Understanding the Dynamics of Subject to the Existing Loan

BooBoo, BooBoo, BooBoo

I’ll try one last time. Why are you referring to the act and not the trust document? The trust documents are what you use to transfer the property into a trust. They do not involve rights of occupancy. PERIOD. The act says it is legal: “a transfer into a trust that does not involve the transfer of rights of occupancy”. Transferring into the trust is legal – you agree with this.

The act ONLY applies to the real property. The beneficial interest is PERSONAL PROPERTY and has nothing to do with the real property. The "Beneficial Interest " is assigned, therefore nothing changes at the courthouse, and the Beneficiary(s) and the Trustee signs a document called “Assignment of Beneficial Interest”.

What you can’t seem to grasp is (your quote): “the assignment/transfer of any or all of the seller’s beneficial interest to you, which appears to me to be in violation of the act as this appears to me to be a way to transfer the property and hide this transfer from the lender”. The Seller never assigns all of his interest.

It appears to you that way, but it is not. It is a way to hide the transfer from the lender if that is what you want to do, however, it is NOT a violation of the act and is perfectly legal and has been usedf for many years in hundreds of transactions.

Gary,

Let me run this by you so you can see how I am looking at this:

An assignment of any beneficial interest by the seller to you is the same as the seller giving up and transferring their rights of occupancy. This assignment still happens whether it is recorded at the courthouse or kept silent between the parties; it still happens. The act never says that ALL of the rights of occupancy are transferred, just that THE transfer of rights of occupancy.

The way I see it, your trust DOES involve the transfer of rights of occupancy by the seller’s assignment of beneficial interest and therefore a violation of the act.

Do you see what I’m referring to, maybe it is just the wording that I am having a problem with.

Again thank you for bearing with me on this subject.

BooBoo,

Glad to meet you.

Let’s get back to the basic’s as explained: “only a transfer of interest in the trust (of which the Corpus is the property).”

To give you a basic understanding of how this all took place would be:

The Corpus Juris Civilis (Body of Civil Law) is a fundamental work in jurisprudence, issued from 529 to 534 by order of Justinian I, Byzantine Emperor.

Justinian gave orders to collect legal materials of various kinds into several new codes which became the basis of the revival of Roman law in the Middle Ages. This revived Roman law, in turn, became the foundation of law in all civil law jurisdictions. The provisions of the Corpus Juris Civilis also influenced the canon law of the church since it was said that ecclesia vivit lege romana — the church lives under Roman law.

The work was directed by Tribonian, an official in Justinian’s court, and distributed in three parts: Digesta (or “Pandectae”), Institutiones, and the Codex Constitutionum. A fourth part, the Novels (or “Novellae Constitutiones”), was added later.

Here is where you start to understand even further about trusts.

Pandects (Lat. pandectae, adapted from Gr. pandektes, all-containing) is a name given to a compendium or digest of Roman law compiled by order of the emperor Justinian I in the 6th century (A.D. 530-533).

The pandects were divided into fifty books, each book containing several titles, divided into laws, and the laws into several parts or paragraphs. The number of jurists from whose works extracts were made is thirty-nine, but the writings of Ulpian and Paulus make up quite half the work. The work was declared to be the sole source of non-statute law: commentaries on the compilation were forbidden, or even the citing of the original works of the jurists for the explaining of ambiguities in the text.

Your next step would be to get your hands on the Fifty Books described above, then you can go to the next level of understanding the trust.

John $Cash$ Locke

Nice to meet you too $Cash$ and thank you for your response.

Gary,

In addition to my previous question, I just reread what you posted to me regarding my question about the T/B; as a matter of fact I’ll quote your answer:

“Your question about what happens to the TB if the seller wants to reoccupy the property makes no sense. This cannot happen as the seller remains a beneficiary and is bound by the paperwork he himself signed as an owner of his trust. Sometimes we set it up where we share future profits with both the seller and buyer. Case closed.”

Could you please explain what you mean by this part of your answer: “This cannot happen as the seller remains a beneficiary and is bound by the paperwork he himself signed as an owner of his trust.” because this sounds to me like the seller gave up all his rights of occupancy and no longer controls his property which as we all know would be a violation of the act.

