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Message
Renting out property without mortgage holder's consent
Posted on 6/27/14 at 2:10 pm
Posted on 6/27/14 at 2:10 pm
I guess this is the right board for this. Need some advice.
here's my situation,
I have had my house on the market for 8 or 9 months and had no offers. I needed it gone by the end of July so I inquired about renting it out as I have an interested couple. During my information gathering I called my mortgage holder, Wells Fargo, and was told I was allowed to rent it out i would just have to fill out a form which would take a couple of weeks to come in. So with what seemed to be permission I went ahead and got everything lined up and only need to get the paperwork to complete agreement. i have the couple ready to move in at the end of july, even delisted my property from real estate agency. Well today I get the paperwork in but it's just a one page notice saying i'm not allowed to rent it out. I call them and they say sorry about that but you are prohibited. This backs me into a corner and screws me over.
I normally wouldn't condone breaking the law but seeing as they screwed me over, how likely is it to be found out by the mortgage lender that you are renting it out? is it worth the risk and what are the repercussions? i'm in a bine here.
sorry for the long post and TIA
here's my situation,
I have had my house on the market for 8 or 9 months and had no offers. I needed it gone by the end of July so I inquired about renting it out as I have an interested couple. During my information gathering I called my mortgage holder, Wells Fargo, and was told I was allowed to rent it out i would just have to fill out a form which would take a couple of weeks to come in. So with what seemed to be permission I went ahead and got everything lined up and only need to get the paperwork to complete agreement. i have the couple ready to move in at the end of july, even delisted my property from real estate agency. Well today I get the paperwork in but it's just a one page notice saying i'm not allowed to rent it out. I call them and they say sorry about that but you are prohibited. This backs me into a corner and screws me over.
I normally wouldn't condone breaking the law but seeing as they screwed me over, how likely is it to be found out by the mortgage lender that you are renting it out? is it worth the risk and what are the repercussions? i'm in a bine here.
sorry for the long post and TIA
5
Posted on 6/27/14 at 2:24 pm to Fearthehat0307
shite, I wasn't even aware the mortgage holder could keep you from renting. Well, "could" is a wrong word, I just didn't think it was prevalent. Sort of like how I've never run into a loan that had a prepayment penalty.
Going to have to look into that.
Going to have to look into that.
This post was edited on 6/27/14 at 2:26 pm
Posted on 6/27/14 at 2:27 pm to Fearthehat0307
That's crazy. I would just rent it out. Although I don't know what would happen if they found out.
Posted on 6/27/14 at 2:30 pm to Fearthehat0307
Damn. Did you agree to that in your mortgage? If so, was it some special kind of loan program or something?
Posted on 6/27/14 at 2:34 pm to Fearthehat0307
What kind of a loan did you have? There are certain loans out there - mainly ones that involved bond financing programs (like those low income programs that have a forgiveable second) that require owner-occupancy. If the owner no longer lives in the home, it would violate the mortgage covenants.
Assuming that there really is some sort of covenant, are you in a posistion to re-fi into a new mortgage without that covenant?
Also, FHA loans have a one-year owner occupant requirement, I believe.
Assuming that there really is some sort of covenant, are you in a posistion to re-fi into a new mortgage without that covenant?
Also, FHA loans have a one-year owner occupant requirement, I believe.
This post was edited on 6/27/14 at 2:36 pm
Posted on 6/27/14 at 2:38 pm to 90proofprofessional
quote:it was your typical conventional 30 year fixed rate loan from my understanding. it did change hands multiple times from my original bank to fannie to wells fargo I think.
Damn. Did you agree to that in your mortgage? If so, was it some special kind of loan program or something?
the notice I received states: At this time, our standard guidelines do not permit customers to rent their property if the loan was originated as an 'owner-occupied' residence
Posted on 6/27/14 at 2:38 pm to LSUFanHouston
Check your insurance too, it's different for owner occupied vs rental.
This post was edited on 6/27/14 at 2:39 pm
Posted on 6/27/14 at 2:39 pm to Kramer26
quote:that's kind of what i'm thinking about doing but was curious about the likelihood of being found out and the penalty if I am
That's crazy. I would just rent it out. Although I don't know what would happen if they found out.
Posted on 6/27/14 at 2:40 pm to eng08
quote:I have landlord insurance all ready to go. had taken care of that already
Check your insurance too, it's different for owner occupied vs rental.
Posted on 6/27/14 at 2:46 pm to Fearthehat0307
quote:
At this time, our standard guidelines do not permit customers to rent their property if the loan was originated as an 'owner-occupied' residence
Well good for them. However, the important thing here is, what does your mortgage say.
A quick google search shows that other WF customers are having similar issues.
Pull out the original mortgage contract and read what it says. Take an attorney friend to dinner and have him read it if you need that. The fact that the loan changed hands is not relevant.
