Re: Trust and seasoning - Posted by JPiper
Posted by JPiper on June 26, 2001 at 02:37:36:
Since our original ?run-in? a few weeks ago my information on the subject has changed somewhat. Meanwhile, I notice your information remains ?mired? in a somewhat speculative status, one with which you still have no first-hand experience.
What changed for me is what I mentioned in my post. I want to refi a property located in my corporation for more than 12 months. My corporation has ample seasoning. The problem is the lender does not want to loan to my corporation. They want to loan to me. Fine, I have no problem with that. I will deed into my name?.BUT, my question to them is, ?Does that create a seasoning problem??
Long silence Bill. The problem is that it DOES create a seasoning issue. At the instant the property is deeded into my name from the corporation, ?I? have only owned the property for an instant, NOT over a year. The lender tells me that they don?t know what to say. This ?situation? is not covered in their guidelines. They huddle. The huddle stretches on for days. Even their own commonsense tells them they should have no problem with this scenario?however they ?know? that there is a seasoning issue. Commonsense tells them however that they should be able to get around it. Finally the underwriters make a decision?.IF we can verify the ownership of your corporation, and if that ownership matches the ?new? individual ownership, we will make an ?exception? to our seasoning policy.
An ?exception? Bill. In other words, a seasoning problem exists but we were able to ?work around? the problem. I will ?prove? through providing my articles of incorporation and registration information ?who? owns the corporation, that those parties will be the new borrowers (my wife and I). While a seasoning problem exists, they will accept this scenario. They didn?t have to. It was a situation not covered by their guidelines. They could have just as easily have rejected the situation. As ?dumb? as that might have been, it would have been consistent with their seasoning guidelines.
Now this trust situation. The situation is identical as far as the seasoning issue is concerned. The INSTANT the property is deeded to the trust, the new owner, the trust (or the trustee), has a seasoning issue. The trust has only owned the property for an instant. Period.
Notice Bill that we didn?t talk about who the beneficiary is?because it?s irrelevant. The owner of the property under this scenario has a title seasoning problem. Doesn?t matter at all who the beneficiary is, even if it?s the previous owner.
Now, will the lenders look past this little ?problem? to see if the beneficiary is the same as the previous owner, as you are undoubtedly going to claim??? Maybe Bill. I don?t know that for sure. They might. They don?t have to at all. And as wise as I know you are, I also know that you don?t know the answer to this one either. All that you know is exactly what I know?there is a seasoning problem UNLESS they are willing to look at who the beneficiary is in order to make an ?exception? to their policy.
Once they decide to take a look at the beneficiary in order to make an ?exception? to their seasoning policy, what YOU evidently are recommending here is to give them the Gatten shuffle. Give them the paperwork showing the beneficiary as the previous ownership, eventhough you possess an assignment of that beneficial interest.
You are being directly asked who the beneficiary is. This is not comparable at all to the DOS clause situation. Here the lender does not ask me who the beneficiary is at all. Nor do I send them any letters telling them who the beneficiary is. In my case, I simply change the ownership to the trust?I don?t send letters or further comment to the lender.
But here?s what?s important?.if I were directly asked ?who? the beneficiary is, I would not lie about it?.either in the DOS situation OR in the seasoning situation.
Now, I don?t know how you do this on a DOS basis. I assume that you don?t lie. But I can?t see how exactly you are going to prove to the lender in this seasoning thing HOW the ownership is the same as it was before deeding to the trust, unless you provide only part of the paperwork. That?s called lying.
Do I know people who lie to lenders? Of course I do. Done all the time. I just don?t recommend it nor do I do it.
Now you might be able to handle this somewhat differently. You might be able to do the assignment ?after? the sale has taken place, and after you have provided the lender the beneficiary information that they want. Skating a thin line?although I would personally not have a problem with that. However, this now puts you in jeopardy because if you wait until this time to do the assignment, you and I both know the assignment may not take place. You now take a risk?whatever that may be.
I would also point out that appointing multiple beneficiaries, etc as you do in the DOS situation does not work here on the seasoning issue. Multiple beneficiaries might be a wise estate planning tool?.but it presents an issue as related to seasoning, in that the ownership does not match the previous ownership. Perhaps you could make an argument with the lender that this ?ownership change? was only an estate planning move. Would that work? I don?t know?nor do you. It obviously remains a seasoning issue.
So where does that leave us? You have a seasoning problem the instant the property is deeded to a trust. Period. You may be able to work around this with the lender provided you can prove that the beneficiary of the trust is the same as the previous owner. You can only prove that by lying, or by waiting to do the assignment which sacrifices control.
In the original question here, the poster stated that he would own the property for a couple of months before sale. So in this case I presume you would not wait for a ?couple of months? to do an assignment, and therefore would be required to lie to the lender by presenting incomplete paperwork, paperwork lacking a silent assignment that you possess.
That?s how I see it anyway Bill. Enlighten me?.do you see it differently?