

Understand that a mortgage, like any other lien, is a lien secured against the PROPERTY, and not against you, individually.

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All of this means that, with the right documentation and releases, you can sell your house to whomever you wish, however you wish. A cash deal is always the easiest and “cleanest” transaction, but there are several others available to you – especially if you’re trying to “short sell” your property or you’re considering “walking away.” Just be sure you have the right legal documentation and sales contracts to do it.