Posted by Glenn on December 17, 1999 at 23:21:38:
The PACTrust does record the initial deed to the trust, and notifies the lender to forward all correspondence to the trustee. The “…permitted…” was in steph’s original post. As far as the transfer of beneficial interest, a partial is done at the beginning to meet other legal requirements. It also allows the (or one of) non-resident beneficiary to depreciate the property. The 100% transfer is done at the close of the trust.
Glenn
DEED of TRUST --/ LAND TRUSTquestion/ Bill Gatten / Bronchick please read… - Posted by steph in tex
Posted by steph in tex on December 15, 1999 at 07:58:08:
Here is what I have:
Seller in foreclosure- up for sale 1/4/00
Plan:
reinstate & take property subject to via Land trust and assignment of benenfitial intr.
Problem:
when reviewing the Deed of Trust, in sec 7. Charges to Borrower and Protection of Lender’s Rights in the Property #9 Grounds for Acceleration of Debt it reads:
(b) sale without credit approval. Lender shall, if permitted by applicable law (including Section 341(d) of the Garn St. Germain Depositiry Institutions Act of 1982,12 U.S.C. 1701j3(d) and with the prior approval of the Secretary, require immediate payment in full of all sums secured by this Security Instrument if:
(i) All or part of the Property, or a benefitial interest in a trust owning all or part of the Property is sold or otherwise transfered (other than by demise or descent) and
(ii) The Property is not occupied by the purchaser or grantee as his principle residence
O>K> guys…
is this now standard lingo? This is the first time i have specifically seen the Garn St Germains Act mentioned in a Deed of Trust. I am hestiant to go through with this deal if notifying the lender that we plan to place the property in a Land Trust will be a Red Flag.
I would like your valued opinions on this one please, and thanks.
Steph in tex
The key is “IF PERMITTED BY APPLICALBE LAW” - Posted by Bill Gatten
Posted by Bill Gatten on December 16, 1999 at 21:20:49:
Steph as we discussed on the phone this morning, in the FHA DOS, the drafters of the clause are relying on the reader’s “Cogntive Dissonance” to throw them off. The fact is that a lender’s (or servicer’s) foreclosing on your loan because you’ve granted your property’s title to a revocable inter-vivos trust is NOT permitted under applicale Law (Garn St. Germain). Period! (Note that it say "if permitted by applicable law? Well…it’s not!)
And contrary to JPiper’s assessment of my motives and my charges, I will be happy to teach you (or anyone else) everything I know for free, if you’re willing to take the time. I’ve been trying to do that here on CRE for a year and a half now.
Dang! How can such a "seemingly (and “reportedly”) nice, gentile, and knowledgeable good-guy fellow ruffle my feathers so d… much, so d… often?? (Phew!) Us ol’ Southern boys are just tryin’ to get along. (Well…southern California…OK?)
Bill Gatten
This is not really a DOS clause question— - Posted by steph in tex
Posted by steph in tex on December 15, 1999 at 15:14:59:
Hold on guys-- this isn’t the same old question- let me try again…
>>
I need to know if this is something that is new in Deed of Trust? I understand the benefits, risk of DOS etc with the Land Trust-that is not my question.
My question is wether this particular Deed states something that others have not, meaning I need to be more cautious—Like perhaps NOT notifying the lender that we are placing the property into a trust.
Are lenders (or this one anyway) getting wise to the Land Trust angel?
It is my practice to notify the lender that we(the seller) are placing the property into a land trust as per our right stated in GSG act. This Deed was originated in 98…I have not seen this specific verbage before-- so-- is this something new?
Do any of you notify the lender of the intent to place the property into a Trust?
Suggestions
Re: DEED of TRUST --/ LAND TRUSTquestion/ Bill Gatten / Bronchick please read… - Posted by Glenn
Posted by Glenn on December 15, 1999 at 14:22:04:
I am not a lawyer, but here is my take on this DOS clause. It is smoke and mirrors. I have seen this in someone’s book, but I can’t remember whose. The key phase is in (b) “…Lender shall, IF PERMITTED BY APPLICABLE LAW…and with prior approval of the Secretary” - IT IS NOT PERMITTED BY APPLICABLE LAW!!! It is specifically PROHIBITTED by the law cited!! Also, does anyone think that the HUD Secretary is really going to review every possible DOS violation to give the lender the right to accelerate! Nothing like trying to intimidate by bringing the feds in on the deal!!
