countrywide - Posted by Peter Rzepka Vegas

Posted by Stacy (AZ) on July 16, 2002 at 13:17:03:

Yeah, good point about foreclosure laws possibly being different in Gatten’s case. Here is AZ we have up to 24 hours before the sale. Although, I don’t know why Gatten, in his infinite wisdom, would send a huge check to CW without any assurance the foreclosure would be stopped. That’s a huge blunder on his part, if that’s what happend. Is that what kind og legal advice his PACTrust firm is giving him??? (Bill, just teasing you, kind of).

However, your post about Ron Star is off base. Ron TOLD CW that he owned the property. Your whole basis of argument is centered around hiding the ownership in a land trust, and being savvy enough to keep CW in the dark. That has nothing to do with what I’m trying to argue: the prior owner, or his/her angry ex-spouse intentionally calling Countrywide and spilling the beans. You have no control over the sellers in a Sub-to.

“Yeah, the house is now in a trust owned by John Boy Walton! Isn’t that illegal? I just thought you should know my ex-wife sold it to him and my name is still on the loan, and I don’t like it one little bit!”

Accelleration comin’ I’ll guarantee. Trust or no trust, it’s time to refi and get it over with (and move on to more important matters, like that idiot tenant rebuilding his Harley engine in the living room!)


JB, for the last time (yeah right) we’ll have to agree to disagree.

countrywide - Posted by Peter Rzepka Vegas

Posted by Peter Rzepka Vegas on July 11, 2002 at 13:26:30:

I have an opportunity to take a house subject to and the interest rate is 5%,but the lender is countrywide. I will due the usual and put it in trust,assignment of beneficial interest to my LLC, but I heard ramblings that countrywide was calling the DOS. Has anyone had any recent experience with countrywide?

re. statements concerning THE PACTRUST!! - Posted by bill gatten

Posted by bill gatten on July 12, 2002 at 14:56:49:

The forgoing thread contains some excellent information and some that is not quite so excellent re. the “PACTrust.” My congrats to JohnBoy who FINALLY gets it and to BillM who got it long ago.

First off, (d…it!) get it! Creating a revocable inter vivos (land) trust DOES NOT violate a lender’s DOSC as long as the creator (the borrower/settlor) remains a beneficiary, and as long as the TRUST ITSELF doesn’t transfer occupancy rights, quite obviously, any income property in a trust can be rented out.

Secondly the frequently allude to never-ending thread of months back wherein I was challenged until I got sick of it, never proved a single thing contrary to the true benefits of the Equity Holding Trust concept.

In that melee, every time I answered a charge by a detractor, it was forgotten about, never acknowledged, and another illogical one took its place. I keep hearing, “Yes but it?s never been challenged,” and that is pure baloney. I have gone to two court hearing in just the past one month wherein it was challenged (2 out of some 40 so challenges far)…in both cases relative to eviction and claims of equity by the dispossessed co-beneficiary. In in one case, we lost on the eviction because the company had served an improper notice and the investor has to start all over again. But in both cases, the claim of having an equity interest in the property was scoffed at by the judge when she saw that the investment in the land trust was wholly separate from the leasehold of the property. Her attitude was, “Let’s handle the eviction issue first, and then you folks can work on the trust ownership issue later.” And in this regard, note that the EHT contracts provide for a 100% buy out of the evicted party?s interest at FMV, so a claim of equity would be wholly irrelevant (such buy out would invariably be at a zero net, the defaulting party always has a right to challenge the offer and be paid in an unsecured promissory note.

On the “complexity” issue…I?m sorry about that, but the equity holding trust is just this complicated:

Create a trust; create a transfer document (deed); create an assignment; create a lease agreement. That’s it! If someone wants it simpler than that, they can let me do it for them: or they can buy my course and do it themselves, which is what I recommend about half the time any way (100% of the time on properties under $80K or so).

