All Topics / Hotch Potch / Paying Out A Wrap

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  • Profile photo of aaron12aaron12
    Participant
    @aaron12
    Join Date: 2003
    Post Count: 8

    A question about paying out a wrap is: what happens if a Wrap instalment contract is for, let’s say, 25 years and the wrapper’s mortgage is 30 years?

    Or let’s say, a wrappee pays a deposit on a house and the wrapper doesn’t put this into repaying the loan? In either case, the wrappee has made the instalments as arranged, but the wrapper has not fulfilled his/her obligations yet to repaying the loan to the bank?

    Another case may be where the wrapper has taken out a line of credit over the property and continually draws down.

    How does the wrappee eventually take over title?

    [specs]

    Aaron Hay
    haya137 (at) optusnet.com.au

    Profile photo of FWFW
    Member
    @fw
    Join Date: 2002
    Post Count: 478

    Hi aaron
    I think as a wrapper you have an obligation to always maintain your loan at a level that means if the wrap buyer wants to pay you out, they can.
    This is one situation where “quick turnover” wraps work well, as for the first 5 or more years of a loan not a lot gets paid off, so therefore the difference in loan balances will be maintained.

    Keep smiling
    Felicity 8-)

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    If the wrappee’s loan ever gets less than the wrapper’s loan, then the wrappee may be in trouble. I think the wrappe should monitor the wrappers loan levels (eg reeceive copies of statements) to make sure this doesn’t happen. If the bank were to foreclose, the wrappe could end up with nothing.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of siaccisiacci
    Member
    @siacci
    Join Date: 2003
    Post Count: 53

    If a wrapper alowed his loan to be more than the purchasers loan then the wrapper is acting illegally. The courts would slaughter the wrapper on the spot.

    Dave

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Dave

    That may be so, but the wrapee would not necessarily know until too late. If the wrapper has no other assets, then the wrappee could be in trouble financially.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of aaron12aaron12
    Participant
    @aaron12
    Join Date: 2003
    Post Count: 8

    Thanks all for the advice.

    Aaron

Viewing 6 posts - 1 through 6 (of 6 total)

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