Sunday, December 15, 2013

Can we lend to a trust?

WHY NOT TAKE TITLE IN TRUST???

By
Mortgage Banker with Larry Bettag - Cherry Creek Mortgage
http://actvra.in/485J
As an attorney and as a lender I've seen more and more people buying and selling in trust. A trust is a great way to own property. It affords ownership, while protecting the individual in many respects.
There are a few things that people need to know when doing a trust and getting a loan.
1) For any lender to allow title to be held in trust, the trust must be revocable. What this means is that the person creating the trust (the trustee) must also have the benefits of the trust as a trustee. This assures the lender that they can enforce the provisions of the loan should the borrower go into default. A trust does not eliminate the borrower's liability, but for estate planning purposes, probate, privacy matters, a trust is a GREAT WAY TO TAKE TITLE. The lender, though, needs to make sure that they can enforce the loan.....so having the creator of the trust as the sole beneficiary, the same person, creates just that.
2) Conversely, irrevocable trusts are not allowed. Often times for estate planning purposes, people will create an irrevocable trust. An irrevocable trust cannot be amended or changed at any point after it's creation except through some protracted legal proceedings. This is a problem if, say, for instance, the lender or the government creates new rules that would affect a trust's ability to own property. A revocable trust can be amended to comport with the guidelines of a lender. An irrevocable trust cannot.
3) Finally, people who own trusts are often so busy that they cannot attend closings.  Or for privacy matters, will not attend closings, and therefore create a power of attorney for the closing. Here's the critical point to be made. A power of attorney can be used to buy and sell properties....provided.....it's in the provisions of the trust document itself. Title companies will insure those transactions. However, they will not allow it if those provisions don't exist within the trust itself.
The bottom line is that taking title through a trust is a great way to take ownership.  But you need to have the trust created, and then from that point on it comes down to working with a lender that knows what they're doing!
 
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