What are Mortgage Assignments?

Frank Chen

Hi, this is Frank Chen with REIClub.com, the only site you need as a real estate investor. Today I've got quick video on mortgage assignments

What Are Mortgage Assignments?

Fancy way of saying taking a property Subject To the existing financing and assigning those rights to someone else.

Loan stays in place, deed transfers ownership
Loan already on the property stays there without any formal assumption on your part
Owner deeds the property to you or end buyer – depends on the deal
You or end buyer sends in the payments to mortgage company just as the former owner did

Is it legal? due on sale clause

Yes, technically most loan documents do not prohibit this action, but most will allow the lender to call the loan immediately due and payable at their discretion if they discover ownership has transferred.

Why would any seller agree to remain liable for the debt??

Many Reasons:

Fast sale
Downsized
Behind on payments
No Equity in the home
Issues with Traditional Sale with Realtor

– Time it takes to sell – may take 60 – 180 days

– realtor fees – 6%

– transfer fees

– closing costs

– repairs

Pros to Mortgage Assignments

Investor Perspective

You use someone else's debt to finance your deals
Acquire properties without assuming credit risk
Interest rates locked in at date of seller's purchase – may be lower than current interest rates
You don't have to deal with bank underwriters
You or Buyer can close quickly – simply taking over the existing loan, including terms
Avoid a lot of transaction costs – realtor fees, closing costs, transfer fees, etc.
Buy difficult to sell property quickly – properties with little or no equity or other problems
Sell to greater selection of buyers – not enough down, shaky credit or history
Make Profit from assignment Fees

Cons to Mortgage Assignments

Investor Perspective

Lender may call loan due and payable in full messing up Buyer and Seller
Sellers may not really understand the transaction, which means you have do
Distressed sellers will forget later how grateful they were at the time
Buyer may stop paying, and/or may destroy property,or simply ignore repairs and maintenance
Ethical responsibility to both Seller and Buyer
Seller expects Investor to keep all promises, even implied promises
Paperwork will likely not hold up in court if Buyer and/or Seller sues for damages later
Too many ways for deal to go bad if Investor not still in control and in middle

We believe Mortgage Assignments carry a high degree of risk for all parties involved. There are many potential issues that can complicate these types of transactions, and therefore, in our opinion, this type of deal is not appropriate for most newer and less experienced investors.

Again, this is Frank Chen with REIClub.com. Please take the time to leave your comments for this video below and please subscribe to our YouTube channel so you'll be automatically notified when we upload more quick video tips for you. Take care and good investing.