The only valid controversy that exists relative to that famed thread of months past (it’s in the archives asserted by Bronchik and Hyre)) is what the IRS would do if they audited the settlor and the resident beneficiary in the same audit. The resident qualifies clearly under IRS Section 163 for a complete write-off of property tax and interest payments. The settlor qualifies clearly as not having sold the property…there is no transfer of title or ownership to anyone: only the placement of the property into a legitimate asset protective trust, and then the leasing of it to a tenant. Whether the tenant claims active tax loss or not is none of the settlor?s business (he/she would have no way of knowing) and no right to do so is mentioned anywhere in the document: such right is given the resident beneficiary by the IRS (163(h)4(D), Rev. ruling 92-105, the hundreds of courts cases involving land trusts, etc…

It is possible that were such a double audit to take place (though I can’t think of a reason why it should or ever would) that the IRS COULD compel the settlor to pay a capital gains tax on a contingency sale. However, if that were to happen, how would that, in any way, be any more punitive or costly than if the same person had done a wrap, CFD, lease purchase or equity share?

Think about it: Would you feel safer in an F-14 fighter jet that hasn’t crashed yet, or in a Kinner bi-plane that hasn’t crashed yet? Each has its place, and in some circumstances, neither can replace the benefits of the other…it’s up to what your intent is, how far you are planning to go, and how high you want to fly.

And by the way, we have some forty million dollars worth of Countrywide Funded Real Estate in PACTrusts and talk to them just about every week on some issue or another. What would happen if they took the position that these transactions violated their DOSC? We would go to court and present the very best defense we could. Would we win? I don’t know…but boy, we sure think so. Would you win in the same battle over the DOSC in a Wrap, Equity Share, Lease Purchase, Subject to or Contract for Deed? No.

Bill Gatten

Re: countrywide - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 11, 2002 at 21:25:39:

Peter Rzepka–(NV)----------------

I also recommend not mentioning the change to Countrywide. And using the trust.

I lost my house at 2000 Robert Way, Sacramento, CA because of Countrywide calling my loan due and then foreclosing and selling the property.

I stalled them off by deeding the property into a partnership name and then putting the partnership into bankruptcy. After the BK was dismissed by the court, I filed another BK in the partnership name. Countrywide ignored it and sold the property at a trustee’s sale. They started the bidding at about $20K less than they were owed on the loan, including unpaid months and late charges. So they lost money and I lost equity and my rental house. Lesson learned: use an attorney instead of doing everything myself. Arrogance produces its own punishments.

And, I was current on the loan when they called it due and would not accept payments anymore.

I foolishly told them of the Sj To, and did not use a trust because I did the deal before I started reading CREONLINE.COM posts. I know better now. Sounds like you know better also.

Good InvestingRon Starr********

Put it in a PACTrust - Posted by Alisa

Posted by Alisa on July 11, 2002 at 15:49:41:

This should avoid the issue all together

Re: countrywide - Posted by Nate(DC)

Posted by Nate(DC) on July 11, 2002 at 14:12:12:

I have done a subject to with Countrywide within the past year. I had the loan in place for about six months after taking the property (I then sold it and paid off the loan) and never once had any inkling of their wanting to call it due. Neither I nor the seller ever notified them of anything. I changed the mailing address and phone number on the Countrywide website, and set it up for automatic payment deduction from my checking account. No problems!

I think Stacy’s correct - all of the examples where we’ve heard about people getting in trouble are where someone actually called the lender and notified them. If you don’t say anything, and everyone else involved knows not to say anything, your risk level goes down tremendously. This is one example of where I like to say “if you don’t go looking for trouble, it won’t come looking for you”


Big Bold Print…DOS - Posted by $Cash$

Posted by $Cash$ on July 11, 2002 at 13:58:14:


When my buyers sign the final closing paperwork in Big Bold Print it basically states, DOS clause “This loan may be called by the Trust Deed Holder and the Buyer is responsible to pay off the loan, etc.” Whether I use a Trust or otherwise I would have this clause in my paperwork.

I would never want to see anyone removed from the property I sold them, but I do want to protect my business.

A fellow investor friend of mine had the DOS clause excercised on him. The Lender filed a motion with the Court to excercise the DOS clause. The Judge asked “are the payments behind or is the loan in default” NO, was the reply. The Judge said “why would I want anyone thrown out of their home.” Motion Denied. Maybe just a sensible Judge and another Judge could rule differently.

