Home Forum Contact Create an Account Sign In Create a Trust

Land trust closure?

This topic contains 8 replies, has 0 voices, and was last updated by Avatar of jerrym jerrym 10 years, 5 months ago.

Viewing 10 posts - 1 through 10 (of 10 total)
  • Author
    Posts
  • #5691
    Avatar of jerrym
    jerrym
    Participant

    When a RB refinances the loan, does the trust end at that point? Or can the trust continue with the RB responsible for the loan?

    The trustee is directed, of course, to sell the home to the RB. But why does the trust have to end? If it does?

    Jerry

    #29567
    Avatar of peter@amakya
    peter@amakya
    Member

    The trust ends and the RB can create a new one. That is the easy way.

    For a bank to finance a trust is more difficult and you lose the “due on sale” protections afforded by the trust. That is the short answer. The long one takes pages and ends with the same result.

    #29568
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    @jerrym wrote:

    When a RB refinances the loan, does the trust end at that point? Or can the trust continue with the RB responsible for the loan?

    The trustee is directed, of course, to sell the home to the RB. But why does the trust have to end? If it does?

    Let’s correct a few things first. An RB DOES NOT REFINANCE. In the old days (up until 24 months ago), there used to be a thing called a “Lease Option Refinance”, which most, if not all of the RBs fit in to. This is no longer the case and I know of no lender who has such product anymore.

    To be truthful, there never really was such a product to allow Leasee’s under contract to buy, to “refinance”. It was and still is “a New Purchase Loan”. However, some lenders treated the deposits, equity and contributions as moneys that can be used for a Down Payment and Closing Costs.

    Today, in order for an RB to use FHA for example, they have to prove that the funds available to them in the trust, were actual cash contributions on their part when the trust was setup. So that means if you put an RB in for a few thousand bucks or paid the closing costs yourself, they may not qualify, although I have had two RBs use their equity in the Trust to qualify for an FHA Loan recently.

    The Trust Terminates beneficiaries are directing the Trustee to Accept the Offer, Convey the Title to the Buyer and Terminate the Trust. However, this does not have to be the case. The Trust does not HAVE to terminate. But, there will have to be some changes to the Trust which will cost more to do than the RB/Buyer will have to pay to have their own Simple Trust.

    #29569
    Avatar of jerrym
    jerrym
    Participant

    @Scott_L._Moyes wrote:

    Let’s correct a few things first. An RB DOES NOT REFINANCE. In the old days (up until 24 months ago), there used to be a thing called a “Lease Option Refinance”, which most, if not all of the RBs fit in to. This is no longer the case and I know of no lender who has such product anymore.

    To be truthful, there never really was such a product to allow Leasee’s under contract to buy, to “refinance”. It was and still is “a New Purchase Loan”. However, some lenders treated the deposits, equity and contributions as moneys that can be used for a Down Payment and Closing Costs.

    Today, in order for an RB to use FHA for example, they have to prove that the funds available to them in the trust, were actual cash contributions on their part when the trust was setup. So that means if you put an RB in for a few thousand bucks or paid the closing costs yourself, they may not qualify, although I have had two RBs use their equity in the Trust to qualify for an FHA Loan recently.

    The Trust Terminates beneficiaries are directing the Trustee to Accept the Offer, Convey the Title to the Buyer and Terminate the Trust. However, this does not have to be the case. The Trust does not HAVE to terminate. But, there will have to be some changes to the Trust which will cost more to do than the RB/Buyer will have to pay to have their own Simple Trust.

    So Scott, what changes would need to be made to the trust? And how much more would it cost to have this done?

    Jerry

    #29570
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    @jerrym wrote:

    So Scott, what changes would need to be made to the trust? And how much more would it cost to have this done?

    A Simple Trust would only cost a few hundred bucks and it may cost as much as $250 for each change of beneficiary. Its probably about the same either way.

    The Buyer’s Lender and the Title Company may also require that the Title be conveyed to the borrower at closing.