Thank you in advance

BooBoo,

I think I understand your confusion. We are talking about two different things. The first is Federal Law, the Garn -St. Germain Act of 1982, passed by Congress, which states that a lender cannot exercise its Due on Sale Clause against: (8) "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; " It is legal and protected.

With a land trust, ownership becomes a private matter. County records will reflect your Trustee as the titleholder in a trust capacity. Privacy and anonymity are among the most important aspects of a Land Trust. No one can tell from the public record who the Beneficiary(s) are, except the Beneficiary(s), and the Trustee. When the title of the property is searched, all that is found out is the property is owned by a Land Trust, no one knows the Beneficiary(s) name.

The use of a “Land Trust” as a method of concealing ownership of property has gained enormous popularity. Professionals such as Physicians, Real Estate Brokers and commodity traders for instance, often establish a land trust to help protect themselves from financial liabilities inherent to their professions.The real estate entrepreneurial community has latched on to the land trust as a creative method to convey interests in property without awakening the institutional “sleeping giant” - the “due on sale” clause contained in almost all Trust Deeds and Mortgages held by Federal and State Chartered Banks. This opportunity exists when sellers of real estate are willing to remain on the existing loan and allow another party to assume all of the costs and tax benefits of the mortgage.

EXAMPLE:

So, for example, You place your property in the BooBoo Trust and name John Locke as your Trustee. You have established your trust legally. Your trustee now holds the deed to your property. There has been no transfer of occupancy rights.

Tony D bops along and takes over your 1st mortgage “subject to” according to the terms of a Triple net lease. You assign him a beneficiary interest making him an owner of the trust as well. You both own personal property, not realty. You have now transferred occupancy rights and assigned a beneficial interest in the trust. You look over your loan papers. There is a Due on Sale Clause. Remember, a DOSC is NOT law. It was NEVER passed by anyone. It is simply words on a contract listing the terms and conditions under which your lender WOULD LIKE to call your loan IF he is allowed to do so by law (WHICH HE IS NOT).

Read your Due on Sale Clause. It will say that transferring rights of occupancy or beneficial interests is a violation of the clause. That is why you thought we are in violation. However, it also says they will call in the loan UNLESS PROHIBITED BY APPLICABLE LAW and they are. That is where you are protected. This clause is meaningless because the lender CANNOT call the loan due to the protection provided under Garn-St. Germain.

Please understand that violating a lender’s due-on-sale clause is NEVER against the law. A violation of the DOSC merely compromises the lenders wishes and can result in termination of the mortgage and foreclosure on their security. In the event of such action, it would be sanctioned and fully supported by law EXCEPT under certain circumstances, one being the placement of the property into an inter-vivos trust (such as in the land trust). It is important to clearly understand that placement of a mortgaged property into a land trust and leasing it out to an unrelated co-beneficiary is authorized (indirectly by non-prohibition) by law [the Garn-St. Germain Law]: FDIRA 1982/12USC1701-j-3.

This has been tried and tested for many years. Hope this clarifies it for you.

Thank you Gary for your explanation of violating the DOS clause.

I understand completely that putting a property INTO a trust is completely legal, ethical and well within the Garn -St. Germain Act of 1982, it is the TRANSFER within the trust that I am still having a problem with. I also understand that violating the DOS is not a criminal act and not against the law; however lender fraud is.

If I am using the trust to HIDE or CONCEAL a transfer from a lender this could be taken as an OVERT act to defraud; something I am doing on purpose so I can gain control of the property without the lender’s knowledge. By just not telling a lender a transfer has been made is an omission not an overt act and I feel would not be looked at in the same light. I also believe the lenders today don’t care who is making the payments as long as they get paid.

I do believe you are using this trust to hide and conceal the transfer based upon your previous statements including this one from your previous post “The use of a “Land Trust” as a method of concealing ownership of property has gained enormous popularity. Professionals such as Physicians, Real Estate Brokers and commodity traders for instance…” and I do believe by the use of this trust you are not only violating the words of the act but also the spirit of which it was intended. By this OVERT violation I believe this could be construed as lender fraud, which we see people going to prison for on a daily basis.

Why do you keep telling people to commit fraud???