If your paperwork is in order you should have no problem. Countrywide is tough, but not invinsible.


Re: countrywide - Posted by Stacy (AZ)

Posted by Stacy (AZ) on July 11, 2002 at 13:53:23:

In all the cases I’ve heard of, Countrywide called the loans due because they found out about the transfer. The sellers called them and told them about it!

This is a risk you must consider. If you’re sure your seller would not inform Countrywide, you could take the risk. Be ready if the worst happens.

Re: countrywide - Posted by JohnBoy

Posted by JohnBoy on July 11, 2002 at 13:52:25:

There has been posts in the past about countrywide calling loans but I don’t recall ever seeing any posts where countrywide has actually followed through with foreclosing on any loans taken subject to! So far the only thing I’ve seen was a “threat” of calling the loan. Meaning they call the loan but don’t follow through with it if they are ignored! This is only my assumption since I haven’t seen or heard of anyone ever coming back and saying they actually filed a foreclosure suit and served a summons. We’ve asked those that have posted in the past to keep us informed of what actually happens. But since no one seems to have posted a follow up I just assume countrywide must not have followed through with it!

Re: Put it in a PACTrust - Posted by Rob FL

Posted by Rob FL on July 11, 2002 at 21:15:57:

My personal opinion is that if the bank really wants to enforce a DOS clause that the PACTrust probably won’t do any good. Maybe it doesn’t violate the letter of the DOS, but it does the spirit/intent. And since the only one who probably truly understands the PACTrust is Bill Gatten himself, most judges and juries will probably not understand it either.

And unless you can get Johnny Cochran to defend you, you will probably lose the suit because the bank pretty much has unlimited money to sue you and hire the fanciest lawyer in the country to represent them if they want to. And by the time you start hiring a lawyer, your profit that you would have made is eaten up with court costs and lawyer fees.

It’s simply a risk you take. If you are afraid of the DOS, then don’t buy properties “subject to.” Personally, I’ve done 2 properties subject to with Countrywide as the lender and never had a problem.

Really? - Posted by Jim FL

Posted by Jim FL on July 11, 2002 at 17:18:51:

How does placing the home into a PacTrust avoid this issue?
I’m not trying to argue, I’m just curious, as I have been how exactly the pactrust avoids the due on sale any better than other methods of buying subject to the existing financing?

I do think the pactrust is a good method for use, but I have yet to see anyone give us any case law or precedence as to what happens should this go to court.
We know the risks fairly well when it comes to buying properties subject to the existing financing using the regular land trust and beneficial interest assignment method.
But for most of us, the risk factor is not clear when it comes to the pactrust.

I’ve been curious about this for some time, and really wonder how this method does versus the other.

Any light you can shed would be appreciated, and please don’t just give the same pat answers we get from all the sales pitches heard before about the system.
I already understand it is a good one, and have no beef with it.
Just curious, and wondering when someone will give exact answers as to one verus the other.

Thanks in advance,
Jim FL

Re: countrywide - Posted by Stacy (AZ)

Posted by Stacy (AZ) on July 11, 2002 at 14:39:05:

Yeah, Nate, that’s the wonderful thing about REI. Each of us has to decide where that thin line exists that separates the acceptable risk from the unacceptable. The main problem I have, especially with CW, is that I can’t control my sellers. There’s no way to guarantee a remorseful seller, or seller’s angry ex-spouse, will find it satisfactory to call the lender and spill the beans.

For me, I try my best to have a contingency plan in case a loan gets accelerated and I need to refi. Kind of tough to do, however, for those just starting out by doing subject-to purchases. Sure, they could have six months of payments in reserve in case they have to foreclose. But could they qualify for a new refi loan if CW gets nasty?

Just some things to ponder. Ignoring the risk is foolish, but understanding and accepting the risk could just be a business decision. The fine line.

Re: countrywide - Posted by JohnBoy

Posted by JohnBoy on July 11, 2002 at 14:07:50:

Did countrywide follow through with foreclosing on these? Did the buyers just refinance before waiting to see if they would follow through? What was the final outcome of these? I’ve heard of them calling loans because of this, but I have yet to see anyone follow up with what actually happened in the end?

