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Charitable Endowment Fee

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J

jonic12

Guest
What is the name of your state? California

I am in the middle of purchasing a new construction condo in Murrieta, CA.
As part of our purchase agreement, the bulider had us sign an addendum imposing a charitable endowment fee on the property that needs to be paid by buyer and seller each time the property is transferred. What we didn't know is that the terms are recorded on our title work. This is showing up on our prelim and is being rejected by lenders because it looks to them like a possible lien could show up on the property from this. Because I am in the mortgage business, I refused to go through the builder's lender, but now every lender I talk to is denying the file because of this, and I am being advised to back out on the property and loose my $4,000 deposit because this is a problem that will persist every time I try to refi or sell the property. I would like to know if anyone has ever heard of this before and if what they are doing is even legal.
 


H

HomeGuru

Senior Member
jonic12 said:
What is the name of your state? California

I am in the middle of purchasing a new construction condo in Murrieta, CA.
As part of our purchase agreement, the bulider had us sign an addendum imposing a charitable endowment fee on the property that needs to be paid by buyer and seller each time the property is transferred. What we didn't know is that the terms are recorded on our title work. This is showing up on our prelim and is being rejected by lenders because it looks to them like a possible lien could show up on the property from this. Because I am in the mortgage business, I refused to go through the builder's lender, but now every lender I talk to is denying the file because of this, and I am being advised to back out on the property and loose my $4,000 deposit because this is a problem that will persist every time I try to refi or sell the property. I would like to know if anyone has ever heard of this before and if what they are doing is even legal.
Click to expand...

**A: I don't quite understand the problem. If the fee is only due at time of transfer, it should be a one time "expense" and not recorded on title and affect lending criteria. There has to be more to this. A lot more.
 
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N

nextwife

Senior Member
I, too, am confused. Typically, this is dealt with to the lender's satisfaction by making payment of the association one-time transfer fee a closing requirement.
 
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J

jonic12

Guest
This particular item has nothing to do with the HOA. And what makes it even more confusing is that the agreement as it is worded on the prelim is between "Lennar Charitable Housing Foundation" and "Greystone Homes." Well Greystone Homes, happens to be a division on Lennar, so it looks to me like they are setting up a charity fund for them to receive the proceeds for themselves every time the property is transferred.
The lenders are refusing to lend on this property because it makes the loan unable to be sold on the secondary market. They want a crystal clean title, and this being recorded with the county makes them question that in the future this could be placed in front of any deeds of trust that are recorded on the property.
Ultimately it seems like they are backing us into a corner that we HAVE to use thier lender because they are the only ones who will approve the loan so far. This is against fair lending practices, right?
 
H

HomeGuru

Senior Member
jonic12 said:
This particular item has nothing to do with the HOA. And what makes it even more confusing is that the agreement as it is worded on the prelim is between "Lennar Charitable Housing Foundation" and "Greystone Homes." Well Greystone Homes, happens to be a division on Lennar, so it looks to me like they are setting up a charity fund for them to receive the proceeds for themselves every time the property is transferred.
The lenders are refusing to lend on this property because it makes the loan unable to be sold on the secondary market. They want a crystal clean title, and this being recorded with the county makes them question that in the future this could be placed in front of any deeds of trust that are recorded on the property.
Ultimately it seems like they are backing us into a corner that we HAVE to use thier lender because they are the only ones who will approve the loan so far. This is against fair lending practices, right?
Click to expand...
**A: how much are we talking about here as the gift amount; $500?
 
J

jonic12

Guest
It is one-twentieth of one percent of the total purchase price. In this case $119.20. It's not paying the fee that is the problem, it is the lender's not lending on the property because of it.
 
H

HomeGuru

Senior Member
jonic12 said:
It is one-twentieth of one percent of the total purchase price. In this case $119.20. It's not paying the fee that is the problem, it is the lender's not lending on the property because of it.
Click to expand...

**A: now I am even more confused. What exactly is the lender telling you as to why they can't finance the property?
 
N

nextwife

Senior Member
And why isn't this being handled like any other title clearance issue that can can be satisfied as part of the closing process (like paying off a mortgage at closing)?

Are they saying the existance of such a fee makes it not comply with secondary market underwriting guidelines?

Is it that they won't lend there at all, or they won't lend until the fee is paid?
 
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