[WSBAPT] Garn-St. Germaine Act - Due on Sale Clause

[Joshua McKarcher]

My rule of thumb is if it changes occupancy, GSG Act protections may be harder to apply - but not always.

I suggest bookmarking -- and always re-reading for the nuanced variations contained within sub(d) of -- https://www.law.cornell.edu/uscode/text/12/1701j-3.

I have never had to dig into sub (5) exempting "a transfer to a relative resulting from the death of a borrower," but it's at play here, I suspect.

If the borrower is Parent (individually) and transfer from RLT is to Child (free of trust and individually), then maybe the statutory interpretation gods or IRS regulations are on your side and "transfer" includes "distribution to trust beneficiary," and "relative" includes Child of Parent-borrower, and "resulting from death" includes "a distribution required by the deceased borrower's RLT," then maybe you're golden!

But that is the technical.

The practical, as some view it: If someone pays the mortgage and taxes and the lender never catches wind of the trustee deed to the new beneficiary - or perhaps trustee and Child agree to leave title alone until one day when actually "needed" and find a way to insure, etc. - then maybe lender happily receives payments and is never the wiser. (I am NOT advocating lying or deceiving or modify parking garage tickets or any of that nonsense; not even close. I'm parroting what I've seen others on this list suggest, even though I've never had to do it and would not counsel a client to do something illegal. Heck, I've heard lawyers say a lender representative TOLD THE party to just keep paying the mortgage and they aren't going to care. I'd reply, "Your name and agent ID number, please?")

But, even then, if the taxes are escrowed and the lender receives notice of a change to Child's name individually for real property tax purposes, then I would think the "jig is up."

So that's the general approach I hear people take. My own goal with these is to have the loan paid off and start fresh, but of course that cannot always happen.

Good luck! Best, Josh

Joshua D. McKarcher
McKarcher Law PLLC
537 6th Street
Clarkston, WA 99403
(509) 758-3345
(509) 758-3314 (fax)
josh at mckarcherlaw.com<mailto:josh at mckarcherlaw.com>
www.mckarcherlaw.com<http://www.mckarcherlaw.com/>



From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Loren Pirkle
Sent: Tuesday, September 5, 2023 9:30 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] Garn-St. Germaine Act - Due on Sale Clause

Good Morning Everyone-

Does anyone have experience with avoiding a due on sale clause under the Garn-St. Germaine Act, when the transfer is from a Revocable Living Trust to an heir/beneficiary(son)? My client's father passed away with his house titled in his Revocable Living Trust and it is now being transferred to the son, along with the debt. I am wondering if there is a way for my client to avoid the due on sale clause. The Bank is saying no and the loan needs to be refinanced at the current rates.

Thank you,
Loren

Lawrence A. Pirkle
Pirkle Law Firm, Inc. P.S.
1220 Memorial Hwy., Suite A
P.O. Box 1788
Mount Vernon, WA 98273
Phone: (360) 336-6587
loren at pirklelawoffice.com<mailto:loren at pirklelawoffice.com>

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