    #29571
    Avatar of bill_gatten
    bill_gatten
    Participant

    Let’s agree on some terms here:

    Standard (Moyesian useage): “Refinance” – Keep the same lender with a new loan on the same security

    Non-standard (Gattenistic verbiologination): “RE-finance” – I.e., to “finance again”…or to “…get a new loan on the same security with the same, or a different, lender.” In other words: “Hey Ma, we financed the ad burned thang once and paid it off, so let’s Re-finance this dad-gum joint. Whuddya say?”

    #29572
    Avatar of nyreattorney
    nyreattorney
    Member

    @Scott_L._Moyes wrote:

    @jerrym wrote:
    When a RB refinances the loan, does the trust end at that point? Or can the trust continue with the RB responsible for the loan?

    The trustee is directed, of course, to sell the home to the RB. But why does the trust have to end? If it does?

    Let’s correct a few things first. An RB DOES NOT REFINANCE. In the old days (up until 24 months ago), there used to be a thing called a “Lease Option Refinance”, which most, if not all of the RBs fit in to. This is no longer the case and I know of no lender who has such product anymore.

    To be truthful, there never really was such a product to allow Leasee’s under contract to buy, to “refinance”. It was and still is “a New Purchase Loan”. However, some lenders treated the deposits, equity and contributions as moneys that can be used for a Down Payment and Closing Costs.

    Today, in order for an RB to use FHA for example, they have to prove that the funds available to them in the trust, were actual cash contributions on their part when the trust was setup. So that means if you put an RB in for a few thousand bucks or paid the closing costs yourself, they may not qualify, although I have had two RBs use their equity in the Trust to qualify for an FHA Loan recently.

    The Trust Terminates beneficiaries are directing the Trustee to Accept the Offer, Convey the Title to the Buyer and Terminate the Trust. However, this does not have to be the case. The Trust does not HAVE to terminate. But, there will have to be some changes to the Trust which will cost more to do than the RB/Buyer will have to pay to have their own Simple Trust.

    Ok for FHA – because I have been giving this alot of thought as many buyers lack necessary assets…If the Settlor gifts a percentage of the beneficial interest to C at creation of the Trust (i.e. Settlor: 80% C: 20%), can FHA consider that an allowable gift if C is the cousin (or other family member) of the Settlor?

    I am looking this as a way to provide a Gift of Equity to Buyer, possibly covering downpayment and closing costs.

    Any thoughts?

    #29573
    Avatar of dave salcido
    dave salcido
    Member

    @nyreattorney wrote:

    I am looking this as a way to provide a Gift of Equity to Buyer, possibly covering downpayment and closing costs.

    Any thoughts?

    Why gift? If there is equity in the property that can be shared, let the settlor assign the end buyer a percentage beneficiary interest in the trust. The end buyer can then tell FHA that he/she is selling off some personalty assets (interest in a trust) to use for the down payment. An investor, (friend, relative, hard money guy), can make a cash purchase of the end buyer’s interest at discount and the end buyer gets his down payment cash. At closing, the investor can turn around and sell his interest back to the end buyer for a profit. Baddabing Baddaboom.

    #29574
    Avatar of homesavers
    NULL
    Member

    @Dave Salcido wrote:

    @nyreattorney wrote:
    I am looking this as a way to provide a Gift of Equity to Buyer, possibly covering downpayment and closing costs.

    Any thoughts?

    Why gift? If there is equity in the property that can be shared, let the settlor assign the end buyer a percentage beneficiary interest in the trust. The end buyer can then tell FHA that he/she is selling off some personalty assets (interest in a trust) to use for the down payment. An investor, (friend, relative, hard money guy), can make a cash purchase of the end buyer’s interest at discount and the end buyer gets his down payment cash. At closing, the investor can turn around and sell his interest back to the end buyer for a profit. Baddabing Baddaboom.

    David if you can pull this off you are the man! I mean that.

    #29575
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    @homesavers wrote:

    David if you can pull this off you are the man! I mean that.

    What do you think REAP/CAPP is? How do you think we’ve been closing our transactions? There’s nothing to pull off, just comply by the law and underwriting guidelines.

Viewing 10 posts - 1 through 10 (of 10 total)

You must be logged in to reply to this topic.

Posted in
Contact Form
Your Fullname:


Email Address:


Phone:


Best Time to Call:


Subject:


Your Message:


Security Code:

 

Can't read the above security code? Refresh