Posted by Blueink_TN on 1/12/11 2:01pm
Msg #368249

Title Co Peeps question

I know some title companies will prepare the documents for removing property from a trust and then putting it back in - all at the table at the time of the signing. And some companies will only handle the removing from the trust... Does anyone know why? Thx!

Reply by ReneeK_MI on 1/12/11 2:29pm
Msg #368255

Liability to the lender, for one thing

While we all know this is done all the time, it's not REALLY always done 'outloud' (so to speak). Some lenders require as a condition to the loan that the property come out of the Trust. Buried in the small details - and depending on how someone interprets them - are conditions put upon changing any title interests after the mortgage is taken (i.e. putting the property BACK into the name of the Trust). Other lenders couldn't care less, some won't mind if it's put back right behind the mtg/DOT.

When faced with this at the table, I never venture down that road. I simply tell the borrower to contact his L.O. about it.

Reply by BobbiCT on 1/12/11 2:42pm
Msg #368262

How much risk for how much $$$?

Risk v. Reward theory.

I work with trust/estate planning attorneys - NOT an attorney not a legalese answer. In short, Revocable Trusts easy to move real estate in and out when the Grantor is currently the Trustee or co-Trustee. Other types of trust, serious tax (including possible conveyance and gift tax), time-line (property deeded in on X date to start clock running to avoid gift and estate taxes or to become eligible for State assistance [Medicaid]), creditor and other estate and "protecting asset" issues. Even moving real property in and out of a Trust for a day can BLOW an expensive estate plan ... or plan to protect assets from creditors and ex-spouses. Some lenders, attorneys and title insurance companies do NOT want to take any risk (advise borrower to have estate planning attorney who did initial trust/deed legal work prepare new documents/deed for loan transaction and send to title company). Others may have reviewed the Trust and, in specific circumstances, there is no real risk or no "issues" that make doing this problematic. Was the Trust initially created and set up so that beneficiaries receive unencumbered (no mortgage debt) property; does Trustee need beneficiary approval to transfer out, sell or mortgage property; is there an indemnification agreement (Trustee not responsible for EXISTING mortgage debt, Grantor agrees to pay ... but then Grantor pays old mortgage off and puts a new mortgage on without indemnification [title company doesn't prepare these] before moving property back into Trust).

Moving real property out of trust, mortgaging, and back into trust: Who does the injured party sue years down the road when the Trust is busted? Is there a person or title company left to sue?

Why do it? Lender wants to sell loan and only or best marketable price is a residence owned by a PERSON. Move title to a person, mortgage property, then wait X days before recording deed back into Trustees and HOPE lender never catches on. Fine print in many mortgage deeds is that if real property is conveyed, even to a Trustee, without lender approval first the loan become due in full immediately. I see it on the Land Records all the time - most lender never catch it ... as long as the mortgage payments are made every month. Sorry for ramble, but from my perspective this is a fascinating potentially dangerous arena.

Reply by Blueink_TN on 1/12/11 3:48pm
Msg #368268

Ahhh - I think I get it

So it sounds as if it's 'safer' to close the loan in the trust if the lender will allow. Note to self - if property is in a trust, allow extra time for reviewing... (so much for the 30 day locks :0 ). Thank's Bobbi & Renee for the GREAT responses.

Reply by ikando on 1/12/11 4:38pm
Msg #368281

Re: How much risk for how much $$$?

Bobbi, what a wealth of information. I work with estate planning attorneys too, but have not seen anything like this. Thanks for the info.

Reply by JanetK_CA on 1/13/11 3:54pm
Msg #368521

Re: How much risk for how much $$$?

Thanks for the insight. The scary thing about this is that most people have no clue about any of this. They get their trust done, then forget about it. In fact, I find it the rare individuals who even know how to complete their Certification of Trust. Also, I think there's at least one big title company that has a policy that doesn't allow them to handle putting the property back into the trust. Your post helps explain why.

The other side of that coin, though, is that I've run into a number of instances where people had previously refinanced and thought the property was back in their trust, but for some reason the change never got recorded. I suspect in a lot of those instances, no one ever even had a new Deed made, let alone got it recorded. Oh well... Not our issue to solve.