Putting a property in trust does not trigger a DOS. That does not however mean that the DOS is "waived". If you own the property and the trust, there was no real transfer of ownership, there was only transfer of the title into your trust.
If the end result is that ownership of the property is transferred, the DOS may not be triggerred because the lender may not realize that the property was sold, or it's not in their best interest to call the loan due. That situation could change, and the DOS could be called due sometime in the future. That being said. In reality it is extremely rare for a lender to call the loan due in the current market.
Quote:If you own the property and the trust, there was no real transfer of ownership, there was only transfer of the title into your trust. jeff12002,
I would like to clarify one point here. When you use a living trust as a title holding device, you do transfer title to the trustee. You, as the grantor, may still remain the beneficiary of the trust, but the trustee is now the titled owner.
What prevents a lender from enforcing the due on sale or transfer clause is a provision of the Garn St. Germain Act (1982). Specifically, a lender is prohibited from enforcement of a note's due on sale clause from title changes occurring during normal estate planning when the title change is
. . . "a transfer into an inter-vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property".
Once beneficial interest in the trust is sold or assigned (as might happen in a Subject To transaction), the lender "could" enforce the due on sale clause. Not all lenders will discover the transfer of beneficial interest. Not all lenders will even care if the loan is current.
DaveT,
While I agree with you with regards to the Garn St. Germain Act, , and the fact that there is a Warranty Deed to the trustee, I don't agree that the Trustee owns the property. The trustee is your employee, and can only legally do what you direct them to do "In Writing" with the title. If you direct him/her to deliver the title to the trust. They cannot do otherwise without commiting fraud. You can revoke their rights as trustee at any time, or asign a new trustee. In some states, you could even be your own trustee. (Not that that makes much sense).
You are right that the trustee may only operate within the powers granted to the trustee.
My comment is only in reference to how the property held by the trust is titled. When the deed is recorded, in every courthouse where I have viewed the records, the legal title will be in the name of the trustee -- for example: John Jones, Trustee, 1234 Main Street Trust.
You said that putting property into a land trust did not trigger the DOS clause. I maintain that putting the property into a trust is a title transfer that does trigger the DOS. It is the Garn St. Germain Act that prevents the lender from enforcing the DOS in this instance.
If you still want to maintain your position, I will agree to just disagree.
Dave,
You are always a wonderful source of wisdom, experience, and information. You are much more technically proficient in these matters than I, and you are probably correct. I believe that the end result of what you and I are saying is the same. The DOS will not be excercised by the lender. Thanks again for the lesson.
Jeff
having recently purchased Bill Bronchiks course on living trusts I concurr that title does indeed pass to the trustee.
This is much like not being the owner of record of a corporation or share holder but controlling said corporation just the same. Generally the beneficiary is able to direct the trustee in their actions depending on the trust agreement etc.
Title does pass from the owner to the trustee and Garn St Germain does keep the lender from DOS while the beneficiary remains the same.
After several years of CRE I have seen only one time the lender called the note due on a subject to type deal where the mortgage was paid each month.
StockPro,
By any chance was there an equity line of credit on the house? I've heard that they greatly increase the chances that the lender will excercise the DOS when they find out that someone else is making the payments and this situation exists.
Jeff
null 
Putting a property in trust does not trigger a DOS. That does not however mean that the DOS is "waived". If you own the property and the trust, there was no real transfer of ownership, there was only transfer of the title into your trust.
If the end result is that ownership of the property is transferred, the DOS may not be triggerred because the lender may not realize that the property was sold, or it's not in their best interest to call the loan due. That situation could change, and the DOS could be called due sometime in the future. That being said. In reality it is extremely rare for a lender to call the loan due in the current market.
Quote:If you own the property and the trust, there was no real transfer of ownership, there was only transfer of the title into your trust. jeff12002,
I would like to clarify one point here. When you use a living trust as a title holding device, you do transfer title to the trustee. You, as the grantor, may still remain the beneficiary of the trust, but the trustee is now the titled owner.
What prevents a lender from enforcing the due on sale or transfer clause is a provision of the Garn St. Germain Act (1982). Specifically, a lender is prohibited from enforcement of a note's due on sale clause from title changes occurring during normal estate planning when the title change is
. . . "a transfer into an inter-vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property".
Once beneficial interest in the trust is sold or assigned (as might happen in a Subject To transaction), the lender "could" enforce the due on sale clause. Not all lenders will discover the transfer of beneficial interest. Not all lenders will even care if the loan is current.
DaveT,
While I agree with you with regards to the Garn St. Germain Act, , and the fact that there is a Warranty Deed to the trustee, I don't agree that the Trustee owns the property. The trustee is your employee, and can only legally do what you direct them to do "In Writing" with the title. If you direct him/her to deliver the title to the trust. They cannot do otherwise without commiting fraud. You can revoke their rights as trustee at any time, or asign a new trustee. In some states, you could even be your own trustee. (Not that that makes much sense).
You are right that the trustee may only operate within the powers granted to the trustee.
My comment is only in reference to how the property held by the trust is titled. When the deed is recorded, in every courthouse where I have viewed the records, the legal title will be in the name of the trustee -- for example: John Jones, Trustee, 1234 Main Street Trust.
You said that putting property into a land trust did not trigger the DOS clause. I maintain that putting the property into a trust is a title transfer that does trigger the DOS. It is the Garn St. Germain Act that prevents the lender from enforcing the DOS in this instance.
If you still want to maintain your position, I will agree to just disagree.
Dave,
You are always a wonderful source of wisdom, experience, and information. You are much more technically proficient in these matters than I, and you are probably correct. I believe that the end result of what you and I are saying is the same. The DOS will not be excercised by the lender. Thanks again for the lesson.
Jeff
having recently purchased Bill Bronchiks course on living trusts I concurr that title does indeed pass to the trustee.
This is much like not being the owner of record of a corporation or share holder but controlling said corporation just the same. Generally the beneficiary is able to direct the trustee in their actions depending on the trust agreement etc.
Title does pass from the owner to the trustee and Garn St Germain does keep the lender from DOS while the beneficiary remains the same.
After several years of CRE I have seen only one time the lender called the note due on a subject to type deal where the mortgage was paid each month.
[addsig]
StockPro,
By any chance was there an equity line of credit on the house? I've heard that they greatly increase the chances that the lender will excercise the DOS when they find out that someone else is making the payments and this situation exists.
Jeff