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What happens to a previous homeowner who sold their home via AITD and now the new buyer is not making the payments and not cooperating? I get that the Seller would need to foreclose on the Buyer in order to get the property back. However, the property is worth less then the note and the bank would ordinarily foreclose on the borrower, yet, he isnt the homeowner anymore - sounds complicated and will need lawyers to straighten this out.
We are in CA - I would imagine the lender has certain rights and the current owner has rights, too. This borrower would cooperate and the best I can think of is for him to assign his rights to the bank, so the bank can foreclose with the rights of the borrower/previous owner.

First, since many readers won’t know this, AITD = All Inclusive Deed of Trust, sometimes referred to as a “wrap”. Commonly used when I want to sell and allow someone to keep my existing mortgage. I give them a new mortgage with payments to me, that “wraps” the existing mortgage, that I continue to pay.
Only solution here is to foreclose on the AITD while continuing to make payments on the underlying obligation. While you’re right that it is a question for an attorney, my guess is that you could have some liability if you allowed the underlying mortgage to foreclose, as you assumed responsibility for paying it on the current owners behalf even if that owner isn’t paying you. I’d imagine an attorney would advise that you foreclose on the AITD take back the property, then allow the underlying loan to foreclose if necessary.

Sean Is Right… But for future reference I would highly recomend that if you are going to sell your property usinng an A.I.T.D., Land Contract or a Contract For Deed, that you protect yourself with what we do here at my company, which is an assignment of rents. An assignment of rents protects you if your buyer defualts even if 30 days late, you can take over the property and continue collecting the rents and making the payments.
If you have any questions feel free to contact me via email…

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There are safe ways to complete a AITD, which benefits both the seller, buyer & lender. For more info contact me via email @