BiggerPockets

The lender is escrowing for insurance. I talked to my own insurance agent, and he told me that even if I add myself as an additional insured I still wouldn't have liability coverage.

I have the property in my personal name right now, but I was planning on doing a QCD to put it into a trust ASAP. I was thinking of just contacting the current insurance company and changing the insured to the trust, with myself and my LLC (who would be the beneficiary of the trust) as additional insured.

A friend of mine told me that the change in insured would be a red flag to the lender.

What would you recommend in this situation? I do have power of attorney for the borrower.

Thanks!

So you don't think the lender (the biggest bank in the u.s.) will care that the insured name changed to some random trust? Should I also add myself personally as an additional insured?

The name on title is my personal name. It was necessary to satisfy the seller, because he wanted to see someones real name on the docs, instead of a mystery corporation.

The trust would def. be used to hide ownership in the tax records.

Why are you trying to hide ownership?

are you trying to avoid triggering the Due on Sale clause?

The trust is not to avoid triggering the due on sale clause, it's to get my name out of the tax records, and is part of my overall asset protection strategy. Trust -> LLC -> Me

I would never tell the bank I own it, but I also have the reserves to paid it off should it be called due.

I think your main question is about insruance. Insurance HAS TO BE in the name of who is on the mortgage - title has little to do with it as far as the lender is concerned.

You are worried about the lender - so you have to have insurance in the name the lender knows about - and you can add anyone else as an additional insured after the property has closed.

if you already closed then add anyone you like - but you have to keep insurance in the same name that is on the mortgage - period.

Not becuase of the due on sale clause but because if you don't they will buy it for you and it won't be cheap.

Nick, your approach certainly has merit, both legally and logically. The little black book may not be too far from the truth. I know that if a person or company makes REO offers and backs out frequently the banks pickup on the trend and credibility is lost, I wouldn't doubt a similar action for title transfer disclosures.

If I were to change methods and attempt your approach, how would you recommend the first disclosure? A phone call, or snail-mail?

My usual method is to include a letter along with the new insurance information informing the lender that I am purchasing the property using existing or some owner financing thus the need to change the insurance information, this works well simply because when the department that receives the new insurance information will update the file as well including the letter.

A week or two later I will call the lender and verify that they have received the new insurance policy and that the letter was updated on the account, I also will inform them to update their system to call me directly if they have any questions or concerns.

I want them knowing who I am and that I can and will preform, I believe it will help eliminate the need for them to feel they must accelerate the loan.

I'm not sure how many times I've sent the letter.

the letter is simple and basic:

To whom it may concern at (insert lender here)

This is an updated insurance policy notifying you of the change. Please note that they policy properly reflects the requirements of (insert lender here) and you'll also notice a change in ownership on the property. (insert borrowers name here) has sold to (insert you here) using either existing financing or some owner financing therefor the need to change the policy to reflect this change. Please update your system to reflect the new information regarding the insurance policy effective (insert date here)

Please contact (insert your name here) directly at (602-555-5555) if (insert lender here) has any questions or if that the policy does not meet (insert lender here) minimum requirements.

Thank you for your time
(insurance agent)
(insurance agent contact info here)


(sellers signature)
(your signature)

Thanks for posting that letter Nick, much appreciated. Have you ever received any complaints from the banks, threats of due on sale, or an interogation on the phone from them?