Short Sales Legal Using Land Trust
I just had a real estate agent in Orlando Florida inform me that selling a short sale from a land trust is not leagal in Florida and that Fannie mae will not fund a loan where the seller is a trust. From what is available to me I cannot find anything that makes this illegal. Anyone else come across this?
Do you know if there are any issues in the state of Florida using a trust ?, as I am not aware of any and I have been performing diligent research.
Lenders make residential mortgage loans to individuals based upon the individuals credit worthiness. As a condition of the loan, the lender will require the individual to give the lender a mortgage which pledges the property as collateral for the loan the individual receives. To close the loop, the lender will also require the indivuals who sign the promisory note to also be on the title to the property. By default, this will preclude making a loan to an individual for a property that is titled to a trustee who is not on the note.
You (actually your trustee) can still sell the property to a cash buyer with an assignment of beneficial interest and the trust can remain intact.
Fannie Mae does not make loans to individuals anyway. Fannie Mae does purchase loans from lenders when the loan meets the Fannie/Freddie underwriting guidelines (i.e. a conforming loan). Some of the underwriting guidelines include title seasoning requirements. Since so many mortgage fraud schemes have relied upon land trusts to circumvent title seasoning and to facilitate mortgage fraud, the presence of a trust has become a red flag. Many lenders are refusing to fund loans for buyers who want to purchase a property in a trust. This means that if you want to sell your property, you will have to take title in your own name -- and then you will have a title seasoning hurdle to overcome. No one will really care if the property was originally acquired by a short sale, it is the presence of a trust that gets in the way.
Even though lenders and title companies may refuse to work with a property held in trust, there is nothing illegal about selling a property held by a trust.
Real estate agents are not always the best informed sources, are they?[ Edited by NewKidInTown3 on Date 06/18/2008 ]