DAD GUMIT BILL B…HEAR ME!!! - Posted by Bill Gatten
Posted by Bill Gatten on August 05, 2001 at 15:40:29:
I know that you are not fully enamored of the PACTrust; however, during our couple conversations you have indicated to me (and posted publically) that it was well conceived and that perhaps you just hand’t fully understood a few of our safeguards until we talked in person.
I know that you understand fully that the new CFD Laws in Texas do not apply to leases, rentals equity shares options, or wraps?jsimply to bona fide Contracts for Deed or anything that would constructively appear to function in the same manner. Please agree that the same the same is true of our beloved (and much besmirtched) NARS PACTrust?, which invariable turns out to be an ideal solution to just about every downside and short-fall of creative financing in general. Pleeeeese?Bill, fold eventually :-). It?s the new 'general" creative financing regulations in Colorado that have me concerned?though, and one might suspect, the PT seems (so far) to be the ideal solution there as well.
Forgive my post being in CAPS below; but I?m doing it this way, to allow so as to more easily separate my responses from your synopsis of the new Texas regulations. You comments are are preceeded by a colon, of course.
:Summary Of New Texas Contract For Deed Law
:Before signing the contract for deed:
:1. Must give the buyer a copy of a survey less than a year old or a or plat of a current survey of the property
? NOT A PROBLEM WITH THE PACTRUST. SHOULD ALWAYS BE DONE ANYWAY (IN TEXAS)
:2. Copies of any documents affecting title to the property: deed, mortgages, liens and other encumbrances, covenants, easements, restrictions, etc.
? NOT A PROBLEM WITH THE PACTRUST. THIS IS ALWAYS DONE IN A PACTRUST ESCROW.
:3. Seller must provide the buyer the equivalent of a Federal Truth-in-lending disclosure, a written disclosure that the buyer cannot be charged a pre-payment penalty and a written disclosure of various items (see attached disclosure form).
NOT NECESSARY W/R TO AN APPOINTMENT OF A REMAINDER AGENT OR CO-BENEFICIARY IN A LIVING TRUST (ALTHOUGH, IT?S IMPERATIVE THAT THE TRUST BE VERY CAREFULLY CONSTRUCTED, SO AS TO AVOID CHARACTERIZATION AS A BUSINESS TRUST, GENERAL PARTNERSHIP, CORPORATION, ASSOCIATION, EQUITABLE MORTGAGE OR DISGUISED SECURITY AGREEMENT. I.E., THE TRANSFER OF THE PROPERTY MUST BE ONLY TO THE TRUSTEE WITH NO CONSTRUCTIVE TITLE OWNERSHIP BEING HELD BY THE RENTER (TENANT) IN THE PROPERTY…
:The contract must:
:1. Have no prepayment penalty
THE PACTRUST NEVER DOES, AS THAT WOULD IMMEDIATELY CAUSE CHARACTERIZATION AS A SECURITY AGREEMENT (ALTHOUGH THE UNDERLYING FINANCING MAY HAVE SUCH A PROVISION)
:2. Have no late payment that exceeds the lesser of 8% of the monthly payment or the actual administrative fee
:NOT AN ISSUE WITH THE PACTRUST
:3. Have a provision in 14 POINT BOLDFACE TYPE that the buyer has 14 days to rescind or cancel the contract
THOUGH NOT IMPLICITLY NECESSARY OR APPLICABLE RE. ACCEPTING A BENEFICIARY APPOINTMENT IN A LIVING TRUST, WE ALWAYS ADHERE TO ALL SUGGESTED RESCISSION REQUIREMENTS NONE-THE-LESS (IN CALIFORNIA IT?S 3 DAYS)
.
:4. Have NO provision that prevents the buyer from using his interest as collateral (although few buyers would ever do so).
NEVER PROHIBITED IN A PACTRUST, THOUGH AS BILL SAYS, VERY FEW RESIDENT BENEFICIARIES WILL ATTEMPT TO DO SO (THOUGH SOME HAVE)
:5. Be recorded by the seller (although the statute is not clear what penalties are applied for failure to recorded!)
IN A PACTRUST TRUST THE DEED IS ALWAYS RECORDED
:6. Be printed in the buyer?s language (if the negotiations for the contract were done in the buyer?s language)
AHH? WE DON?T SPEAK SPANISH TOO FLUENTLY (OK, WELL, MAYBE: ?ADIOS,? ?TACO,? ?EN VOCAS CERRADOS NO ENTRAN LAS MOSCAS,? OR ?LE PIDO PERDONE SENIORITA?PERO EXACTAMENTE QUE COLOR SON SUS CALZONCILLOS?? OR PERHAPS? ?ALTO HIJO! IS ESTATE SUS MOCARRO EN MI BOTON DE PUERTA ?? BUT?NONE-THE-LESS, THE ASSIGNMENT OF BENEFICIAL INTEREST AGREEMENT IS ALWAYS IN ENGLISH AND THAT MEETS THE REQUIREMENT ANYWAY.
:1. Provide an annual accounting (postmarked by January 31st)
ALWAYS DONE IN A PACTRUST, IF/WHEN FACILITATED BY AND THROUGH NARS)
:2. Deliver title within 30 days after the buyer?s payoff or final payment of the debt (there
are big per diem monetary penalties for non-compliance!)
ALWAYS DONE IN A NARS FACILITATE PACTRUST
:3. Notify the existing insurance company within 10 days of the existence of the contract and the name of the buyer to be added as a named payee on the policy.
NOT AN ISSUE WITH THE PACTRUST, NORMALLY DONE ANYWAY.
:New default rules:
:If a purchaser defaults after the purchaser has paid 40 percent or more of the amount due or the equivalent of 48 monthly payments under the contract for deed, the seller is granted the power to sell, through a trustee designated by the seller. The seller may not enforce the remedy of rescission or of forfeiture and acceleration (still available as a remedy if the contract is less than 4 years old and less than 40% paid).
NOT AN ISSUE WITH THE PACTRUST, SINCE A DEFAULTING RESIDENT BENEFICIARY MUST BE PAID THE LOAN AMOUNT, PLUS $1.00, ?OR? 100% OF THE FAIR MARKET OF HIS INTEREST?IF HE WISHES TO CONTEST THE AMOUNT BEING OFFERED (WHICH AMOUNT WILL BE COVERED BY AN UNSECURED PROMISSORY NOTE).
:The seller shall notify a purchaser of a default under the contract and allow the purchaser at least 60 days after the date notice is given to cure the default.
IN A PACTRUST, THE RESIDENT IS MERELY LEASING AND WILL BE TREATED AS WOULD ANY LESSEE IN ANY PROPERTY WHEREIN THERE IS NO BUY-OUT PROVISION, NO BARGAIN PURCHASE PRICE OR PURCHASE OPTION.,