Ask a Lawyer, David L. Leon, Attorney, Dallas, Texas (214) 696-0021 » liens

What is a wrap around mortgage?

David Leon — Sat, 26 Dec 2009 04:15:28 +0000

A typical wrap around mortgage is when a borrower sells a house to buyer, and the buyer is responsible for paying the first mortgage. In many cases, the seller takes the payments from the buyer and pays the first mortgage directly.

For example, Joe has a mortgage on his house with First National Bank for $10,000, payable in $100 monthly payments. Joe then sells his house to Jessica for $12,000, for $120 monthly payments. Jessica puts no money down. Jessica is making payments to Joe for $120 per month. Joe, in turn, pays the $100 per month to First National Bank, and keeps the extra $20 per month.

Most of these scenarios violate the “due on sale” provisions contained in most Texas residential mortgages.

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15/02/2009 -- I’ve temporarily rented out my house while I’m looking for a new house to buy. Do I lose my homestead protection on my house? (0)
15/02/2009 -- My spouse moved out, and I stayed in the house. Will I lose my homestead protection? (0)
15/02/2009 -- I have a judgment lien. Does that attach to a homestead? (0)
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I have a child support lien. Is the exempt personal property protected from attachment?

David Leon — Sun, 28 Jun 2009 14:28:29 +0000

The Chapter 42 exempt personal property protections do not apply to child support liens, per Sec. 42.005.

CHILD SUPPORT LIENS. Sections 42.001, 42.002, and 42.0021 of this code do not apply to a child support lien established under Subchapter G, Chapter 157, Family Code.

25/12/2009 -- What is a wrap around mortgage? (0)
28/06/2009 -- I have a judgment against me. Can I use non-exempt property to pay off debts secured by exempt property? (0)
06/03/2009 -- What is a “liz pendens”? (0)
15/02/2009 -- I have a judgment lien. Does that attach to a homestead? (0)
15/01/2009 -- I had two liens on my house (first and second). The first lienholder foreclosed. Can the second lienholder do anything? (0)

I have a judgment against me. Can I use non-exempt property to pay off debts secured by exempt property?

David Leon — Sun, 28 Jun 2009 14:16:38 +0000

Section 42.004 of the Texas Property Code attempts to prevent this practice (which is also commonly referred to as a fraudulent transfer to avoid creditors.) The statute provides:

If a person uses the property not exempt under this chapter to acquire, obtain an interest in, make improvement to, or pay an indebtedness on personal property which would be exempt under this chapter with the intent to defraud, delay, or hinder an interested person from obtaining that to which the interested person is or may be entitled, the property, interest, or improvement acquired is not exempt from seizure for the satisfaction of liabilities. If the property, interest, or improvement is acquired by discharging an encumbrance held by a third person, a person defrauded, delayed, or hindered is subrogated to the rights of the third person.

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25/12/2009 -- What is a wrap around mortgage? (0)
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28/06/2009 -- What is a fiduciary duty? (0)
28/06/2009 -- I have a child support lien. Is the exempt personal property protected from attachment? (0)
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What is a “liz pendens”?

David Leon — Sat, 07 Mar 2009 01:14:17 +0000

A liz pendens is a filing which informs the public of a dispute regarding a parcel of real property. For example, if someone is claiming an ownership interest in land, but is afraid that the person in possession of the land will sell the land prior to a suit being filed, then the person can file a liz pendens, informing a would be purchaser that the property is in dispute. There are heavy penalties if someone wrongfully files a liz pendens.

25/12/2009 -- What is a wrap around mortgage? (0)
28/06/2009 -- I have a child support lien. Is the exempt personal property protected from attachment? (0)
28/06/2009 -- I have a judgment against me. Can I use non-exempt property to pay off debts secured by exempt property? (0)
06/03/2009 -- What is adverse possession? (0)
15/02/2009 -- I have a judgment lien. Does that attach to a homestead? (0)
15/01/2009 -- I had two liens on my house (first and second). The first lienholder foreclosed. Can the second lienholder do anything? (0)

I have a judgment lien. Does that attach to a homestead?

David Leon — Sun, 15 Feb 2009 20:59:59 +0000

Most judgment liens in Texas are not applicable to homestead property, per Sec. 41.001 of the Texas Property Code. There are exceptions to this rule under subsection (b) for items such as purchase money liens, taxes, mechanics and materialman’s liens, homeowner’s association liens, etc.

If you have a lien against the person and s/he sells the homestead, the proceeds from such sale are not subject to seizure for up to six months, per subsection (c) of the statute.

25/12/2009 -- What is a wrap around mortgage? (0)
01/01/2010 -- When can a judgment creditor take my home? (0)
01/01/2010 -- I have a judgment against me for a credit card debt. Can they take my house? (0)
25/12/2009 -- I am a co-signor on a real estate note. The primary borrower has abandoned the property. Can the bank come after me? (0)
28/06/2009 -- I have a child support lien. Is the exempt personal property protected from attachment? (0)
28/06/2009 -- I have a judgment against me. Can I use non-exempt property to pay off debts secured by exempt property? (0)
06/03/2009 -- What is a “liz pendens”? (0)
15/02/2009 -- I have a judgment from another state, but the defendant lives in Texas. Now what? (0)
15/02/2009 -- I’ve temporarily rented out my house while I’m looking for a new house to buy. Do I lose my homestead protection on my house? (0)
15/02/2009 -- My spouse moved out, and I stayed in the house. Will I lose my homestead protection? (0)

I had two liens on my house (first and second). The first lienholder foreclosed. Can the second lienholder do anything?

David Leon — Fri, 16 Jan 2009 04:56:49 +0000

This is a common question. The answer is that a second lien holder’s security interest in your home is lost if the first lien holder forecloses. However, the debt is not wiped out, the obligation to pay still survives. If the second lien was a non-recourse note, then the second lien holder may not go after the borrower. (In Texas, home equity loans are non-recourse, so the lender may only look to the property for relief.)

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01/01/2010 -- I have a judgment against me for a credit card debt. Can they take my house? (0)