Re: Really? - Posted by jeff

Posted by jeff on July 11, 2002 at 18:20:01:

to tell yuo the truth Jim, i have read up on the pactrust and as of right now, i do not know one more thing about it than i did before i ever heard of it.

that thing must not be for the meak of heart, every sentence i read almost was so far over my head that i was wantnig to look up words like “COW” in the dictionary to see if i still understand the english language.

is this pactrust thing this complicated or am i just too stupid to understand anything thats not as basic as a subject to deal?

Re: countrywide - Posted by Nate(DC)

Posted by Nate(DC) on July 11, 2002 at 17:41:03:

Of course, tough to control the seller(s) and their friends, relatives, lawyers, etc. This particular deal I knew the sellers would not say anything because they were also real estate investors and knew how the game was played. I had a high level of confidence in that.

I also would think you could try to keep your risk down by making sure there’s a decent amount of equity in the property - it’s a heck of a lot easier to refi at 80% LTV than at 95% or higher!


Re: countrywide - Posted by Stacy (AZ)

Posted by Stacy (AZ) on July 11, 2002 at 14:23:42:

JB, I don’t know. I heard that the person who posted as “Jackie” did in fact have to refinance when her CW loan was called, but probably because she didn’t want to spend the time and resources to fight them in court. Personally, I’d think hard before taking a CW loan subject-to, and be sure I had my ducks lined up if the worst happened. Here are links to the relevent posts:

From a Bronchick post:
If Countrywide has a h***-on about the due on sale, then just stay away from Countrywide loans! I have had several from Countrywide I put in trust and they never asked for the trust agreement. I think Jackie’s case was a fluke because the former owner was dumb enough to tell the lender.

Re: Really? - Posted by waynepdx

Posted by waynepdx on July 12, 2002 at 21:32:07:

I just went and listened to some people at a Legrand Seminar. Is it Lou Brown that Legrand is a student of?

Well anyway, I got into a big discussion with him after he was done about the DOSC.

What I ascertained is you need to bring several layers of trust protection into the picture.

First you put the shares of your company into a trust.

Then you put all of your personal assets into a trust.

Heck you can even have individual trusts for every one thing you own.

Then you buy can buy and lease property with a trust.

Now you have the Trustee named and you also have a backup trustee named also in case the first one defaults or dies.

Now you have the beneficiary of that trust be one of the trusts that you created for your fork collection.

Now the court drags in the trustee of the first trust and then he releases the beneficiary…oh wow its a second trust. Now the people suing you have to put out more money to continue court action to drag the trustee of the second trust in.

Oh wow the beneficiary of that trust is your spoon collection. and so on and so on.

When someone goes to an attorney and they say…Mr. bob is my landlord, then the attorney goes and types up the name on an asset database and he sees you have 50 properties in your own name…he is gonna work on pro bono.

Now if you have everything locked up in a different trusts, then he will come back and say …I need 10k or 5k for a retainer and we charge 450 an hour.

Now how long do you think a person can pay that if they are renting?

You name the trust whatever you want. Name it Multnomah county elm street.

This confuses and hides it even more. If they are searching for the trust and it is buried in multnomah county then the lawyer might not want to take on the city.

OR how about naming it Underprivledged Childrens College grant Trust.

Who wants to be known as someone who takes money away from a trust to pay for underpriveledged kids college?

Now the beutiful thing is that you can have the trust name your company as the managers of the property and all payments, etc flow through there.

You then use your company to record all the taxes, expenses, income etc.

You get the gist of it…I learned quite a bit from the seminar I went to today.

Re: Really? Yep - Posted by Bill M

Posted by Bill M on July 11, 2002 at 19:06:35:

The “pacTrust” works for me. I’ve done it, and it does require more “paperwork” than L/O. But it offers far more protection for all parties while making the arrangement comply under Garn St Germaine.

Owner place HIS property into trust in HIS name. INforms lender of the change.
After that, owner assigns a portion of the beneficial interest to 2nd party. 2nd party then also signs a lease which binds him/her to pay all expenses including maintenance, taxes, insurance and mortgage. Maybe even a little extra to the owner…

At the end of the lease, the resident has option of buying out the other party… or not. If not, they sell it, and split proceeds according to their beneficiary agreement.