Thus the land trust is perfectly suited to avoid DOS violation. The selling of beneficial interest makes the personalty (the real estate is in trust, thus becoming personalty) immune to judgements against any co-beneficiary to the trust, which makes the land trust safer for the non-injuring party, and that is the purpose and benefit of the PACTrust.
Glenn
Re: DEED of TRUST --/ LAND TRUSTquestion/ Bill Gatten / Bronchick please read… - Posted by Bud Branstetter
Posted by Bud Branstetter on December 15, 1999 at 12:23:13:
steph,
What would bother me is the second clause that requires permission to not be his principle residence. If he can’t rent it out or needs permission to rent then it says they have a right to call the note due.
By also saying that if any part of the interest is transferred then the PACtrust would also violate that portion.
Now, an option to purchase for the amount of arreages is on the brink and you had better be able to refi or qualify.
Re: I’m interested, too, but my take… - Posted by Stacy (AZ)
Posted by Stacy (AZ) on December 15, 1999 at 10:28:38:
I’ll be watching for the legal response, but this seems to me to restate exactly what we already know.
The owner can place the title into a land trust while he’s still living there, and this will NOT cause a DOS violation. Therefore, the deed to trust should be recorded (with your choice of trustee, and the current owner as the beneficiary).
Transferring the beneficial interest of the trust to you should not be recorded, and the lender should not be notified, as this will definately violate the DOS.
I don’t see anything new here, but I’ll watch for replies.
Stacy
Bill Gaten? Is this common? - Posted by B.LC
Posted by B.LC on December 15, 1999 at 09:44:14:
Hello Steph,
I agree that this is a question for “the Bills”
I, too, am interested in seeing the responses.
B.LC
Re: The key is “IF PERMITTED BY APPLICALBE LAW” - Posted by JPiper
Posted by JPiper on December 16, 1999 at 21:58:42:
Bill:
What I said in my post was that your charges were “nominal”. What “nominal” means to me is that they are much less than their value. I’m gathering you feel this assessment of your charges is incorrect according to your post.
So tell me, if your charges are not nominal…how should I refer to them in the future?
JPiper
Re: This is not really a DOS clause question— - Posted by Glenn
Posted by Glenn on December 16, 1999 at 09:18:29:
A couple of comments, and a question. You refer to a Deed of Trust - is this what we refer to as the mortgage in Ohio? Or is it the Deed showing ownership at the courthouse.
As far as notifying the lender, the trustee needs to handle all paperwork with regards to the trust, so that all co-beneficiaries get all notifications, copies of bills, etc., so it is necesssary to notify the lender of the change in handling.
Glenn
Re: This is not really a DOS clause question— - Posted by JPiper
Posted by JPiper on December 15, 1999 at 18:18:17:
I?m not one of the Bill?s?.but here?s my answer to your question.
First, I don?t know why you?re notifying the lender of your transfer to the trust. Presumably you?re doing that on the advice of one or both of the Bill?s. I have never done that personally?.nor can I think of any reason why you should do it.
Second, this language looks different to me. What type of loan is this, who originated it? The language concerning occupancy by the purchaser as principle residence almost makes this sound like one of those ?first time buyer? type loans. Is it? For you info, the ?first time buyer loans? are usually FHA loans with first time buyer riders.
I?m also wondering if you left something out of your quote of the clause. How about reprinting the entire clause, and tell us what type of loan this is and other information about the loan that you may know. Again, I?m specifically wondering about first time buyer restrictions.
Finally, let me tell you a little story. I first learned about land trusts around 10 years ago. Supposedly there was a handful of us in S California who knew about using the land trust as a means of dealing with the due on sale clause. I kept my knowledge secret. Funny though, 3 years ago or so when I arrived on this site here?s Bronchick writing about land trusts and due on sale clauses?.lol?all the info you could ever want to know, and that I had kept secret, for $150.
Now Gatten arrives on the scene. He has a twist. He?s believes he?s gotten around every nuance of the due on sale clause?.and he?ll show you how for a nominal sum (I guess that?s true).
