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Dynasty School (www.dynastySchool.com) 9-37 REAL ESTATE FINANCE
• • DVA and FHA loans are always assumable and maintain the same terms and conditions. Some fixed rate mortgages and variable interest rate mortgages are assumable. Statute and Case Law – The California Supreme Court prohibited state chartered lenders from exercising due–on–sale clauses on their real estate loans unless the lender could prove a threat to the loan security. However, the federal Garn–St. Germain Act of 1982 preempted state prohibitions. Liability – In most instances, the buyer becomes primarily liable for the existing loan and the seller becomes secondarily liable. A seller may be released from all liability through a novation. • The Veterans Administration requires a “release of liability” to relieve the seller of primary responsibility for a DVA loan with no change in terms and conditions. FHA requires a “substitution of liability” and terms and conditions will remain the same. • Qualifying – Except for FHA and DVA loans, the lender may qualify the assuming party, charge an assumption fee, and renegotiate the loan at different terms and conditions. Subject To – If an existing loan contains no enforceable due–on–sale clause, the property can be sold “subject to” the existing loan, in which case the buyer's only risk is his equity. AITD/WRAP-AROUND
An all–inclusive trust deed (AITD), also called wrap–around, is a junior trust deed used to finance the sale of property, taken by a lender or carried back by the seller in an amount to cover any existing trust deeds on the property as well as any additional amount, all provided for in one junior trust deed at one interest rate. Subject To – An AITD is commonly used to preserve existing trust deeds at a favorable interest rate and avoid the costs of refinancing. It is normally
9-38 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 9: FIXED RATE MORTGAGE AND ALTERNATIVE MORTGAGE INSTRUMENTS
used when there is no enforceable alien...
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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.
- Spring '10