Your post is really asinine. I’d like you to come out of the closet and post your real name. You are an obvious plant. I have an idea you are a “subject to” afficionado who is upset because without the land trust, “subject to’s” are a violation of the DOSC. I don’t know what your problem is in that lenders rarely ever invoke the DOSC, except for the fact that the trust affords legal protection.

This is not fraud and has never been. If you know so much, why ask questions? Your mind, if that’s what you call it, is obviously made up long in advance and your purpose is to try to discredit the trust.

The NARS trust has been used for 22 years without a challenge on thousands of properties. Every document is reviewed by the legal department before signing. I could refer you to several attorneys who would set you straight.

I spent a lot of time sincerely answering your questions and all the time you have a hidden agenda. Too bad the trust does what others can’t – not violate the DOSC. Get to you, doesn’t it? Have a nice day.

Gary, sorry, but it seems you are the one with a hidden agenda, and I’m sure I’m not the only one to think that. Your posts are all the same. Sorry, but it’s a bit ridiculous when you keep saying things about anyone who doesn’t agree with your way of doing business.

If you want to talk about assinine, talk about paying 1% of the value of a property and $40 per month. I would rather deed it right to an LLC, in the open, and keep the extra couple thousand dollars. There is nothing wrong with trusts, but the fact is that they are used to prevent the banks from seeing the transfer. I will never try to sneak around when it comes to running my business.

It would be nice to see some sound general advice without having the repetitive NARS trust virtues shoved down everyones throats. The average person starting might want to keep the money spent that you spend to set up a trust. A non profit corp trustee is not needed to buy a house. The DOS is a non factor. Deeding into an LLC is plenty enough protection.

I dont mind trusts, but it seems rather stupid to keep telling people about them unless they want to know. Most of your posts dodge the questions and turn it into a little mini salespitch of the values of using a NARS trust.

It is not illegal to violate the DOS, and to say that is a good reason to use a NARS trust is ridiculous. I would prefer to not deceive the lender. Using a NARS deceives the lender, whether it is legal or not. It still deceives.

The above is my opinion only.

Bobo,

If you took the time to read this thread you would see that I responded to a question as to how to not violate the DOSC. You keep posting the same crap over and over. Of course it is not illegal to violate the DOSC. That is exactly what I posted.

The trust is not used to prevent the bank from seeing the transfer. In fact, I notify the bank as I did on my own house so your post is just more baloney. You subject 2 boys are all alike. You violate the DOSC every time you do a deal.

As for “deeding into an LLC is enough protection”, you are simply wrong. An LLC is still partitionable and subject to liens and encumbrances. It will protect your personal assets, not your property. You need to do a little more research.

Gary,

This is a small part of an article published by a well respected national consumer organization.

“The most likely result (client) could have anticipated when signing the trust agreement is exactly what the other co-beneficiaries hoped for: a default on (the client’s) obligations resulting in an implied intention to sell their beneficial interest, followed by a quick eviction from their home. As was preached over and over again in his seminar program, 'stay unassociated with the end results, and caring costs money.”

“He specifically gave an example where it was necessary to evict an elderly woman from her home after her husband passed away and she could not meet her obligations.”

Whose method of trusts was this article referring to?

You’re preaching to every one about the DOS, have you no shame about what you do to the ederly or anyone else you deal with as a matter of fact.

John $Cash$ Locke

Poor John. You know I don’t handle foreclosures, and I have never had a seller remain as the tenant. If I did, and the tenant couldn’t afford to stay in the property, she would still retain all her equity and we would simply replace her with a sub-lessee and assist with moving expenses. Nice cheap shot though, John. It wasn’t too transparent.

Gary,

I did not write this article, so cheap shot is not appropriate, tell it to the person who wrote it, only have them play the tape of what was said at this seminar.

Just answer the question do you use this method to do your land trusts that is referred to in this article?

If this is the company you keep then the brand falls on you also.

John $Cash$ Locke

John,
You know good and well those remarks were taken out of context. Having met the man personally as I know you have, I say Shame on you!!
While I hope my RB’s all purchase the home as agreed, I pop a bottle of champagne if I have to evict since it means another payday. So what? I did exactly what I said I would, they didn’t. Next. I run businesses, not charities.

