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Maduka Nweke
Transfer of mortgages seem to be a precise remedy for people who are capable of sustaining their mortgage. But because most people would like to access the loan facility, they will first not check the risk vulnerabilities. They will just go on and start what they will not finish. They will not consider whether the facility is transferable and fail to ask relevant questions.
Although, rule seems not possible, there are ways you can transfer a mortgage, and why you might want to consider it, following some exceptional cases. Most loans aren’t transferable, and the reason for this is that they have a “due on sale” clause. That means, when the property is sold, the entirety of the loan comes due. But some loans are created without due on sale clauses, and so they can be transferred from seller to buyer. These are known as “assumable loans according to experts. There are three main types of assumable loans. There are some of these mortgage loans that are alien to Nigeria and Nigerians. VA loans are designed to be assumable because service members move frequently for their careers. Loans closed before March 1988 can be transferred freely, with no additional approval from the lender; however, given that those loans are now nearly 30 years old, there aren’t too many left around. Loans closed after that date must have the transfer approved by the lender, which means that the person on the receiving end of the transfer has to meet certain income and credit standards to qualify.
FHA loans can also be designed to be transferable without lender approval. The loan must have closed before December 1989 which also means not many are still around. Otherwise, the lender must approve the new borrower. USDA loans can also be transferred, but lender approval is required, and the recipient must not exceed certain income requirements. But besides all these, there are many reasons you should make a mortgage transfer. With today’s low interest rates, there is less incentive to want to take over someone else’s mortgage. However, when rates rise, this option looks more attractive.
Taking over a loan also saves on closing costs. So instead of paying to originate a new loan and all the taxes and other closing costs associated with that, a buyer pays a nominal fee to assume the existing loan. You also don’t need a down payment to assume a loan. Nigerians, because of the rule/policy implementation always do not see the positive aspect but the government angle. This because there instability in policies implementation and real investors do not always subscribe to policy summersault. They believe that, even if a loan transfer is possible and preferable, there are some complications to the process. These complications are the considerations because if one cannot mitigate a complicated issue, there is no gain going forward.
When your lender transfers servicing, they hand over the management of your loan to a new mortgage or servicing company. For the borrower, all this means is a new institution will be collecting your payments, handling your escrow accounts, dealing with any insurance or tax matters, and answering your questions. This transaction will not impact your initial mortgage agreement in any way. Your loan amount, interest rate, contractual payment obligation and payment schedule will remain the same. The only change as a result of this transfer will be where you send your monthly mortgage payment. This transfer could take place at any time during the life of your loan. In some cases, loan servicing can be transferred right after closing even before a payment is made. Under the Real Estate Settlement Procedures Act (RESPA), lenders are typically required to provide certain disclosures during the mortgage process. This includes a Mortgage Servicing Disclosure Statement, which explains whether the lender intends to service the loan or transfer servicing to another company. Transfer of loan servicing is no reason to panic. In fact, it’s quite common in the mortgage industry for loan servicing to be transferred from your initial lender to another company. While it may not be cause for concern, it’s important for you to understand your rights as a borrower and what to expect during (and after) the transfer.
The mortgage transfer, no matter from which angle one sees it, does not come and go without the various pitfalls. These pitfalls, kind of act as checks and balances in the whole transactions. Although you don’t need a down payment to assume a loan, you still might need to come up with a big chunk of change to make the transfer. Since you’re assuming only the existing loan amount, you are responsible for paying the seller for their equity in the home.
The more equity a seller has, the more money the buyer has to pay up front. For example, if the purchase price of the property is $300,000, but the seller has paid down the loan to $200,000, the buyer has to come up with the $100,000 difference that the seller has racked up in home equity. If the buyers don’t have that much cash on hand, they can take out a secondary loan, but that loan will be at the current higher interest rate and include standard closing costs, making the transfer much less attractive. Another thing to watch out for is that the original borrowers still retain responsibility for the loan unless they have a release in writing from the lender. If they fail to get this release, they are still liable if the new homeowner fails to repay the loan, and the loan debt will still count against them if they attempt to take out a new mortgage. If you do go through a loan assumption, be sure to hold onto your release paperwork in case there is ever an issue down the line.
In America, almost every loan other than a VA, FHA, or USDA loan will have a due on sale clause. However, because of a law called the Garn–St. Germain Act of 1982, there are some transfers that all lenders are required to allow despite the due on sale clause. Most of these are transfers between family members related to unanticipated changes in the homeownership, explains Combs. Here is a list of the most tenable common exemptions; Loan transfer to a relative on the death of a borrower; Loan transfer from a borrower to a spouse or children; Loan transfer from one exposure to another during a divorce or separation. This is only if they continue to live there and or Loan transfer to a living trust, if you continue to occupy the property. These transfers work by either adding a person to the home’s deed, removing a deceased owner from the home’s deed, or having the spouse giving up ownership sign a quitclaim deed. Once ownership of the home has changed hands, the new owner can continue to pay the previous owner’s mortgage.
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