Trusts Risks?
Is anyone familiar with placing trusts on property? What type of trust in lay terms? Obviously this was designed to avoid the due-on-sale clause but is it legal and effective? Are there any risks to the seller?
The Garn–St. Germain Depository Institutions Act of 1982 (Pub.L. 97-320, H.R. 6267, enacted October 15, 1982) is an Act of Congress that deregulated savings and loan associations and allowed banks to provide adjustable-rate mortgage loans. The act was a contributing factor in the savings and loan crisis of the late 1980s.[1]
The bill, whose full title was "An Act to revitalize the housing industry by strengthening the financial stability of home mortgage lending institutions and ensuring the availability of home mortgage loans," was a Reagan Administration initiative.[2]
The bill is named after its sponsors, Congressman Fernand St. Germain, Democrat of Rhode Island, and Senator Jake Garn, Republican of Utah. The bill had broad support in Congress, with co-sponsors including Charles Schumer and Steny Hoyer.[3] The bill passed overwhelmingly, by a margin of 272-91 in the House.[4]
An important consumer change was to allow anyone to place real estate in their own trust without triggering the due-on-sale clause that allows lenders to foreclose on a current loan upon transfer to another. This greatly facilitates the use of trusts to pass property to heirs and minors. It may also protect the property of wealthy or risky owners against the possibility of future lawsuits or creditors, because the trust owns the property, not the individuals at risk. The bill states "...A lender may not exercise its option pursuant to a due-on-sale clause upon 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 propertyâ€. (The Garn St. Germain Depository Institutions Act of 1982, (U.S.C.) 1701j-3(d)(8). .[5]