Garn-St. Germain Depositary Institutions Act - Posted by JPinPa

Posted by JPinPA on February 16, 2001 at 06:49:37:


Garn-St. Germain Depositary Institutions Act - Posted by JPinPa

Posted by JPinPa on February 14, 2001 at 19:30:17:

Can anyone tell me if this statute applies to all banks or can a local bank somehow be exempt and require mortgage acceleration whenever Title is transfered?

Re: Garn-St. Germain Depositary Institutions Act - Posted by David Alexander

Posted by David Alexander on February 15, 2001 at 11:51:00:

The Garn St. Germaine Act is a federal law that allows a property to be transferred to an Intervivos trust.

Now most banks will tell you it doenst matter and they are going to call the loan due… They dont understand the Act.

On the otherhand they just want the payments.

Be more specific as to what you wnat to know.

David Alexander

Re: Please restate your question - Posted by Stacy (AZ)

Posted by Stacy (AZ) on February 15, 2001 at 10:50:42:

I tried to understand your question, but to no avail. When you ask if a local bank can be “exempt” from Garn, what do you mean?

Garn, among other things, lays down the rules that may be followed by a lender, at its option, to call a loan due and payable upon title transfer. A local bank has this option as well as a national bank, or a private individual (owner finance).

If the “due on sale clause” is in the mortgage or trust deed docs, the lender has the option to call the loan. It’s rare that lenders don’t have a DOS clause in their mortgages. But, if for some reason a lender wants to allow title transfer, they can choose to leave out the DOS clause.

Did this help at all?


Redline’s assumption is correct - Posted by JPinPa

Posted by JPinPa on February 15, 2001 at 13:25:25:

Sorry for not being more clear. I was unsure as to how to ask the question. So here goes…

Spoke with a real estate attorney yesterday. Gave him the “subject to” scenario. He said putting the deed in a trust violated the DOS. I said it didn’t due to the exemptions under Garn-St. Germain. He said since it is a Federal Act a local bank may not have to abide by the exemptions. ???

He also stated that any deed transfer has to be recorded within 60 days, as required by the state of Pa. so they can receive the transfer tax in a timely fashion. I said that the recorded document would only show a transfer into a trust which is not a sale, the beneficiary would still be shown as the original owner. He reponded saying the fact that it was transfered into a trust doesn’t matter. Pa still considers it a transfer and tax is due.??

Time to get another attorney?LOL

Any input would be appreciated.

Thank you, JPinPA

Re: Please restate your question - Posted by Redline

Posted by Redline on February 15, 2001 at 11:18:21:

I think he’s asking if a bank can circumvent this if, say, they are not federally chartered for example. i.e. do ALL banks/lenders have to follow this?


Here is the deal… - Posted by Jim Pasquini

Posted by Jim Pasquini on February 15, 2001 at 22:48:32:

The simple act of putting the property into a land trust does not violate the DOS clause. The violation comes when you transfer the entire beneficial interest in the trust as G-SG indicates the borrower must be and remain a beneficiary.

Your attorney is also wrong about G-SG applying or not applying to a local bank. One of the big reasons why G-SG came into being was the De La Cuesta decision. Under Wellenkamp v. Bank of America the right to wrap a property was established when Wellenkamp prevailed. Subsequently, Fidelity S&L v. De La Cuesta decided that you couldn’t wrap with a federally chartered lender. G-SG was established in part to bring all depository institutions in line. I’ve even heard it suggested that a private lender would be subject to G-SG, but that is a topic for another time.

The transfer of beneficial interest is not a sale of realty, but rather a sale of personalty. Still, if you transferred the entire beneficial interest I don’t think I’d like to be on your side if challenged in court. You could probably get away without paying transfer tax if you stayed below radar, but you can also get away with not paying income tax if you stay below radar as well. There is just he11 to pay if your radar cloaking fails.

You might ask Mr. Attorney-man if a someone puts a PA property into their own living trust for asset protection purposes if they owe transfer tax? Be interesting to see what his answer is.