Do you suppose that any lender, or the representative of any lender, has ever heard of any of this information? I mean here?s two guys running around the country giving seminars you?d think at least ONE lender might have attended, or read something written by one of the two of these gentlemen.
So will things change? I don?t think there?s any question about that. The only question is WHEN.
Meanwhile, please post the information regarding the loan if you would.
JPiper
Re: DEED of TRUST --/ LAND TRUSTquestion/ Bill Gatten / Bronchick please read… - Posted by steph in tex
Posted by steph in tex on December 15, 1999 at 15:17:34:
Thanks Glen. Has this been here all along? Or have they added this verbage specific to the GSG act?
Thanks to everyone whos posted
steph in tex
Re: DEED of TRUST --/ LAND TRUSTquestion/ Bill Gatten / Bronchick please read… - Posted by Bill Gatten
Posted by Bill Gatten on December 16, 1999 at 21:34:52:
Bud dad gummit!! The PACTrust doesn’t violate anything! It’s the revocable, beneficiary directed (Illinois-type) land trust around which the PACTrust is built that is the issue. The PACTrust is no more than the net leasing of a trust property by a co-beneficiary in the trust.
The main issue here is that a lender just cannot arbitrarily put something in the DOS Clause that violates Federal mandates (well…they can put it in, I guess, but they can’t enforce it). The GSG even indiates that this is true “irrespecitvie of what may be written in the note or on the deed…”
And when Piper suggests that things are going to change…well they did! That’s why Garn St. Germain was written. However, if the Federal government sees that lenders are being duped and intimidated by Bill Gatten and Bill Bronchik (both of whom apparently stole Piper’s secret somehow), then I’m sure they’ll step in. But do you truly think they know (or care) that either of us exists? Bronchik, maybe…he’ a flourishing attorney (Me? I’m merely a simple stump in the vast forrest of creative finance).
Bill Gatten
Re: DEED of TRUST --/ LAND TRUSTquestion/ Bill Gatten / Bronchick please read… - Posted by Glenn
Posted by Glenn on December 16, 1999 at 09:30:37:
Note that the clause to which you refer is (b)(ii) which indicates that it is a condition under which (b) can be invoked, but my take is that this is just an intimidation clause, because it isn’t permissible by law. The trust just allows a personal property interest to be created, and that a sale of the property will occur in the future - it doesn’t guarantee that the resident beneficiary will even be the buyer. The sellar remains on the mortgage for the entire period, and if the resident co-beneficiary defaults, the sellar is still responsible. At that time they would get back the beneficial interest sold to resident co-beneficiary, and resell the interest to a new co-beneficiary.
Glenn
Re: I’m interested, too, but my take… - Posted by Glenn
Posted by Glenn on December 16, 1999 at 09:43:56:
I agree that I don’t think there is any new threat here, but I think the clause is new. I’m not sure you are correct that just transferring the partial beneficial interest is not “PERMITTED BY APPLICABLE LAW” and would violate the DOS clause. As far as recording - why do it - it is unnecessary and a waste of the recording fees. Remember, when the Illinois Land Trusts were first set-up, Henry Ford was using it for anonymity. If it’s good enough for Henry, the rest of us can keep people from knowing our business also!
Glenn
Re: Bill Gaten? Is this common? - Posted by Bill Gatten
Posted by Bill Gatten on December 16, 1999 at 21:22:34:
Yes. Not only common but standard in all FHA loans written after the Garn St. Germain Act of 1982.
The key is that the paragraph is a toothles tiger…it says “We will definitely break the law if the law will allow to.”
Bill Gatten
Re: 'Thought you wer being sardonic (as it were) - Posted by Bill Gatten
Posted by Bill Gatten on December 17, 1999 at 16:57:14:
Jim,
No offense…honestly. I presume you enjoy the banter as much as I do. I assumed (apparently incorrectly) that your use of the word “nominal” in your post was in a more sardonic sense, and that you perhaps thought I did indeed charge too much for what I do (I probably do, but, hey, I do have to buy shoes and Metamucil).