“He specifically gave an example where it was necessary to evict an elderly woman from her home after her husband passed away and she could not meet her obligations.”
Yep, it sucks evicting anyone. However, because I am a businessman and this is my livelihood, I’d make the same call. My first priority is to my business. Evictions are a challenge all landlords face eventually. In the trust scenario, the beneficiaries duties and penalties are clearly outlined from the onset. As an investor, my responsibility is to ensure the mortgage is serviced and the investment is protected. This particular gal had 2 months in reserves to make payments while she got it together, she also had the opportunity to sell the home outright when she got into trouble. But I know you know this. How many landlords would allow 2 months arrearages without eviction? You would? I call bulls**t.
You’re rapidly losing stature in my eyes, John. Delete this post as I know you will.
Regards,
Dave

Dave,
First I have never let anyone stay in the property, because as we all know they are not going to pay. Second I make sure they have money enough to put a roof over their head and money to eat on when I do the deal with them.

John $Cash$ Locke

The elderly lady was a tenant in a property she couldn’t otherwise qualify for without us. She was not a foreclosure bailout as you suggested, but I know that you already knew that. Point made, end of story, have a nice life.

You’re remarks are intentionally deceptive, and reek with the obvious intention of character assasination. I know for a fact you know our system since you once hosted a teleconferencing call for us during the NC AG fiasco. I fail to see the root cause of your rancor. Doesn’t matter. I’ll agree to disagree agreeably with you in exchange for you stopping the slam on ethics. Fair enough?
Dave Hurlbrink

Dave,

You are failing to see why I post as I do. When you or Gary slam Subject To deals then you are going to get a reply from me and others who practice this creative investing technique.

You and Gary have a tendency to make remarks about peoples character when it does not go your way, such as Gary’s latest post calling me NoCash, when you attack someone then be prepared for the ram.

In other words a taste of your own medicine will apply, I quoted straight from the Article about what was said, you say out of context, I say well contact the writer and have him retract his article for making false statements. So you guy’s brought that article up by knocking Subject To deals and my reply was those that live in glass houses should not throw stones.

Of course you could just stick to advising posters from you creative investing expierence, without saying other methods are illegal, so when you teamed up with Gary what he says will reflect on you.

However, I do understand your training as it is posted on the front of a web site you frequent, "(no sneaking around like subject to’s).

Hope you get the message from this post and I stick to helping folks who need it without knocking anyone’s method of investing. Then I will do the same.

John $Cash$ Locke

John,
I’m glad we’re getting to the bottom of this. I’ve never slammed Sub 2 deals, to the best of my knowledge and certainly don’t recall ever making any negative remarks about anyone’s character. I’d like to see an example of where this might have happened, since that’s not the intent. I do understand that sometimes the true message is lost through an impersonal email, as I’d suspect is the case in this instance.
I’d be glad to take a taste of my own medicine if indeed I truly offended someone somehow. Turnabout indeed is fair play. For the record, you brought the article up, not I.
Getting back to sub2’s being illegal, I think you might be referring to posts about the Texas legislation and executory contracts. For some reason, you’re misinterpreting my well meaning intentions to assist others. We’re all on the same team with the same objectives. Most other investor’s I’ve met are some of the greatest folks around; I do take it personally when someone denigrates our industry by unethical deals as I know you do. In no way are these remarks directed at you or your methods. If you took it personally, I again apologize and look forward to working together to self-police our industry.
Regards,
Dave

Dave,

“to the best of my knowledge and certainly don’t recall ever making any negative remarks about anyone’s character” - do you mean the post I deleted for you calling me a liar? However, it is forgotten on my part.

Had not Subject To investing been slammed, not by me, then this article would have never seen the light of day, so whoever did the slamming really brought the article up.

As I said “I will do the same”, just a little advice keep a tight leash on the radical one, he hurts your cause more than helps it. Calling me NoCash, when he signs his name da Wiz, who would name themselves after a bodily function?

John $Cash$ Locke

John,
You ask the impossible since I can control no one other than myself. I recall you starting the character assasination through the plaintiff attorney post, but consider it water under the bridge. My bad that I escalated the situation. Please, for the future, know that I hold myself completely accountable for anything I personally say or do. Let’s put the foolishness behind us and focus on what we do best.
Sound like a fair arrangement?
Regards,
Dave