Assumability of FHA Mortgages and release of liability?

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I am receiving conflicting information. I have one mortgage broker stating that no conventional fixed rate mortgages are assumable and must be refinanced. The bank itself is giving conflicting information. The rep on the phone states they will send out an Assumption of Mortgage and Release of Liability package, while the rep that the broker deals with for that bank says they don’t have assumable mortgages. According to this site it would appear that if the mortgage is FHA insured that it IS assumable. Are all FHA loans assumable, or only those that do not have “due on sale” clauses? Who is right? The bank doesn’t even seem to know the answer. Located in NJ.
Are Freddie Mac mortgages assumable under any circumstances?

  1. Reply
    May 1, 2011 at 3:37 am

    FHA loans are assumable via “qualified assumption”, meaning that the assuming party has to qualify per FHA guidelines for the loan and that, as as result of their qualification, the original borrower is released from future liability in case of the assumer’s default.

    Most conventional loans are not assumable. The exceptions are some of the Adjustable Rate Loans which may be assumable, however, these are becoming rare.

    A review of the terms of the deed of trust recorded by the lender against the property will clarify the assumption terms. There will be a clause specifically detailing the loan’s assumability. If you cannot find your loan closing package, your lender should be able to send you a copy of your deed and any Riders detailing loan terms.

    Neither your broker or the rep have seen your trust deed, so they are not dealing with factual data.

  2. Reply
    tom r
    May 1, 2011 at 3:56 am

    All FHA loans are assumable, but many years ago they changed it so that the new borrower must qualify and you were still held liable if they went into default. I have been a mortgage broker, real estate salesman for 25+yrs and can tell you that you are getting some bad info, if you want to IM me we can discuss it further

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