real estate finance - full book (500 pgs)

Again the impounding technique prevents most of the

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Unformatted text preview: sure. The only time that the distinction between “assumption” and “subject to” becomes important is when the foreclosure results in a deficiency. If a deficiency judgment is obtained, the lender could proceed only against the maker of the note, the seller, if the buyer purchased subject to the existing loan. Had the buyer assumed primary liability for the debt, the buyer could be held liable for the deficiency. LOAN ASSUMPTION (BUYER OR BOTH LIABLE) A real estate loan is assumed when the new borrower is approved by the lender and a formal assumption agreement is executed. When a loan is assumed, the original borrower–the seller–can be relieved of responsibility, provided release of liability is given. In other words, if the original borrower wants to be relieved of liability, the new borrower must formally assume the loan and the original borrower must obtain a release of liability. Unless there is a complete novation, both parties could be liable on a formal assumption. Loans can be formally assumed by applying to the lender. If the note and trust deed contain a due–on–sale clause, the FHA and the DVA must approve requests for assumption. Specific procedures have been set up by these agencies to process assumptions. On a DVA loan, the new borrower must be a veteran with appropriate entitlement if the seller is to be relieved of primary liability. Assumption under Cal–Vet is accomplished when another eligible veteran qualifies for a new loan on 14-36 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 14: THE LOAN PROCESSING the same property and in the same amount as the old one, but at the then–current interest rate. Technically this is not a loan assumption; rather, it is a new loan. LOAN PAYMENTS DUE Loan payments are usually due on the first of each month. After the loan is closed, the borrower is notified as to how to make payments. There are basically two methods lenders use to collect payments. One is the monthly billing system. Before the first of each mont...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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