Page 16 - Boca Club News - March '24

Page 16, Boca Club News
Legal: High Interest Rate Alternatives

By Michael J Posner, Esq. a partner personal liability for the mortgage payment. In some cases Some sellers will offer a wrap mortgage to buyers as a
in Ward Damon P.L., a mid-sized the seller is then released from personal liability at the time way to have the loan continued to be paid by the original
real estate and business-oriented of closing and assumption by the buyer, who becomes the borrower. The seller finances the full purchase with a new
law firm serving all of Florida, with sole borrower. A buyer who does not assume the mortgage mortgage that wraps around the existing loan. Then the buyer
offices in Palm Beach and Lee County. loan is deemed to take subject to the mortgage, meaning makes payments to the seller on the wrap mortgage, and the
They specialize in real estate law that, while the buyer does not have personal liability for seller then makes payments to the lender. Sometimes the
and can assist lenders, buyers and the loan, the property they are buying is still subject to wrap mortgage is larger than the existing loan, and the seller,
sellers with purchases, loan closings the mortgage. In those cases any recourse liability for the as lender, gets to keep the difference between the new loan
and refinances of residential and mortgage that the seller may have is not released. payment and the existing loan payment.
commercial real estate. They can be reached at 561.594.1452 Most loans on the market are not assumable and contain Another strategy used by some sellers is to transfer their
or at mjposner@warddamon.com. clauses that specifically state that any transfer (including residence into their own trust. This type of transfer is specifically
In today’s volatile mortgage market, many buyers are a beneficial transfer) will be deemed a default under the exempt from the due on sale clause due to a federal statute (12
priced out due to high mortgage interest rates that are hovering mortgage. If a buyer closes on a property with this type of U.S. Code § 1701j–3). Once in the trust, they then transfer the
around seven percent. In addition, many homeowners would mortgage the lender has the option of declaring a default beneficial interest to the new buyer, but remain as trustee, so
love to sell their home, either to capture the equity built up under the mortgage, proceed to call the loan and require that the legal title remains in the original seller/borrower (with
over the last few years or to upsize or downsize, but they payment in full, failing which a loan foreclosure could be the beneficial interest now vested in the buyer). However, most
are trapped in their homes due to historically low interest filed against the new owner buyer, the old owner seller due on sale clauses also treat transfers of the beneficial interest
rates from three to four years ago. By way of example only, and the property. as a triggering event for the due on sale clause.
the monthly payment difference on a $400,000 mortgage is Some buyers and sellers are willing to assume this risk, For buyers with the ability to refinance a loan quickly, or
nearly $1,000 ($1,686.42 at 3% versus $2,661.21 at 7%). either counting on the lender to not find out (a lender may for sellers able to satisfy an existing loan, the risk of the due
This has led many buyers to explore mortgage not become aware of a sale until it receives a new tax bill on sale clause may be outweighed by the interest rate savings
assumption options. Mortgages generally fall into three showing the new owner). Others believe that the lender and the quicker sale of a property, though the potential for
categories of assumability. First, there are mortgages that may complain about the sale but hope that no action is damaging credit reporting, foreclosure and judgments means
are freely assumable, which means that no lender consent taken by the lender to call a default or foreclose as long that these types of transactions must be done cautiously with
is required. These mortgages are rare and are usually as the monthly payments are timely made to the lender. a knowing understanding of the risks.
private loans or simple purchase money mortgages from
Some loans, such as veteran’s administration and FHA Medical Matters: Elder Abuse
a prior seller.

loans, are assumable with consent of the lender. A buyer
must still apply and qualify for the loan, but assuming By Richard Nagler, M.D., a member successful private practice in Internal Medicine and
good income, credit and lower debt to income ratios, of Broken Sound Club and retired Gastroenterology. During that time, he also served for
the ability to assume these loans can be accomplished physician. After graduating from ten years as Chief of Medicine at Huntington Hospital in
without too much difficulty. The biggest issue is the lack the University of Pennsylvania Huntington, N.Y.
of good infrastructure by these lenders for these types of and New York University’s School The over-65 population in America is increasing rapidly
assumptions. This can lead to lengthy delays in obtaining of Medicine, Dr. Nagler served every year, and with it a rise in the abuse of these seniors
approval (up to six months). A whole industry has sprung his internship and residency at nationwide. At present over six million cases are being
up just to assist buyers in timely obtaining approval (for Baltimore City Hospital and Johns reported annually, which represents one in 10 adults over
a fee, of course). It is imperative that the buyers factor Hopkins. He followed that with a 65. However, the situation is much worse as it is estimated
in delays in their purchase offer to avoid contracts being Fellowship in Gastroenterology at Yale University School that, due to unreported cases, only one in 24 incidents is
cancelled due to the delays in getting approval. of Medicine, and was then Chief of Gastroenterology being reported to the authorities.
Two types of assumptions occur with these types of at Fitzimmons General Army Hospital in Denver. He Elder abuse is defined as a single or repeated action
mortgages. A buyer who agrees to pay the note secured returned to the Yale Medical School for one year as an
by the mortgage is deemed to assume the loan and has Assistant Professor of Medicine before opening his own Medical Matters on page 18

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