Wrap Around Mortgage?

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What is a wrap around mortgage? I currently owe 60K on my home and I want a family member to have the property. My selling price is 170K. How would this loan benefit me and how does it work?

We have a court date set for the 20th but are looking for others who may be going thru what we are going thru so that we can hopefully get a continuance. We have been battling this company since Feb of this year for being 2 months behind due to job loss. We asked them for a payment wrap around and then were informed 1 month later that we didnt qualify because we had a subprime mortgage. We then got the money we owed them and when we sent it they sent it back and said that our house was already in foreclosure. We had to hire an attorney to get them to take half the money and work out a forebearance. Then we signed on for a loan modification, they denied it and sent back our money again, then we agreed to do a deed in Lue of foreclosure and again we were denied. We want to keep our house but since they refuse to take our payments we are not sure what to do. We cannot hire any local attorney’s because they all either work for WFHM or sit on the Board of directors and it creates a conflict of interest. Any suggetions would be helpful

  1. Reply
    January 28, 2011 at 11:26 pm

    Well it is pretty simple but I don’t know what state you’re in and how the state real estate laws would affect your transaction so the best I can do is give you general information on wrap arounds. Go see what they say about them here:
    From the FDIC an opinion on wrap around mortgages: http://www.fdic.gov/regulations/laws/rules/4000-520.html
    IRS: Selling your Home Publication: http://www.irs.gov/publications/p523/index.html and http://www.irs.gov/publications/p523/ar02.html
    IRS: Home Sale Exclusion rules, publication: http://www.irs.gov/newsroom/article/0,,id=105042,00.html
    This should give you enough information to begin to inquire with more precise questions relating to your benefits.
    Buena Suerte

  2. Reply
    Realty Shark
    January 28, 2011 at 11:41 pm

    First, check the Note and Mortgage docs on your current loan. Most have a “due on sale” clause which says that if the property is sold in part or in whole, the entire mortgage balance becomes due and payable in full. Usually, quit claiming part of your property to a spouse for the purposes of adding them or deleting them as community property, or putting the house in a trust doesn’t count; it is okay.

    If you have a due on sale clause, then a wrap around mortgage is not going to do any of you any good without the express written permission of the Note holder.

    If there is no such clause, and you intend on acting as the banker, then the wrap around mortgage makes you the lender as a private mortgage. You take back a Note for $ 170,000 and the relative makes the payments to you. You then take his/her payment and pay the underlying note so that you know it is being paid and won’t come back on you if they screw up and don’t make your payment. The Note stays on the property in your name and it is still your responsibility. You must charge interest; the government sets an amount that they consider real. If you don’t, there are consequences all around. If you take this route, use a professional Note collector, like Noteworld.com to collect the payments from the relative, pay the underlying Note, and send the rest to you. They charge about $ 25-40/month which you can split with, or pass along to, the realtive. Noteworld will give all parties year end 1099 & 1098 statements for their tax records and keep it all tidy.

    If you are thinking that there is another mortgage lender out there who is offering them a wrap-aroud mortgage, then the best thing to do is seek the advice of a CPA to see how it affects your taxes and whether or not you are to receive an interest deduction from the payment which is really being made by your relative. I don’t see any true benefit with this method unless you retain a write-off.

    At least with the first method, you get an interest income plus whatever down payment they have and you can take the property back and resell it if they don’t pay up. Just make sure you can make the underlying note payments while you are foreclosing if it comes to that, and that you will have enough cash from the down payment to put on another property. Will you have enough income to cover the new property payments with the interest income you are making? Can you afford it if they mess up and you have to foreclose? All very valid questions you must ask yourself.

  3. Reply
    January 28, 2011 at 11:47 pm

    try getting relief with chapter 13 bk atty so you can get caught up in 5 years not just a couple of months

  4. Reply
    January 29, 2011 at 12:14 am

    Call your local TV stations and ask if they would be interested in talking with homeowners like yourselves. Sometimes embarrassing the lender publicly will do the trick. I can tell you Countrywide has treated us the same. The sheriff sale was Oct 21 and we have to be out by April 21. We’re Realtors, no unemployment for us! We’re over 50 and no degree’s, so you eliminate most employers from hiring us! Looks like a Walmart greeters jobs is about it. And with the kind of income, we can’t save our home. No one cares about us little guys, only the big guys like AIG and Ford/Chrsyler etc. You watch the auto manufacturers will get another bail package before the year is out.

  5. Reply
    Rustin G
    January 29, 2011 at 12:26 am

    i feel terrible for you, i agree with the other person who said to ak your local news station if they would be intrestd.

  6. Reply
    A D
    January 29, 2011 at 12:47 am

    I don’t have any experience with your situation, but a previous poster alluded to a similar experience.

    I am so sorry to hear about your situation. It seems to me that this is the type of situation the Federal Bail Out was intended to avoid. From what you say has happened, it makes me very angry that you are being made to experience this.

    Have you tried to contact any local or national media outlets? I think this situation needs to see the light of day.

    Good luck to you. I wish you the best.

  7. Reply
    January 29, 2011 at 1:46 am

    Perhaps you could contact your senator or congressman. I have been watching the news and just yesterday, “Chase mortgage division”, is putting a hold on foreclosures. They are restructuring all of their loans if possible. Good luck to you! We have a 2nd T.D. with W.F. that we just cannot pay due to job loss.

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