A customer called my loan office with the following. She has very poor credit and a short sale/foreclosure on her credit report. Her FICO scores are about 550. She now rents a home. She inherited a $2.4 Million 30 unit apartment building from her parents. It is officially owned by her via her corporation / limited liability corporation. She has a mortgage of $400,000. The building is operating at about $100,000 net income annually. She is in need of a $100,000 loan to pay off credit cards and do some building upgrades. The LTV makes this deal tempting and we have set her up with a lender at 14% with 4 points at closing. The lender is requesting that she actually transfer the deed over to him at the time of the loan and upon repayment in 1 year with an option for a 2nd year she will be able to "buyback" the deed for the amount owed. If she does not pay the building will be his, he will take over the original mortgage and she is out. He wants to do this because he is not interested in potentially sitting through foreclosure procedures and or bankruptcy court. It will give him chance to buyout the 1st mortgage and not have to sit in court for months. Is this practice legal in NJ? Will the deal be reversed by a judge for "predatory" lending? Any specific ideas on actuality of making such a deal? I am really looking to make this happen for both the client and the lender. At this time she seems willing to go for pretty much anything, so it really comes down to legal or not and how to do it right.
