land trust for sub2 - Posted by james(CA)

Posted by William Bronchick on April 12, 2011 at 18:21:43:

Surprise, I actually agree with John Hyre on this one.
The land trust does not get around the due on sale in
the context of not triggering it because if you change
beneficiaries, the due on sale is triggered. But, the
question is:

  1. How likely is the bank to notice?
  2. How likely is the bank to care?
  3. What are the consequences if they do?

land trust for sub2 - Posted by james(CA)

Posted by james(CA) on March 30, 2011 at 18:23:45:

What are steps and forms needed to do sub2?

Does LT give 100% (or close) against DOS?

Re: land trust for sub2 - Posted by John Hyre

Posted by John Hyre on April 04, 2011 at 16:02:40:

The question is too broad for me to answer the whole thing…in other words, I do not intend to make a massive post that walks you through sub2, step by step. Bill’s courses do a nice job in that regard.

One area where Bill and I might respectfully differ (lawyers do that all the time!): I do not think that a land trust gets around DoS. This is based on my reading of regulations that clarify Garn St Germain Act. Basically, intent of act and point of regs is that estate planning sorts of trusts were intended to be exception to DoS. Other types of trusts were not intended to be excepted. That doesn’t mean a Sub2 cannot be done - I just wouldn’t do anything that a court could construe as hiding the transaction from the bank because such an act could be viewed as a deceptive business practice. I have dealt with this very issue in conjunction with a state’s attorney general going after an investor.

I have had clients successfully disclose transaction to bank. I have also seen banks get stupid over such a disclosure. In majority of cases, clients neither hide nor disclose transaction, and bluntly warn seller of DoS risk.

John Hyre