[WSBARP] [WSBAPT] Due on Sales Clause and transfers to trust

Tue Feb 3 08:48:35 PST 2015

This is more of a survey question for the wise minds that inhabit this
listserv.

How many practitioners have actually seen a large bank (Wells Fargo/Bank of
America, etc…) call a note on a breach of the ‘due on sale’ provision on a
sale ‘subject to’? A wrapped note transaction.  I have never seen one.

Obviously, a whole different answer when dealing with a small local
bank/credit union or commercial loans.  I have seen that situation as the
bank officers are far more aggressive.  Likewise, these small lenders are
far more likely to file a judicial foreclosure and seek a deficiency versus
the large banks.

When I am counseling my clients I'm always very mindful to remind them of
the due on sale provision and where necessary obtain a written document
advising the clients of the risks on buying a property ‘subject to’ which I
tuck away in my file.

When I argued my sole case to the Supreme Court (Bank One vs Alby (2005)),
which had lots of issues one of the very tangential issues dealt with
restraints on alienation and due on sale provisions.  Not at issue in that
case, but I've always been interested in the topic.

Thank you.

*Robert R. Rowley* | Attorney at Law

505 W. Riverside Ave, Suite 500

Spokane, WA  99201

Telephone: (509) 252-5074

Mobile: (509) 994-1143

Facsimile: (509) 928-3084

Email: rob at rowleylegal.com

Web Site: www.rowleylegal.com

*From:* wsbapt-bounces at lists.wsbarppt.com [mailto:
wsbapt-bounces at lists.wsbarppt.com] *On Behalf Of *Jennifer Y. Sohn
*Sent:* Monday, February 02, 2015 4:32 PM
*To:* 'WSBA Probate & Trust Listserv'
*Subject:* Re: [WSBAPT] Due on Sales Clause and transfers to trust

Sure, and based on my experience, most commercial banks will work with you
to make this work. With fannie mae loans, I found that the approval/review
fee can be quite hefty. In any case, for non-residential, I would advise
the client (in writing) to get a prior waiver and the risks of not getting
one.

*From:* wsbapt-bounces at lists.wsbarppt.com [
mailto:wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com>]
*On Behalf Of *Lovie Bernardi
*Sent:* Monday, February 2, 2015 3:04 PM
*To:* WSBA Probate & Trust Listserv
*Subject:* Re: [WSBAPT] Due on Sales Clause and transfers to trust

Thanks, Jennifer. That was my thought as well on the lack of occupancy. I
found an unreported federal case that ruled against the bank on that issue,
but it seems like a risk. I like your suggestion on the transfer on death
deed, Kate, especially if the banks are unwilling to approve the transfer.

*From:* wsbapt-bounces at lists.wsbarppt.com [
mailto:wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com>]
*On Behalf Of *Jennifer Y. Sohn
*Sent:* Monday, February 02, 2015 2:31 PM
*To:* 'WSBA Probate & Trust Listserv'
*Subject:* Re: [WSBAPT] Due on Sales Clause and transfers to trust

I would review the deed of trust and any other loan documents. My
experience has been that most commercial banks (including Chase) doesn’t
care too much, or will approve the transfer upon request, but I recently
had a lender (a fannie mae loan) call a loan for transferring assets to an
RLT.  If there are more than 1 properties I would presume the non-residence
property will not fall under the (d)(8) exception.

*From:* wsbapt-bounces at lists.wsbarppt.com [
mailto:wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com>]
*On Behalf Of *Lovie Bernardi
*Sent:* Monday, February 2, 2015 1:54 PM
*To:* wsbapt at lists.wsbarppt.com
*Subject:* [WSBAPT] Due on Sales Clause and transfers to trust

Dear listmates:

I have a client whose wife passed away. The couple owned multiple
properties in Idaho and Washington, most with substantial mortgages. The
wife had been living in Washington for medical treatment for many years
when she passed away while the husband lived in Idaho most of the time. We
filed a probate here in King County and an ancillary probate is being
handled by an attorney in Idaho. The will instructed the PR (husband) to
place the wife’s portion of the community property in a living trust that
was established before her death. She died before any of the property was
transferred to the trust, hence the two probates. Interestingly, the trust
did not become irrevocable upon the death of the wife.

The husband wants to transfer both his wife’s interest and his interest in
the properties to the trust, in order to avoid a double probate at the time
of his own death. (He will probably still be an Idaho resident.) My concern
is whether the transfer will trigger the due on sale clauses in the
mortgages. Most of the mortgages are with Chase. I have reviewed the
exemptions from the due on sale clause under 12 USCS Section 1701j-3(d).
The transfer of the wife’s interest falls under exemption (d)(3) (“a
transfer by devise, descent, or operation of law on the death of a joint
tenant or tenant by entirely”). But does the husband’s transfer of his
interest fit under (d)(8) (“a transfer into an inter vivos trust in which
the borrower is and remains a beneficiary and which does not relate to the
transfer of rights of occupancy”)?

Am I safe to transfer both the wife’s interest and the husband’s interest
in the properties without triggering the due on sale clause? I attended a
trust CLE last August which suggested the transfer of real estate to a
trust during lifetime might trigger the due on sale clause. Does anyone
have experience with this issue and/or suggestions for me? Thank you in
advance for your input.

Lovie Bernardi

Attorney at Law

Seligmann & Flaherty, PLLC

216 First AVE S, #450

Seattle, WA  98104

(206) 682-2616

lovie at sbfirm.com <joni at sbfirm.com>

http://sbfirm.com

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