For the record (as you said) Jim: A PACTrust, when fully (and properly) contructed involves not only the setting up of a land trust, but also the creation of Assignments of Bene. Interest; Powers of Attorney (2), Transfer documentation; Preliminary Changes of Ownership Reports (somes two or three deeds, depending upon the chain of title); Beneficiary Agreements; Occupancy Agreements; directions to Escrow,; Rider data and addenda documentation; direction to agents; exculpatory documents for agents and escrow; explantion letters to buyers, to sellers, to agents, etc. Then on top of that we have to order and review all title data and make necessary additional transfer documentation; input all data into our collection service and with the corportate trustee (takes a day or so). Then we correspond directly (by mail and phone) with all creditors, insurance companies and taxing agencies to assure that they know who the payments will be coming from and how to change their records. Now…that’s what we charge our nominal fee FOR (…to end a sentence with a prepostion).
HOWEVER…understand–CLEARLY–that the standard investor type who isn’t worried about all the legal nuiances and protective devices that we build in (sometimes as an over-kill), can do this whole thing by merely filling out the basic forms (from our doc manual) himself and taking the deed and PCOR down to the county recorder’s office.
The do-it-yourself variety wouldn’t be a “PACTrust™” per se: but it IS a do-it-yourself 3rd party land trust conveyance, and affords the functions and benefits I talk about if done properly… THAT’S FREE…but even at that I still am ALWAYS happy to work with those folks in every way possible (mentoring, wording their ads, answering their client’s questions, their clients’ attorneys and accountant’s questions, etc.) WITHOUT ANY CHARGE…simply because they bought a book, or a Success Pack, or a Membership or attended a workshop…or just because they didn’t ever be mean to me (or ask the really, really hard research questions like you always do).
Candidly, the drawbacks in doing it all yourslef is that mistakes are far more likely, and we obviously can’t endorse the contracts from standpoints of construction, interpreation, integrity and enforceability, the way we can when we handle it.
And besidss, a percent (or so) of the property’s value is a whole lot less than a real estate commission; and a lot less than any attorney I know would charge for the same service.
Your friend and fellow cowboy singing star,
Bill Gatten
Steph, I assume that… - Posted by Tim Randle
Posted by Tim Randle on December 16, 1999 at 07:54:02:
“f/u” is an abbreviatin for “follow up” and not something else? Couldn’t resist…
JPiper I wondered where you were! - Posted by steph in tex
Posted by steph in tex on December 15, 1999 at 20:23:22:
I am so glad to hear someone else thinks this language looks different. You are correct- this is an FHA loan.
This is a newer Deed of Trust, orig in 1998.
There is no mention of 1st time buyer status, however there is language about them having to live in the property for one year.
Everything else looks to me to be “standard” if you will- for lack of a better term, except for the sec
9(b)
(i)inclusion of the Garn St. Germain piece.
(ii) property is not occupied by the purchaser as his or her principle residence,…(this next part i did not include before) or the purchaser does so occupy but his or her credit has not been approved in accordance with the requirements of the Secretary.
Then it goes on with more verbiage that we see all the time–then Sec 9(b) is mentioned again here:
#12 Successors and Assigns Bound: Joint and Several Liability; Co-signers. The convents and agreements of this security Instrument shall bind and benefit the successors and assigns of the lender and borrower, subject to the provisions of paragraph 9(b).
Other than that–nothing I haven’t seen before.
I will probably continue on with this deal, but I will not notify the lender about the trust. I feel that as long as the note is being paid I’ll be o.k.
Just needed to see if this is something that indicates Lenders to be “privy”, if you will, to our clever way around the DOS. If they are smart enough to put the language in as it is here, then they would certainly be likely to question whether benefitial interest had been transfered. Thanks again to all who have responded. I got an email from both “Bill’s”. Bronchick is out until monday, and will f/u then, Gatten will certainly give us his thoughts soon.
JPiper–as always–I thank you
steph in tex
Re: DEED of TRUST --/ LAND TRUSTquestion/ Bill Gatten / Bronchick please read… - Posted by Glenn
Posted by Glenn on December 16, 1999 at 09:34:49:
I believe that this is new verbage. Something new for the bank’s lawyers to try to intimidate the unsuspecting public about. That is what is great about this message board is that is allows us to keep getting educated as new methods arrive to try to confuse us.
Glenn