Putting Non Owner Occupied Properties in a Revocable Trust. Will that accelerate the Note?
I am currently trying to put 3 of my rental properties in my revocable trust. My attorney advised me any change in the deeds may accelerate the notes on these properties. I phoned one lender that holds 2 of my notes. The verbal response was they would not give permission to change the deeds, but I should open a "case" on their website for further information. I opened the case and requested permission to put the property in the trust. I received the following reply. I have sent this to my attorney for interpretation.
We have received your correspondence regarding a living trust. Unfortunately we will not be able to comply with your request; however, we would like to advise the following:
Section 18 of your Deed of Trust prohibits the sale or transfer of the property or interest in the property without Lender’s prior written consent. Transfer of the property to a trust in which the borrowers are the settlors, trustees and beneficiaries of the trust does not activate this clause, nor will it cause Lender to accelerate the loan.
Thank you and we appreciate your business. Have a great day!
The other property is with another lender. I phoned them and was told the federal government prohibited them from giving permission to place rental properties in a trust unless it was done at the time of purchase.
I have a copy of this deed of trust, and checked it out. This is what (coincidently section 18?) of the deed says:
If all or part of the Property is sold or transferred without Lenders prior written consent Lender may require immediate payment in full of all sums secured by this Instrument. HOWEVER, this option shall not be exercised if such exercise is prohibited by law.
This has all been sent to my attorney for review. Attorneys are sometimes slow so in the interest of getting some opinions a bit quicker I am asking the BP community My question here is this.
Has anybody ever heard of a federal government restriction on deed changes, or ownership by a trust for rental properties that are financed through a conventional loan? Has anybody else run into this and how did you handle it?
your comments are appreciated!
RR