You must be logged in to reply to this topic.
-
Thanks for posting the August blog about Wrap mortgages. Great info! I’ve also read and studied a lot of Pete Fortunato’s info regarding wraps, they can be a great tool.
We are considering lending to investors on a 2nd position wraparound mortgage. The 1st position was a MERS mortgage with an institutional lender (Wells Fargo currently owns their mortgage and is the payee). That is a low fixed rate 30 year mortgage so we feel it makes the risk equation a little better for us in 2nd position. A few questions:
1. We’ve wrapped private mortgages before but not institutional bank loans, anything to be concerned about or be cautious of?
2. Collecting payments – Should the borrower continue paying the 1st position bank loan separately with an additional payment to our company and we review the 1st mortgage statement periodically? Or Should they pay us the lump sum for both mortgages and we pay the underlying loan out of that? or other ideas? …Their 1st mortgage payment is escrowed so the lump sum payment might be an accounting headache. Any suggestions on a practical way to make the payment process easy for all parties?
3. They currently have PMI, they can easily have that removed going through the bank’s appraisal process or use proceeds from this 2nd wrap loan to pay down the 1st mortgage to 80% of its original value and have PMI automatically dropped. They promised they would do one of these 2 things to eliminate PMI. I was thinking of having an addendum drafted outlying this. Its in their best interest so I’m guessing they will do it asap but should we tie it into the note/mortgage agreement?Thank you!
.
I’m replying not because I’m an expert on wraps, etc. However, beware of Wells Fargo. See this nasty scandal in which they are the culprits:The point is that trusting any document coming from Wells Fargo to be untainted requires a lot of extra scrutiny. Even more so with MERS which broke chain of title laws in state after state. Similarly, when the OneWest Bank from Sacramento, CA pulled some similar stuff (that lasted several years), although they had to pay a stiff fine, their CEO simply bought off one congressman to stop any prosecution.
So consider how much extra due diligence you want to pay for to insure that Wells Fargo hasn’t diddled with the paperwork in ways you’d otherwise never anticipate.
–Dee
.
It seems to me that it’s most comfortable when you make the payments on the underlying. That way you know they are being made, or if there is an issue, you find out immediately
Whether eliminating PMI benefits you or them depends upon how you write the wrap. So you probably want to make an agreement about that.
You must be logged in to reply to this topic.
