If preservation of the income stream is a primary goal, then a buyer who wishes to assume the defaulted loan should be very attractive to a lender. The first question you should ask all lenders is, "Subject to underwriting conditions to make sure I am creditworthy, is it possible to assume the loan?"
Unfortunately, many lenders will tell you that assumption is not possible. That may be because it is not allowed under their various contracts with other parties. It might be that assumption is not allowed at that particular stage of default. For example, the people in customer service who deal with current loans or those less than 60 days past due may not know anything about loan assumptions. At that stage, it might not be allowed. But, if the loan becomes 60, 90, or 120 days past due, there may be different rules.
If you are not happy with the answer you receive, always ask for a second opinion from a supervisor. Also, be sure to ask the supervisor if there will be different rules at a later stage in the default.
The servicing company earns money by efficiently servicing loans, preferably by continuing to service the ones already in its portfolio. Foreclosures are not good for the company, nor is it good for a buyer to pay off the defaulted loan and obtain financing elsewhere. It would be in the servicing company's best interest if you would assume the loan, continue making payments, and it could continue earning its fees. In that regard, servicing companies have the same motivation as lenders.
Unfortunately, servicing companies have very lengthy and complicated contracts spelling out their rights, authority, and obligations.As much as their personnel might want to acquire you as a customer with an assumption and retain the defaulted loan, their hands might be tied.
Keep in mind, also, that servicing companies must work very efficiently if they are to make a profit. You are only one of the very many foreclosure investors with whom they will come in contact. If there are as few as one hundred of you - an unrealistically small number for large servicers - they cannot afford to spend time on creative solutions. The legal department will have to render an opinion regarding whether assumption of the loan is allowed or not.
The loan owner will have to give his or her consent, if that is required. The company's legal department will have to determine if it is allowed to give consent or if its structure and stakeholders make that impossible. All this might be insurmountable for you.
Remember the efficiency motivation when talking to servicing companies. Be prepared. Have all supporting documentation available. If you argue in favor of a lower value than the price demanded, have complete information about comparable sales. The servicer will have to make a case to superiors supporting the acceptance of a lower price or a less than complete payoff. I usually like to make it easy for them to plagiarize my material. The more documentation I give a servicer, the better my chances of getting what I want.
Put everything in writing, so a new person assigned to the file can get up to speed quickly. Reference the servicer's file number on all correspondence so employees do not waste time trying to find the loan you are writing about. Begin all letters and emails with a short recap of recent events.
If you refer to a document already submitted to the servicer, attach another copy of the letter that references the document. That way, no one has to find the prior correspondence or documents. Remember, these are very busy people with massive internal pressure to maximize returns by spending as little time as possible on each loan. Help them, and in doing so you will help yourself.
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Note: This article was sent to us by: Tyler Lanster at 06262010
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