THE PACTRUST AND THE D.O.S.C. - Posted by Bill Gatten
Posted by Bill Gatten on January 06, 2003 at 17:08:30:
I swore I’d not get into these discussions anymore; however, this is one I can’t resist, since my name and my baby’s name (the PACTrust) is bounced around so freely below.
For those of you who don’t know me, I am the creator (inventor, originator) of the “PACTrust™” and its number one undying, unwavering, hard-headed and opinionated proponent and champion (and I take no prisoners).
Now, on the issue of there never having been a case where the DOSC was triggered and then thwarted by the PT. THERE ARE NO SUCH CASES!! We think this is (may be) because the PACTrust succeeds (as we claim it does) in preventing such actions on the part of the lender. If I put an electric fence around my house to keep out robbers…some would insist that I would have to show some robbers having been fried on the fence to prove that it works, despite the fact that a good robber can spot an electric fence and would probably not try to broach it in the first place.
Please understand that our trustees currently hold (and in the past have held), titles to well in excess of 100 million dollars worth of SFR properties financed by Countrywide alone. In each one of these transactions we make the payments, interact and interface with the customer service and legal departments in the various Countywide offices; and we are quite well known by them as a company who handles payments on loans on properties in land trusts wherein the borrowers are no longer making the payments.
The fact that that there has never been a challenge by a lender doesn’t mean that proof of protection isn’t available…it merely means that either: 1) we’ve just never been “caught,” or 2) the protection afforded by the process is in fact effective. We choose #2 because of the fact that we are so well known by Countywide that if they thought they could hornswaggle us they would have done so a long-long time ago.
For those detractors who still remain (in the face of successes like Jim Kennedy’s, Bud Branstetter’s, Jodi Tousignant?s, Martin Weisberg?s, Mike Roberts, etc., etc. (all major companies across the county who use our program and our documentation without our assistance): please…try to clearly understand the following once and for all:
In the PACTrust? model the property actually and honestly IS NOT SOLD! It is instead placed into the owner’s own land trust, which trust structure is fully allowable under federal law. Next, the property is leased to a “would-be” owner, who is willing to forgo ownership of the property in favor of receiving all of the benefits of ownership…without his/her name being on the title (title ownership is not necessary is you get 100% of the “Bundle of Rights” in Fee-Simple Ownership anyway).
This is not a trick or gimmick. The property REALLY is not sold! The “ownership” benefits are afforded by the Beneficiary Agreement; the occupancy and possession benefit is afforded by the Lease Agreement; and the tax benefits are afford by the IRS (IRC 163(h)4(D) in so much as any beneficiary in a land trust MUST be treated as an owner of the trust property for tax purposes (therefore, a full Net Tenant who is also a co-beneficiary in the land trust gets all the same tax treatment as he/she would IF they were owners in fact). Other documents might include Powers of ?Attorney, Trustee Direction, Collection Service Direction, Escrow Instructions, Exculpatory forms, etc.
On some of my own properties over the years, I have missed payments by 2-4 months at a time (wherein Countrywide was the lender); and I have never (nor have our clients and students) been confronted with a letter like the one which is the subject of this thread. I have received notices that foreclosure was immanent, but the laons were reinstated without a problem once brought current. Why not? Why wasn?t I foreclosed upon? Because when the lender checked the title and its condition, they did NOT see an unauthorized transfer. If they checked on the property, they saw only a lease agreement with a tenant. In none of these transactions has there been a sale or transfer of title to anyone but a bona fide land trust trustee–wholly without consideration, without a transfer basis, without a property tax increase, without reassessment, without a capital gains imposition, etc. And?without a due-on-sale violation.
I used to be offended by this cr** about my never posting anything but vague allusions and no proof for what I say (because of my having depended too heavily upon these kinds of websites for my income for a period of time, my business was severely damaged a year or so ago by certain mean-spirited nay sayers). Understand this: I can probably prove there is no Santa Clause…but I cannot prove that there IS one (because there AIN"T one to prove?get the point? You can not prove a negative).
I am once again accused here below of offering only “vague” illusions and proofs relative to the issue of the PACTrust and the Due on Sale Clause. In the past I resented those comments: now I just smile (admittedly with some annoyance), happy to be mentioned now and then (and defended by some very intelligent people who truly know what they?re doing) and go on making my living and not worrying about due-on-sale calls.
Bill Gatten