[WSBARP] Garn St. Germain and non-residence

[Mimi Wagner]

Hello listmates,

 

Hypothetical clients (HC) are about to take out a loan secured by property
that is not their residence.  The property is currently in their living
trust.  The lender is proposing to move the property out of the trust, close
the loan, then move the property back into the trust.  There is a risk that
the lender could take the position that the transfer back into the trust
violates the due on sale clause because this is not HC's residence.  The
lender refuses to add anything custom to the loan docs on this issue.  HC
wants to go ahead because even if the lender took that position at some time
in the future, worst case scenario HC could pay off the loan.  

 

I'm curious if anyone has ever experienced any issues with this type of a
situation in real life and if so, how it was resolved.  It seems like this
issue should come up from time to time but perhaps it doesn't.  

 

Thank you, 

 

Mimi M. Wagner 

Attorney at Law
 <mailto:mimi at sanjuanlaw.com> mimi at sanjuanlaw.com
Phone (360) 378-6234
Fax (360) 378-6244
 <http://www.sanjuanlaw.com/> www.sanjuanlaw.com

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