Can I assume 1st TD in a foreclosure

[EconProf]

Question first, then the background: Can I assume the very desirable 1st Trust Deed in a foreclosure if I make up all the arrears, late fees, other costs, etc. This would be better than getting a whole new loan or coming up with the cash at foreclosure, since it is a 5-unit newer apt. building in Yuma, 25 year fixed @ 6 5/8. HLS tells me any new financing would be at a much higher rate with a worse loan-to-value ratio (It is $195k owed on a value of $25ok).
Here is why I have to know. I have a $50k second TD on this property, so have to buy it before trustee sale (about 2 months off), or talk the owner into a deed-in-lieu. The latter would probably require a bribe to get him to cooperate.
If I can work with the lender, then I’ll be in a better negotiating position with the owner. The owner doesn’t really care since he is underwater on the 1st & 2d TD anyway, and BTW, his credit is already trashed.
Would appreciate any advice from Piggs who have been in this sort of situation.

[SK in CV]

I’m a bit confused by your descriptions of what the current status is, but a couple things that might help….

Almost all non-residential loans (including apartments of more than 4 units) written in the last 20 years are due on sale. Since you say the property is newer, it’s highly unlikely that the loan is assumable by contract. That doesn’t meant it can’t be assumed, just that it would require negotiation with the lender, probably involve the payment of points/fees and underwriting just as if it is a new loan.

There is no way you will be able to assume an existing loan at foreclosure by that loan. The possibility exists that you may be able to negotiate with the lender prior to TS, including negotiating the arrearages. Since you already hold the junior loan, you obviously have leverage as well as the 2nd most to lose.

If you were to foreclose on your note, the whole thing may be different. It sounds like it’s too late for that to happen? I’m not familiar with AZ law, so it is possible that a foreclosure of a junior lien does not trigger a due on sale event, but in any case, it does put you in a stronger negotiating position.

Be careful, if you’re not in the right place at the right time, with the right amount of cash on hand, you could easily be wiped out. And be careful not to throw good money after bad. While Yuma hasn’t been hit near as bad as the Phoenix area (it never went up as much either), the rental market in most parts of Yuma really sucks right now. Lots of vacancies. And there is no good reason to assume that it will ever come back. It is over-built and there is almost no good reason for anyone to ever want to buy (or live) there.

[SK in CV]

I’m a bit confused by your descriptions of what the current status is, but a couple things that might help….

Almost all non-residential loans (including apartments of more than 4 units) written in the last 20 years are due on sale. Since you say the property is newer, it’s highly unlikely that the loan is assumable by contract. That doesn’t meant it can’t be assumed, just that it would require negotiation with the lender, probably involve the payment of points/fees and underwriting just as if it is a new loan.

There is no way you will be able to assume an existing loan at foreclosure by that loan. The possibility exists that you may be able to negotiate with the lender prior to TS, including negotiating the arrearages. Since you already hold the junior loan, you obviously have leverage as well as the 2nd most to lose.

If you were to foreclose on your note, the whole thing may be different. It sounds like it’s too late for that to happen? I’m not familiar with AZ law, so it is possible that a foreclosure of a junior lien does not trigger a due on sale event, but in any case, it does put you in a stronger negotiating position.

Be careful, if you’re not in the right place at the right time, with the right amount of cash on hand, you could easily be wiped out. And be careful not to throw good money after bad. While Yuma hasn’t been hit near as bad as the Phoenix area (it never went up as much either), the rental market in most parts of Yuma really sucks right now. Lots of vacancies. And there is no good reason to assume that it will ever come back. It is over-built and there is almost no good reason for anyone to ever want to buy (or live) there.

[SK in CV]

I’m a bit confused by your descriptions of what the current status is, but a couple things that might help….

Almost all non-residential loans (including apartments of more than 4 units) written in the last 20 years are due on sale. Since you say the property is newer, it’s highly unlikely that the loan is assumable by contract. That doesn’t meant it can’t be assumed, just that it would require negotiation with the lender, probably involve the payment of points/fees and underwriting just as if it is a new loan.

There is no way you will be able to assume an existing loan at foreclosure by that loan. The possibility exists that you may be able to negotiate with the lender prior to TS, including negotiating the arrearages. Since you already hold the junior loan, you obviously have leverage as well as the 2nd most to lose.