A car is a very complicated machine, and I could never build one. But I can drive pretty well, and I couldn’t imagine going without a car just because I didn’t know how to build it or how each and every instrument works! I learn what I need to know and hire others to take care of the rest.

Same thing goes with using a land trust instead of lease options/ contract for deed/ etc. Seems to me that the Land Trust offers more flexibility, fewer legal headaches, less exposure to outside legal issues, and greater potential for monthly cash flow than other options.

Of course, that’s just my experience…

Bill in OR.

Re: countrywide - Posted by JohnBoy

Posted by JohnBoy on July 11, 2002 at 15:49:46:

Yes, but just calling the loan and actually pursuing it are two entirely separate things. A lender can send letters CALLING the loan due, demanding the loan be paid off, threatening to foreclose, blah, blah, blah!

What I would like to know is if anyone called their bluff by waiting to see if anyone was actually ever served a summons to go to court over being foreclosed on???

You don’t need to get an attorney for this. You just ignore the lender. WAIT until someone is actually served a summons to a foreclosure complaint. Then you have about 60 days or so from that just to file an answer to the complaint. Which you could stall that off by filing a motion to dismiss the case stating the payments are current and the loan is not in default. That buys time where the court accepts a motion instead of an answer until they have a hearing on your motion. Then after that if your case is not dismissed the court will order you to file your answer within 30 days. The point is, all this will take TIME, usually up to 3 months from the time you are served with a summons of the complaint!

So at this point you do not need to get an attorney to fight anything unless you want to fight it. My point is WAIT to see IF it ever even goes this far to where the lender actually FILES A COMPLAINT to foreclose with the court! Until that happens, everything prior to that is nothing but the lender blowing smoke by making THREATS of calling the loan. Then IF you actually get served a summons of the complaint, THEN just refinance the property at that time and pay off the loan if you don’t want to try to fight it in court. But until the lender actually files the complaint with the court and someone is served by the court, there is no reason to hurry out and start refinancing the loan because until you are actually served with the summons by the court, everything else is just hot air from the lender making threats to pursue calling the loan due!

So other than anyone just getting letters from the lender calling a loan, has anyone actually been served a summons of a complaint by the court stating the lender is foreclosing on the mortgage??? Anything before being served a summons doesn’t mean crap. If you run out and refinance then you are only giving in to the lender’s THREATS of foreclosing. I would WAIT until the court actually serves a summons before doing anything. THEN decide whether to refinance or fight it after getting served a summons. Otherwise you may just be jumping the gun ASSUMING the lender is going to follow through with actually foreclosing!

Re: Yep - Posted by Jimbob

Posted by Jimbob on July 11, 2002 at 20:50:29:

Bill in OR,

Garn St. Germain provides exclusion to the DOS clause when there is ??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?.

If you are transferring rights of occupancy using a lease agreement, as you say, you are not protected by GSG?the loan can be called at the lenders option.

This, and other, problems were pointed out to the PT people in a discussion on this board a few months back?seems it?s been (conveniently perhaps) forgotten.

There are other (serious) problems too. Like the sale/no sale issue. Seems PT is touted as being a delayed sale. Well, if you are transferring the bulk of the burdens and benefits (which PT claims to do?occupancy, tax benefits, etc.) you have a sale, at least that is the way the IRS will probably view things.

Now these things are starting to come back:

  • Partition?PT claims if you have two unrelated parties to the trust, it cannot be partitioned, that?s just not true, you need a two (or more) party LLC.
  • Complexity?The only people I?ve ever heard say PT was not complex were the people selling the thing, everybody (and there have been plenty) else says it?s hard to understand.
  • Expense? Even the PT sales people say it?s expensive. So why spend extra for something that doesn?t provide much, if any, added value.
  • Never had a problem? The PT people always say they have never had a problem so everything is okay, don?t worry about it. I?ve rolled stop signs for years and never gotten caught, does that mean I never will?

The bottom line is that you should not simply take the word of the PT sales people, get an independent opinion from somebody that knows.

Hope this helps,