Removing a second home rider from mortgage - how does it works?
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Anonymous
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Does anyone have experience with this?
We purchased a home, which will be used as our primary home in a few years. We do not own a home, but live out for the country in a home provided by my spouses employer. When getting financing, we made it known we would be living in the home in a few years, but that we would most likely rent it out until then. The lender suggested a second home mortgage since we did not have a home in the area. Sounded great to us as we got the same interest rate as a primary home rate. However, at closing, out POA signed a rider that we would not rent the home. We did not find out about this until about a month after settlement. We have since contacted the lender to ask about having the rider removed. We are waiting for a letter with instructions as to how to have the rider removed - sounds like we need write a letter explaining why we want the rider removed. Does anyone know what I should expect? |
Anonymous
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You've settled, the mortgage is recorded, I wouldn't worry too much beyond that. It is unlikely that the servicer for whatever trust the mortgage is now held by will send someone to the home to see if it is indeed rented.
It sounds like you did not make any misstatements on the loan application, so there is unlikely any recourse the lender has anyway. My suggestion would be to go forth and do as you intend - rent it for now and occupy at some point, or not. |
Anonymous
My suggestion would be not to take legal advice from the internet! |
Anonymous
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Consult a lawyer, you have binding legal documents that say you will not rent.
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Anonymous
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Your loan officer suggested you commit loan fraud so he could get paid and close the loan.
What year was this? |
Anonymous
| Fuck the banks they are a bunch of assholes. They should be lucky you aren't short selling or mailing in the keys. Its all about intent at the time of sale , after the sale people's situations change. |
Anonymous
To add , the owner occupancy requirement is usually 1 year before renting it out |
Anonymous
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I would be careful, in the most extreme case, if you take the early PP's advice and go ahead and rent the home out while the rider is still in effect, you have committed loan fraud and the lender can call the mortgage due and force you to pay the entire mortgage back. If you don't, they can foreclose on the house. So you should consult with a real estate lawyer to find out how to get that rider removed before you actually try to rent the home.
This is why I hired a real estate lawyer to review my mortgage documents before we closed. For $650, he reviewed the docs, and also attended our closing and skimmed and explained in simple English what every document was that we were signing. He ended up catching a significantly large error (they had locked the wrong rate and put a higher interest rate on our closing HUD than was on the preview HUD). It saved us over $3000 and more than made up for the fee that we paid him. If you had hired a lawyer, you could have avoided signing that rider in the first place. I've never understood why people are willing to spend hundreds of thousands of dollars, and not hire a lawyer for a few hundred dollars to ensure that they don't do anything stupid with the biggest purchase of their lives. |
Anonymous
| OP here. This took place just one month ago. We discussed our intentions with the broker, but he did not disclose to us the second home rider. A copy of the second home rider document was also not provided to us BEFORE closing. Because we used a POA, we did not know such a thing existed until after closing. From what I'm finding on the internet, this same situation has occurred for many people. It appears some lenders are not putting purchasers in a loan that fits them. |
Anonymous
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We just had a similar thing happen. We bought a foreclosure with an FHA loan. We've done a ton of DIY and paydown and are now at 20-25%. So, we decided to refi to lose the PMI and get a better interest rate. The new lender knew those were our goals. But he still had us signing up for another FHA loan at TWICE the PMI cost of our existing loan. Luckily, my husband is in the mortgage business and caught the error but not until after we'd done the paperwork and application. Crazy. I agree with the pp who said it's worth it to get a specialized lawyer or adviser who can explain to you what you're really getting.
Unfortunately, OP, I think you're now in a situation where you need legal advice after the fact. That would be my first step. |
Anonymous
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12:54 here: by all means consult a lawyer about this, but keep in mind there are a few things in play. Banks have difficult time foreclosing on homeowners who haven't fulfilled the most basic obligation under a loan - making payments. A technical default, if this is even that, is not something a bank would likely pursue even if they were aware of it. And if you did not falsify the application, this creates a discrepancy in the documents, something a bank would be very leery of pursuing (because if they lose, damages can be enormous.)
If you did proceed with renting, I personally don't think that's an egregious thing. Many investors "live" in a home for a month as their primary residence in order to obtain favorable financing...is it gaming the system? Sure. But that's the way the world works, for better or worse. |
Anonymous
This is very foolish advice. I would never follow this. It's basically saying, go ahead an knowingly violate a document that you signed in the hopes that a bank will not find it at some point and might not foreclose on your house and if they do, they might not follow through. Banks are institutions and if something gets called to their attention for any reason, the gears go to work and the foreclosure happens. It may take time and you may have a reprieve of a few years, but the machinery doesn't care and will process your home. I've seen homes that started foreclosure and they were not in arrears and they were not able to stop the foreclosure process and the family ended up losing a lot of money and out of a house, when they could afford to stay there. Don't follow this advice and become another statistic. |
Anonymous
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Consulting a lawyer is foolish advice? I'm simply pointing out that if the buyer was truthful on the loan application (which becomes part of the loan documentation file) that they intended to rent the house, but there was also a rider in the loan documents that prohibited renting, this created a discrepancy in the loan documents. Basically an indefensible position for a bank to call a default, which they would not likely do anyway with a performing loan.
Is there a risk, absolutely. But what I was pointing out is that it is a similar risk to that taken by large numbers of people who buy houses with primary residence mortgages who have no intention of long-term occupancy. It's a common circumstance, and I have never heard of anyone being foreclosed on for the contested violation of a non-monetary covenant. I would be curious as to the link you have for such a foreclosure. |
Anonymous
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PP, you may be right but you're setting the OP up for an awfully painful and expensive interaction w/ their bank including he said-she said episodes re the POA's actions, who knew what when, etc.
Long story short: legal advice is definitely needed here and not but a bunch of internet couch-lawyers (IMO). |
Anonymous
| How recent was the purchase? Can you refinance to get rid of the rider? |