If you were to foreclose on your note, the whole thing may be different. It sounds like it’s too late for that to happen? I’m not familiar with AZ law, so it is possible that a foreclosure of a junior lien does not trigger a due on sale event, but in any case, it does put you in a stronger negotiating position.

Be careful, if you’re not in the right place at the right time, with the right amount of cash on hand, you could easily be wiped out. And be careful not to throw good money after bad. While Yuma hasn’t been hit near as bad as the Phoenix area (it never went up as much either), the rental market in most parts of Yuma really sucks right now. Lots of vacancies. And there is no good reason to assume that it will ever come back. It is over-built and there is almost no good reason for anyone to ever want to buy (or live) there.

[SK in CV]

I’m a bit confused by your descriptions of what the current status is, but a couple things that might help….

Almost all non-residential loans (including apartments of more than 4 units) written in the last 20 years are due on sale. Since you say the property is newer, it’s highly unlikely that the loan is assumable by contract. That doesn’t meant it can’t be assumed, just that it would require negotiation with the lender, probably involve the payment of points/fees and underwriting just as if it is a new loan.

There is no way you will be able to assume an existing loan at foreclosure by that loan. The possibility exists that you may be able to negotiate with the lender prior to TS, including negotiating the arrearages. Since you already hold the junior loan, you obviously have leverage as well as the 2nd most to lose.

If you were to foreclose on your note, the whole thing may be different. It sounds like it’s too late for that to happen? I’m not familiar with AZ law, so it is possible that a foreclosure of a junior lien does not trigger a due on sale event, but in any case, it does put you in a stronger negotiating position.

Be careful, if you’re not in the right place at the right time, with the right amount of cash on hand, you could easily be wiped out. And be careful not to throw good money after bad. While Yuma hasn’t been hit near as bad as the Phoenix area (it never went up as much either), the rental market in most parts of Yuma really sucks right now. Lots of vacancies. And there is no good reason to assume that it will ever come back. It is over-built and there is almost no good reason for anyone to ever want to buy (or live) there.

[SK in CV]

I’m a bit confused by your descriptions of what the current status is, but a couple things that might help….

Almost all non-residential loans (including apartments of more than 4 units) written in the last 20 years are due on sale. Since you say the property is newer, it’s highly unlikely that the loan is assumable by contract. That doesn’t meant it can’t be assumed, just that it would require negotiation with the lender, probably involve the payment of points/fees and underwriting just as if it is a new loan.

There is no way you will be able to assume an existing loan at foreclosure by that loan. The possibility exists that you may be able to negotiate with the lender prior to TS, including negotiating the arrearages. Since you already hold the junior loan, you obviously have leverage as well as the 2nd most to lose.

If you were to foreclose on your note, the whole thing may be different. It sounds like it’s too late for that to happen? I’m not familiar with AZ law, so it is possible that a foreclosure of a junior lien does not trigger a due on sale event, but in any case, it does put you in a stronger negotiating position.

Be careful, if you’re not in the right place at the right time, with the right amount of cash on hand, you could easily be wiped out. And be careful not to throw good money after bad. While Yuma hasn’t been hit near as bad as the Phoenix area (it never went up as much either), the rental market in most parts of Yuma really sucks right now. Lots of vacancies. And there is no good reason to assume that it will ever come back. It is over-built and there is almost no good reason for anyone to ever want to buy (or live) there.

[EconProf]

Thanks SK.
More background as to why I need to protect my $50k already invested and avoid being frozen out by FC on the 1st TD.
With rent of $3000/mo, a 6 5/8 % loan (good for investment properties), I can make money owning this building. I have 5 of exactly the same building next door, three of them since new in 2003, and two acquired deed in lieu of foreclosure recently.
The latter two I also had 2d TDs on, and had to pay off the owner, in FC on the 1st and 2d TDs, $10k to go away. He cooperated, turned over all the paperwork, I made up all the late fees, payments, FC costs to date, and beat the Trustee’s Sale date. So the lender (WaMu) knows me, has copies of the settlement papers, will soon get a copy of the Deed, etc. But they won’t officially put me on the loan. They seem to be saying, just keep those payments coming in and we’ll be quiet. Some call this Extend and Pretend. I call it unnerving. On the next building I’d like to be more up front and legal with them and actually be on the loan, and do it all before FC. On the other two buildings they were hard to communicate with because of privacy rules, etc., but when I finally got to the right people they got real friendly and kept asking when I would mail in the total arrearages.

