Posted by JohnBoy on July 11, 2002 at 09:18:28:
When you take over mortgages buying property subject to, you don’t TELL the bank holding the loan about it! You just do it!
IF the bank finds out they COULD call the loan due because of the due-on-sale clause IF they wanted to. The KEY words here…IF they find out…IF they wanted to IF they found out. And IF they find out that doesn’t mean the bank MUST call the loan due. It only gives the bank the OPTION of calling the loan due IF they wanted to. If the loan is current and all the payments are being made on time, then even IF the bank somehow found out chances are they won’t do anything about it! They MIGHT even threaten to call the loan IF they found out, but when push comes to shove where you just ignore them chances are they won’t follow through with pursuing it. Banks are in the business of loaning money. NOT in the business of calling good performing loans due just to turn them into bad loans on their books. Bad loans on their books hurt them. So even though they may not like it IF they did somehow find out, in all likelihood they will do nothing about it as long as the payments are being made on time. It costs banks a LOT of money to foreclose on property. They don’t want to own property. They just want to loan money and get paid back on time.
So you just take the loans over and you just don’t TELL the bank you are taking over the loan! You just take it over without telling the bank and send the payments in each month!
If you set everything up right then the only way the bank could find out is only IF YOU OR THE SELLER TELLS THE BANK ABOUT IT! If you and the seller never tell the bank then the bank will likely never know about it as long as you structure the deal properly!
If you never TELL the bank then how can they find out? Well they could run a title search and if you had the seller deed the property to YOU then that would show up in the title search where the bank would see the seller deeded the property to you. So don’t have the seller deed the property to YOU.
Instead, you have the seller deed the property into a land trust naming the seller(s) as the beneficiary(s) of the trust. A bank can’t call a loan due under the due-on-sale clause if a seller deeds their property into a land trust as long as the seller(s) remain a beneficiary of the trust. Federal law prohibits a lender from calling a loan due when deeding to a land trust where the seller remains a beneficiary of the trust.
Once the seller deeds to a land trust naming themselves as the beneficiary(s) of the trust…you then have the seller ASSIGN all of their beneficial interest of the trust over to YOU making YOU the new beneficiary of the trust. This does violate the due-on-sale clause where the lender COULD, IF they WANTED TO, call the loan due. But the assignment of beneficial interest is silent where the only way the lender can find out about it is only if YOU or the SELLER were to TELL the bank about the assignment!
When you deed the property to a land trust only the deed naming the trust gets recorded.
The assignment form assigning the beneficial interest of the trust only needs to be notarized. So that does not get recorded. Since that document is only notarized and does not get recorded, then there is no way for the bank to find out unless YOU or the SELLER were to TELL the bank about it!
IF the bank ever runs a title search it will only show where the seller deeded the property to a land trust. Nothing they can do about that. The bank MIGHT ask to see the trust agreement IF they even find out about the property being deeded to a land trust. The party the bank will need to contact about this would be the trustee of the trust. You have the seller name YOU, or your attorney, or someone that you trust as the trustee of the land trust. Then IF the bank should find out about the transfer to the land trust they would contact the trustee. IF the bank asks to see the trust agreement you COULD just tell the bank to pound to sand since that is private information and if they insist on seeing that then they will have to go to court and get a court order to see it!
But since the land trust lists the seller(s) as the beneficiary(s) of the trust, the trustee can allow the bank to see the trust agreement if they wanted to cooperate with them. When the bank sees the trust agreement they will see that the seller(s) is listed as the beneficiary of the trust. You just don’t offer to show them or say anything about the assignment of the beneficial interest of the trust. So the the bank sees the seller is listed as beneficiay(s) of the trust which is all they are looking for IF they asked to see the trust agreement and they are satisfied once they see that. What they don’t know is that the beneficial interest of the trust was assigned to someone else since that document does not get recorded and is only notarized and kept in your personal files!
And that is how you just assume non-assumable loans!
If you go to the top of the main news group page and click on the “search archives” function, then type in “subject to” and click on search, you will get thousands of posts on this subject.