[WSBARP] [WSBAPT] Garn St. Germain & Exception for transfer where child of borrower becomes owner

[Kelby Derenick]

In my experience, the probability of the lender allowing the loan to be
assumed is about 0%.  This is because the lender would rather force the
buyers into a new higher interest rate loan given the current environment.
I think what I have done in the past in these situations is use a real
estate contract between the parties and have buyers pay the outstanding
mortgage directly every month.  Technically you need to get lender
consent for this also.  But I have seen situations where the parties enter
into the real estate contract without obtaining consent and the bank never
comes knocking.

I don't know if anyone else has other ideas.

Kelby J. Derenick
Attorney

*9414 State Ave., Suite E*

*Marysville, WA 98270Ph: (206) 659-5061*


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On Thu, May 11, 2023 at 3:59 PM Timothy Wagar <tim at testamentlawfirm.com>
wrote:

> I’m wondering if anyone here could point to some resources or offer
> thoughts/advice regarding the following situation:
>
>
>
> Clients (H and W) own 2nd home in greater Seattle area that they rent to
> son and daughter-in-law (S and DIL). S and DIL currently pay close to fair
> market rent, but would like to purchase the home. However, S and DIL do not
> have financial means to obtain conventional financing from a lender given
> today’s higher rates. H and W’s 2nd home is worth $500,000. Balance
> remaining due is $250,000 (secured by DOT) with excellent interest rate
> compared to current market interest rates.  H and W would like to sell 2nd
> home to S and DIL, but don’t want to pay off current mortgage balance (and
> use up all their cash) to offer 100% seller financing to them. It appears
> that 12 USCS Section 1701j-3 (Garn St. Germain) under subsection (d)(6),
> specifically excepts from enforcement a due on sale clause for “a transfer
> where the spouse or children of the borrower become an owner of the
> property.” H and W previously contacted mortgage lender and advised of
> their intent to transfer 2nd home to S. No response has been received and
> it has been approximately 9 months. H and W have been waiting patiently,
> but would like sell property to S and DIL at Fair Market Value with S and
> DIL assuming current mortgage and executing a 2nd note (for $250,000)
> secured by 2nd DOT.
>
>
>
> Is it problematic that the home sought to be transferred is a rental (from
> my reading of the regs it *seems okay* *—*but anyone else think
> otherwise)?
>
> Anyone generally have a best practice with respect to proceeding if
> written consent is not forthcoming from lender?
>
> Thoughts on whether this is a bad or good idea?
>
>
>
> FWIW, lender is United Wholesale Mortgage. Thanks in advance for any
> thoughts, ideas, advice.
>
>
>
>
>
> [image: Logo Description automatically generated]
>
> *Timothy A. Wagar LLM*
>
> *Phone & Fax*:  425-358-5340
>
> *Email*: tim at testamentlawfirm.com
>
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>
> Suite 2053
>
> Issaquah, WA 98027
>
> *www.testamentlawfirm.com* <http://www.testamentlawfirm.com/>
>
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