Posted by Bill Gatten on April 06, 1999 at 17:41:01:
As a matter of fact, if someone were seeking total and complete squeaky clean “perfection” in the process of avoiding a lender’s Due-on-Sale Clause, this is the way they would do it. The substitution is never recorded anyway, unless the trust is to be re-written and the property re=deeded to a new (Vs. a substitute) trustee…
The appointment of one’s self as trustee removes all doubt from the mind of the “less than fully knowledgeable” bank clerk, as to whether or not Garn St. Germain [12USC 1701(b)] is being strictly adhered to. Then the subsequent (silent) Substitution of Trustee would be done strictly to create an unbiased arms-length corporate trusteeship for the parties.
The thing we’ve given thought to, but have never worried about (because we’re more than ready to defend our position in court), is that a lender might not realize that a land trust is beneficiary directed, and in so much as GSG states that the borrower must be the “trustee,” presume their security interest had been compromised. The assumption would be that if the borrower were not the trustee, the Power of Direction, and therefore the control over their security, would have been relinquished (this is why in a PACTrust we insist that the non-resident beneficiary retain a nominal beneficiary interest and 50% of the voting rights… unless ceded by a silent Power of Attorney).
Jim, keep the question coming… you’re writing my new book for me.