Hi I just thought I would throw this situation out there and see if anyone has any advice. I purchased a tri-plex in New Orleans 1 1/2 years ago, it is owner occupied. The condo craze is incredible right now here and have decided that I would like to convert and sell off. The first problem that I have run into is that I did not put a release clause in my mortgage. My original plan was to get a home equity line of credit do the conversion with renovations then as I sold off the units would pay a portion of the mortgage off leaving my unit and 1/3 of the mortgage intact due to the prepayment penalty in my mortgage which would be up next year..then sell off the 3rd unit. Now I believe that I am going to need to refinance with the release clause in the new mortgage....now the person at Countrywide, which is where my mortage is, told me yesterday that I should just get the home equity line, do the conversion, sell off the units and dont tell them that I did this....she said that they would never know that this happened....I was kinda shocked to hear her say this, of course she said it "off the record" which was my first clue that this was not really on the up and up...I guess my question really is does anyone have any advice on starting this process and should an attorney be the first person I talk to...or should I get the refinancing taking care of first...THANKS SO MUCH FOR ANY ADVICE

Damon

As soon as you attempt your first closing the "House of Cards" would fall apart... you have no Deed to convey and you could not provide clear title and any financing the buyers may have had will go away... fast.

If you sold for cash only... with no title insurance... with no deed being recorded (IE: you had a Fool for a Buyer) you may be able to get away with it for a while... same with a Contract for Deed and other forms of deferred purchase.

You first need to determine if your zoning allows for what your attempting, then if the structure itself will allow it and what the process of obtaining 2 new Property Identification numbers is. Then look for a New Loan which allows partial releases... don't expect this to be the typical low interest loan... it is an investment type loan and you will probably have a 60 to 75% LTV max.

Also note that lenders INCLUDING Countrywide perform routine Occupancy Checks both by records and on-site. This could flag a work around and result in a DOS demand for the full value of the remaining loan amount.

Did she tell you how you were supposed to convey a clear title to a property that is encumbered by a mortgage???

Refinance and do it right.