Posted by Nate(DC) on March 04, 2002 at 22:10:43:
Well, theoretically, the beneficial interest is personal property, so it would have to be secured with a UCC-9 filing and not a mortgage. This raises some issues for the buyer refinancing later, because they will have difficulty finding a lender willing to refinance them if the property is held in a trust, particularly one with such onerous terms, and if the property were to be conveyed to them directly it would not be a refi.
I suggest you also talk to a lawyer about the arrangement being considered an “equitable mortgage” in the event something goes wrong. I am not a lawyer and therefore cannot give legal advice, but essentially this doctrine means that, despite the form of the transaction, the substance of it is a mortgage, meaning that if something were to go wrong, you would have to follow the foreclosure procedures as if it actually were a mortgage. In any event the buyer could hold things up in court for a long time, claiming there was an equitable mortgage. Walks like a duck, quacks like a duck. Why not just do a lease-option?