Paying Out A Wrap

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aaron12
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@aaron12
Join Date: 2003
Post Count: 8
April 3, 2004 - 1:49 pm
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
FW
Member
@fw
Join Date: 2002
Post Count: 478
April 3, 2004 - 8:57 pm
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
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
April 4, 2004 - 7:49 am
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
siacci
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@siacci
Join Date: 2003
Post Count: 53
April 5, 2004 - 6:48 am
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
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
April 5, 2004 - 9:34 am
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
aaron12
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@aaron12
Join Date: 2003
Post Count: 8
April 6, 2004 - 11:30 am
Thanks all for the advice.
Aaron