Parent/Child Ownership Transfer. Two Questions... - Posted by Hugh (CA)

Posted by Bill on July 13, 2002 at 07:36:22:

Yes

Parent/Child Ownership Transfer. Two Questions… - Posted by Hugh (CA)

Posted by Hugh (CA) on July 12, 2002 at 21:18:34:

Two questions about what one should do after ownership of a house is transferred from parent to child:

  1. According to Garn-St. Gremaine, the due-on-sale clause cannot be enforced. But what about the loan obligation? Should the bank be contacted to have the loan obligation transferred over to the child? (And would this be a costly transaction?)

  2. What about insurance — fire, flood, earthquake — should these be changed over to the child’s name also? (The agent says the bank won’t accept insurance in any name other than whoever signed the original loan papers — and that’s what prompted this post.)

Thanks for your input!

---- Hugh

Re: Parent/Child Ownership Transfer - Posted by JoeKaiser

Posted by JoeKaiser on July 13, 2002 at 13:01:43:

The lender can’t enforce the due on sale, but it’s not like they actually have to go out of their way to make everything smooth sailing for you.

Their hands are tied . . . and the rest is up to you. The loan obligation remains as to the original borrower (a loan obligation is not a “minor detail” that can be handled by “transferring to the child”) and insurance is easily handled with an agent who’s willing to push things.

Joe

due-on-sale? - Posted by Donald

Posted by Donald on July 13, 2002 at 03:02:42:

Hugh

Question here----
Are you saying I can deed a house to a child and it will not ‘trigger’ the due-on-sale clause?
Talk to me.
Donald

Parent/Child Ownership Transfer. Two Questions… - Posted by Bill

Posted by Bill on July 12, 2002 at 21:37:37:

I just did the same thing in January. Bank of America held the first.

I did a quit-claim deed to the kid and then he refinanced the property with Bank of America with a no-cost loan. I think he got a 6.49% 30 year loan with no cash out.

With interest rates the way they are now, I cant imagine the bank caring one way or the other just as long as they get their money each month. I just wanted it out of my name.

Insurance was a piece of cake and was handled at the same time.

In 97 I did a wrap on another piece of property I owned where B of A had the first, and the buyer was able to get insurance from his State Farm agent without any trouble.

I make the underlying payment each month and I have yet to hear from B of A about the transaction.

I never notified them about the sale, but the Insurance agent sends them copies of the policy each year.

Yes. - Posted by Hugh (CA)

Posted by Hugh (CA) on July 13, 2002 at 09:38:29:

Donald,

According to the Garn-St. Germaine Depository Institutions Act, there are nine situations where a lender may NOT exercise the due-on-sale clause. Regarding your question, here’s an excerpt from the Act:

“…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 - …
(6) a transfer where the spouse or children of the borrower become an owner of the property;…”

You can read more of the Act itself and the other eight exceptions at:

http://www4.law.cornell.edu/uscode/12/1701j-3.html

Of course, I’m not an attorney, so this post is for educational purposes only, it’s not legal advice. (And be sure to ask your doctor if it’s OK before transferring a house to a child!)

---- Hugh

Re: due-on-sale? - Posted by jeff

Posted by jeff on July 13, 2002 at 08:18:35:

i thought that was just in the case of death by the parent? can this be done if noone dies?