Re: Hold on… - Posted by JohnBoy
Posted by JohnBoy on January 02, 2003 at 10:33:47:
BTW,
You don’t need any case references where a PACTrust was successfully defended. What you need is a case reference where a PACTrust was UNsuccessfully defended to show that it does violate a DOSC. Without a case reference that shows a PACTrust was defeated in court over a DOSC, then the need for a case that shows it was successfully defeat is moot! If there is no law or case reference to show it IS illegal or in violation of a law, then it IS LEGAL, period!
So how would a PACTrust violate the DOSC? Based on Gatten’s arguments and the way the law reads vs. the way a PACTrust is structured, it seems that it doesn’t violate the DOSC. That would be worth defending a case should one ever end up in court over the DOSC.
Think about.
In a PACTrust their is NO loan assumption. The loan remains SOLELY in the sellers name. The buyer never agrees to make the payments to the LENDER or makes any promises to the LENDER. Only promises to the SELLER. That is not a loan assumption. Someone else sending in the payments on behalf of the borrower in itself is NOT a loan assumption. If you were to write out a check to help out grandma by making her mortgage payments for her that is NOT a loan assumption. No where does the law say a third party is prohibited from making someone elses mortgage payments for them!
Federal Law PROHIBITS a lender from calling a loan due when the owner of the property transfers title into a land trust where the borrower remains “A” beneficiary of the trust. No where does the law say anyone else can’t be a beneficiary in ADDITION to the borrower. It states only that the borrower must remain “A” beneficiary of the trust.
Title NEVER transfers to another INDIVIDUAL. Title only transfers to a TRUST. Once title is transferred to a TRUST, it is the TRUST that legally owns the property. No individual person owns the property. Beneficiary(s) of the TRUST do not own the property. The TRUST itself owns the property.
Federal Law allows you to give a leasehold interest in the property as long as the lease is for less than 3 years and does not contain an option to buy. The PACTrust does NOT allow for any options to buy. It only allows the TENANT, under a triple net lease, the FIRST RIGHT OF REFUSAL TO BUY by a certain date. A first right of refusal is not an OPTION TO BUY. A first right of refusal to buy is not prohibited under the Federal Law. Only an OPTION TO BUY.
Here what the law says:
Section 1701j-3. Preemption of due-on-sale prohibitions
(d) Exemption of specified transfers or dispositions
With respect to a real property loan secured by a lien on
residential real property containing less than five dwelling units,
including a lien on the stock allocated to a dwelling unit in a
cooperative housing corporation, or on a residential manufactured
home, a lender may not exercise its option pursuant to a
due-on-sale clause upon -
(4) the granting of a leasehold interest of three years or less
not containing an option to purchase;
(8) a transfer into an inter vivos trust in which the borrower
is and remains a beneficiary and which does not relate to a
transfer of rights of occupancy in the property; or
Based on the way this law reads, the way a PACTrust is structured would NOT violate the DOSC.
So the issue here isn’t, provide me with a case reference where the PACTrust was successful in court defending itself over a DOSC. The issue here is, show me a case where the PACTrust was UNseccessful in defending itself in court over a DOSC???
If there is NO case to show where a PACTrust was UNsuccessful defending itself in court over a DOSC, then just PERHAPS it means the reason is because the PACTrust does NOT violate a DOSC? Yes? Maybe, maybe not. Maybe it’s just because there hasn’t been a lender willing to take it to court. But it would SEEM to me that with the THOUSANDS of PACTrusts that Gatten claims to have done over the past umteen years that there would have been at least ONE case where a lender went to court attempting to inforce it’s rights under the DOSC! But just MAYBE this hasn’t happened yet because no lender has felt they could win going to court??? Who knows! But based on the number of years the PACTrust has been being successfully used and out of all the THOUSANDS of PACTrusts that have been done, that in itself is enough to make one think that the PACTrust would provide you with the safest method to use buying property subject to the exisiting mortgage. Based on the history of using a PACTrust to date, this would also be worth defending in court at any cost regardless of what the value of the particular property is worth just to win the case and set a precedence that the PACTrust does NOT violate a DOSC! At least that is just my opinion.