[EconProf]

Thanks SK.
More background as to why I need to protect my $50k already invested and avoid being frozen out by FC on the 1st TD.
With rent of $3000/mo, a 6 5/8 % loan (good for investment properties), I can make money owning this building. I have 5 of exactly the same building next door, three of them since new in 2003, and two acquired deed in lieu of foreclosure recently.
The latter two I also had 2d TDs on, and had to pay off the owner, in FC on the 1st and 2d TDs, $10k to go away. He cooperated, turned over all the paperwork, I made up all the late fees, payments, FC costs to date, and beat the Trustee’s Sale date. So the lender (WaMu) knows me, has copies of the settlement papers, will soon get a copy of the Deed, etc. But they won’t officially put me on the loan. They seem to be saying, just keep those payments coming in and we’ll be quiet. Some call this Extend and Pretend. I call it unnerving. On the next building I’d like to be more up front and legal with them and actually be on the loan, and do it all before FC. On the other two buildings they were hard to communicate with because of privacy rules, etc., but when I finally got to the right people they got real friendly and kept asking when I would mail in the total arrearages.

[EconProf]

Thanks SK.
More background as to why I need to protect my $50k already invested and avoid being frozen out by FC on the 1st TD.
With rent of $3000/mo, a 6 5/8 % loan (good for investment properties), I can make money owning this building. I have 5 of exactly the same building next door, three of them since new in 2003, and two acquired deed in lieu of foreclosure recently.
The latter two I also had 2d TDs on, and had to pay off the owner, in FC on the 1st and 2d TDs, $10k to go away. He cooperated, turned over all the paperwork, I made up all the late fees, payments, FC costs to date, and beat the Trustee’s Sale date. So the lender (WaMu) knows me, has copies of the settlement papers, will soon get a copy of the Deed, etc. But they won’t officially put me on the loan. They seem to be saying, just keep those payments coming in and we’ll be quiet. Some call this Extend and Pretend. I call it unnerving. On the next building I’d like to be more up front and legal with them and actually be on the loan, and do it all before FC. On the other two buildings they were hard to communicate with because of privacy rules, etc., but when I finally got to the right people they got real friendly and kept asking when I would mail in the total arrearages.

[EconProf]

Thanks SK.
More background as to why I need to protect my $50k already invested and avoid being frozen out by FC on the 1st TD.
With rent of $3000/mo, a 6 5/8 % loan (good for investment properties), I can make money owning this building. I have 5 of exactly the same building next door, three of them since new in 2003, and two acquired deed in lieu of foreclosure recently.
The latter two I also had 2d TDs on, and had to pay off the owner, in FC on the 1st and 2d TDs, $10k to go away. He cooperated, turned over all the paperwork, I made up all the late fees, payments, FC costs to date, and beat the Trustee’s Sale date. So the lender (WaMu) knows me, has copies of the settlement papers, will soon get a copy of the Deed, etc. But they won’t officially put me on the loan. They seem to be saying, just keep those payments coming in and we’ll be quiet. Some call this Extend and Pretend. I call it unnerving. On the next building I’d like to be more up front and legal with them and actually be on the loan, and do it all before FC. On the other two buildings they were hard to communicate with because of privacy rules, etc., but when I finally got to the right people they got real friendly and kept asking when I would mail in the total arrearages.

[EconProf]

Thanks SK.
More background as to why I need to protect my $50k already invested and avoid being frozen out by FC on the 1st TD.
With rent of $3000/mo, a 6 5/8 % loan (good for investment properties), I can make money owning this building. I have 5 of exactly the same building next door, three of them since new in 2003, and two acquired deed in lieu of foreclosure recently.
The latter two I also had 2d TDs on, and had to pay off the owner, in FC on the 1st and 2d TDs, $10k to go away. He cooperated, turned over all the paperwork, I made up all the late fees, payments, FC costs to date, and beat the Trustee’s Sale date. So the lender (WaMu) knows me, has copies of the settlement papers, will soon get a copy of the Deed, etc. But they won’t officially put me on the loan. They seem to be saying, just keep those payments coming in and we’ll be quiet. Some call this Extend and Pretend. I call it unnerving. On the next building I’d like to be more up front and legal with them and actually be on the loan, and do it all before FC. On the other two buildings they were hard to communicate with because of privacy rules, etc., but when I finally got to the right people they got real friendly and kept asking when I would mail in the total arrearages.

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