Re: Land Trusts - Posted by Thomas K. Standen
Posted by Thomas K. Standen on March 16, 2005 at 12:25:38:
Angela
Take a look at the language in the Garn St. Germain act.
You will see that the borrower may place the property into a trust, and as long as they maintain a benefical interest in the trust it is a bar to the lender calling the loan due.
I have found over the years when you have a question concerning the right, obligations, and duties of lenders, it is always appropriate to take a look at the statute concerning the issue.
I have listed the section from the due on sale section of the Code (Garn St. Germain Act) below. You will find the section concerning trusts, and it is clear from the reading of the section, that if the owner of the trust kept a beneficial interest in the trust when it was transferred, then the loan cannot be called due. However, if the owner of the trust did not do so, then the loan can be called due.
United States Code
TITLE 12 - BANKS AND BANKING
CHAPTER 13 - NATIONAL HOUSING
Sec. 1701j-3. Preemption of due-on-sale prohibitions
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 -
(1) the creation of a lien or other encumbrance subordinate to
the lender’s security instrument which does not relate to a
transfer of rights of occupancy in the property;
(2) the creation of a purchase money security interest for
household appliances;
(3) a transfer by devise, descent, or operation of law on the
death of a joint tenant or tenant by the entirety;
(4) the granting of a leasehold interest of three years or less
not containing an option to purchase;
(5) a transfer to a relative resulting from the death of a
borrower;
(6) a transfer where the spouse or children of the borrower
become an owner of the property;
(7) a transfer resulting from a decree of a dissolution of
marriage, legal separation agreement, or from an incidental
property settlement agreement, by which the spouse of the
borrower becomes an owner of the property;
(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
(9) any other transfer or disposition described in regulations
prescribed by the Federal Home Loan Bank Board.
Hopefully this will be of assistance to you and others that may have the same problem.
Thomas K. Standen
North American Loan Servicing
tom@sellerloans.com