My experience has been, as long as the loan gets paid, the bank generally does not care. Yeah, their lawyers have to do their mumbo jumbo, but considering how many foreclosures they are still dealing with... they are not going to foreclose a mortgage that is paying promptly.
Posted on 6/27/14 at 2:49 pm to LSUFanHouston
quote:so you feel renting without consent is unlikely to cause me harm?
My experience has been, as long as the loan gets paid, the bank generally does not care. Yeah, their lawyers have to do their mumbo jumbo, but considering how many foreclosures they are still dealing with... they are not going to foreclose a mortgage that is paying promptly.
eta: we are discussing doing a lease purchase agreement. would that change anything as far as going without consent and being found out? I called them and they said I couldn't do lease purchase either
This post was edited on 6/27/14 at 2:51 pm
Posted on 6/27/14 at 3:00 pm to Fearthehat0307
You could do a down payment with a lease and an agreed upon price. Then require them to get real financing and actually buy by a certain time period.
I have heard some stories told on here about people doing this knowing the Tennant will never get financing, once the date comes they don't have financing, they evict and keep the deposit.
I have heard some stories told on here about people doing this knowing the Tennant will never get financing, once the date comes they don't have financing, they evict and keep the deposit.
Posted on 6/27/14 at 3:00 pm to Fearthehat0307
quote:
so you feel renting without consent is unlikely to cause me harm?
Define "cause me harm". I can't predict what WF or any other bank will do.
Now, a Lease Purchase Agreement is a whole another ballgame. Banks do not like those. They also don't bond for deeds, or any wrap financing. But again, as long as the loan is getting paid... are they really going to call the loan?
While many of us are willing to offer advice, you are reaching the territory where I would reccomend engaging a real estate attorney.
Posted on 6/27/14 at 3:05 pm to LSUFanHouston
quote:I mean as in what kind of repercussions would be expected if found out? pay a penalty, criminal charges, etc.?
Define "cause me harm". I can't predict what WF or any other bank will do.
quote:I meant does doing a lease purchase agreement instead of just collecting a rent check increase the likelihood of the bank finding out through a paper trail or what have you?
Now, a Lease Purchase Agreement is a whole another ballgame. Banks do not like those. They also don't bond for deeds, or any wrap financing. But again, as long as the loan is getting paid... are they really going to call the loan?
Posted on 6/27/14 at 3:06 pm to LSUFanHouston
quote:yeah I just figured the answer they would give me would be if they said you can't do it then you can't do it
While many of us are willing to offer advice, you are reaching the territory where I would reccomend engaging a real estate attorney.
Posted on 6/27/14 at 3:17 pm to Fearthehat0307
Why in the world would you volunteer that info to them?
If the house burns down, the insurance pays off the mortgage company first anyway.
They aren't the law. The absolute worst they could do is call in the loan and you would have to redo they another lender. Trust me, as long as Wells is getting paid, they aren't paying attention to your individual little mortgage.
Rent it!
If the house burns down, the insurance pays off the mortgage company first anyway.
They aren't the law. The absolute worst they could do is call in the loan and you would have to redo they another lender. Trust me, as long as Wells is getting paid, they aren't paying attention to your individual little mortgage.
Rent it!
Posted on 6/27/14 at 3:22 pm to Fearthehat0307
Homestead exemption will/could become an issue. If WF is escrowing for taxes/insurance and then get a large tax bill, they might inquire as to why.
Posted on 6/27/14 at 4:09 pm to CHSBears
It is in all conventional mortgage language (Fannie/Freddie) that the mortgage cannot be assumed. This means that someone else cannot benefit off of your credit profile. Since the bonds that financed it are based off of your credit and not the new buyer's. Rental could be a gray area. There are hardship scenarios where you can rent it, but you would have to look at the actual language. However, the risk factors are far higher on rentals than owner/occupied. I believe then a bond backed mortgage would be able to be moved to immediate acceleration for the same reason. So yeah, don't tell them or they could" call your note. Most people change their insurance coverage when it becomes rental property, that is when they usually find out. We always had people who tried to finance rentals as owner/occupied, we could always tell by the insurance and the taxes.
Posted on 6/27/14 at 4:11 pm to GeeOH
quote:
Wells is getting paid, they aren't paying attention to your individual little mortgage.
Unless the business rules trigger an inspection when the insurance policy changes from a homeowner policy to a dwelling policy. It's all automated, dude.
Posted on 6/27/14 at 4:47 pm to LSUFanHouston
quote:
Well good for them. However, the important thing here is, what does your mortgage say
Actually..... what really matters is what does your INSURANCE POLICY say.
Ultimately if you make the note payments the mortgage company will not even know.
What WOULD matter is if you have a loss on the property and the insurance carrier denies the claim because you misrepresented the risk.
House burns down, insurance does not pay, world of shite.....
eta:
Yall just started talking insurance before i got here.... weekend ruined
This post was edited on 6/27/14 at 4:48 pm
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