[WSBARP] Query re Enforcement of Owner Occupancy terms

[Richard Holland]

I have heard – anecdotally – that it is a pretty big risk if it is an FHA loan.  Presumably big brother can figure out pretty quickly that one is trying to double dip on the owner occupied front.

While a bank often can choose to accelerate, they usually respond by increasing the interest rate / changing the terms since the loan no longer is owner occupied.  Will they – as a practical matter – discover it?  I suppose that depends on how quickly the ‘client’ stops using the house as their residence and having their mail and checks etc. reflect the ‘new’ location.  It isn’t like the bank sends people out to the property to confirm exactly who lives there so it is really about the electronic/paper trail – especially when you are talking about 6 – 9 months of ‘overlap’ and not years.

I would not ever advise a client to do it and I would make sure I had strong documentation about that, but I understand that you’re trying to respond to a client who is asking “yeah okay, I get you think I shouldn’t do it, but what if I want to anyway?”

From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Craig Blackmon
Sent: Friday, September 16, 2016 8:57 AM
To: WSBA Real Property List Serve <wsbarp at lists.wsbarppt.com>
Subject: [WSBARP] Query re Enforcement of Owner Occupancy terms

Listmates, I am seeking any practical insight on whether lenders actually enforce the terms of owner-occupancy restrictions. Specifically Client refinanced and promised to reside in house for 12 months. A few months later, and "Dream Home" is now on the market. Client is curious to know practical risk of moving out and into Dream Home, then renting asserted "residence." Any real-world insight is appreciated on how lender may react, if at all.

And on the legal end - since I have your attention - it is my understanding that the lender's remedy in most instances is acceleration (I haven't yet reviewed the instrument at issue). Thanks as well for any thoughts there.

Enjoy the weekend! Go M's!!!

Craig

Craig Blackmon, Attorney at Law
Seattle Real Estate Lawyer<http://www.seattlepropertylawyer.com/>
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