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This topic contains 17 replies, has 0 voices, and was last updated by Avatar of blackpuma blackpuma 10 years, 10 months ago.

Viewing 15 posts - 1 through 15 (of 19 total)
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  • #5370
    Avatar of blackpuma
    blackpuma
    Member

    Just finished a day of training with Scott and Dave. Awesome! Put a second stage on my rocket. Hope people are paying attention. :D

    #28090
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    Forget everything you’ve read on my posts about REAP and CAPP for a moment or anything to do with using the EHTrust for “Flip” type or Short Term transactions.

    Why? Because 99% of the transactions done by all members except maybe me at this time are the traditional… “stay on your loan and leave your equity in place for a few years while we put a resident in the property that will… yada yada yada”.

    This method does not involve a lender in anyway nor does it require their permission or approval to do. There are no mortgage applications, down payments, etc required.

    Now, lets take this out say 36 months and the RB decides its time to exercise their right to purchase. First the notify the Trustee and Beneficiaries that they intend to do so while at the same time giving a call to their favorite Mortgage Broker to apply for a loan. This would also include the creation of a Purchase Offer to the Trustee. To arrive at “the purchase price” the RB orders their appraisal. Whatever that amount comes back to be becomes the purchase price.

    Most lenders treated this like, what is referred to in the industry, as a “Lease Option Refinance”. In acutality it is a New Purchase Loan but most lenders will allow the Leasee’s or RB’s contributions and equity to be used to either offset the purchase price or be used to pay any required down payments or closing costs.

    As a Loan Officer I either know, or will find, lenders who have such programs and so thats who I will use.

    The only difference between a “Long Term” EHTrust transaction and a Short Term transacation is time. Because the borrower is not, or has not been, a resident of the property they wouldn’t be looking for or applying for a Lease Option Refinance. It would of course be a new purchase loan and they would be purchasing the property from the owner/seller just like any other purchase. They are subject to the same lending requirements as any other buyer and any funds that are required must be approved by their lender. If they aren’t they don’t get the loan or the property.

    In our case, we have had two RBs use FHA Loans to purchase the property from the trust. FHA allowed them to use their interest in the trust to satisfy the required downpayment and closing costs. I had nothing to do with them as a loan officer or had anything to do with getting them qualified. Each of them contacted their own loan officer. I simply provided the information that the lender’s underwriter asked for. Obviously both loans were approved and our RBs purchased the property “from the Trustee” with no problem.

    With the Short Term transactions using the REAP/CAPP method we provided the same information requested by the buyer’s lender and closed the transactions. We provided them with everything they asked for including copies of the trust and each buyer/borrower were approved.

    The answer is in full disclosure to the underwriter and providing the documents requested. They either approve or disappove. The only times our buyers have not been approved or the deal didn’t close is when the buyer themself could not provide the other required documents or conditions requested by the underwriter. In my experience it is because they could not show Proof of Funds, Reserves, Verification of Deposits, other than those used and approved for use as the downpayment. In all cases these were Million Dollar properties and above. This not typical for properties valued at say $500,000 and below.

    As for who the lenders are who have “Lease Option Refinance” type products available, just make a few calls to your wholesale reps and ask.

    As for those who will allow the sale of “Personal Assets” to be used for either Downpayment, Closing Costs or both, I would say most, if not all of them. Some may require that the buyer have been a beneficiary of the trust for 30,90, 120 days and some may require that the funds from the sale of Personal Assets be held in escrow for 30 to 60 days or so before they will allow the loan to close.

    On the last few deals we’ve used this process I do know that the borrower/buyer used a lender who did not require any source or seasoning of funds. They are few and far between but the borrowers are seasoned investors and have relationships with them already, which really helps.

    That’s my story and I’m sticking to it!

    #28091

    As far as I know the end buyer isn’t on title prior to their purchase. If I’m wrong someone will correct me.

    #28092
    Avatar of socalgal
    socalgal
    Participant

    I thought the end buyer is on title as a Resident Beneficiary. If you’re saying the end buyer’s inclusion on title is terminated, then that’s a break in title for which the lender would require seasoning.

    #28093
    Avatar of areyes
    areyes
    Member

    Resident beneficiary, investor beneficiary and settlor beneficiary are never on title.

    It’s just a straight purchase offer between resident beneficiary and Equity Holding Corporation. EHC has legal title, equitable title to real property and the power of sale.

    #28094
    Avatar of joecain
    joecain
    Member

    The Resident Beneficiary is NOT on title or in the chain of title.
    The original owner is.
    The Corporation acting as Trustee is.
    That’s all folks !!

    I think this may be another mis-communication.
    The Resident Beneficiary is exactly that and nothing more.
    They are a beneficiary to the Trust in whose Trustee legal title to the subject Trust is vested via Title Transfer Deed recorded in the Office of the Clerk of the County Recorder where the property is located. They are also the party leasing the property from its owner, the Corporation acting as Trustee.

    If the Resident Beneficiary chooses to purchase the property as an end buyer of the property following the termination of the Trust, they may do so, but until such point in time as they are successful in closing the sales transaction following the termination of the Trust and actually purchasing the property, they are not in the chain of title.

    #28095
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    @SoCalGal wrote:

    I thought the end buyer is on title as a Resident Beneficiary. If you’re saying the end buyer’s inclusion on title is terminated, then that’s a break in title for which the lender would require seasoning.

    Well, now we’re getting somewhere. Never are the beneficiaries “on title’. The title is vested 100% with the Trustee from inception of the trust. And since putting your own property in an inter vivos trust in which you remain a beneficiary is not considered a break in the ownership or title this issue is now put to rest.

    #28096
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    Based on your understanding of this system you are right, and that is why you are wrong. Somewhere you missed the understanding the very basics of trusts and the NARS EHTrust.

    - Owner creates their own RLT and vests the title with a 3rd party corporate trustee. Doing so does not create a break in the title.

    - Settlor makes assignments to other remainder agents (e.g. beneficiary/s) and either directs the trustee to lease or sell the trust property.

    That’s it.

    #28097
    Avatar of socalgal
    socalgal
    Participant

    No, that’s not “it.” Most lenders won’t lend if the property buyer is in a trust. They require the property buyer to get OUT of the trust, then they will lend to him as an individual. If he wants to, he can get back in the trust.

    If you believe otherwise, who exactly are the lenders that will lend when the buyer is in a trust?

    If the trust in which the buyer was a participant has been recently recorded (less than 12 months), then the buyer is SOL if new value is used.

    #28098
    Avatar of rick
    rick
    Participant

    Let me see if I have this straight.

    The title is conveyed to the trustee in trust.

    So the title is in Trust. That’s it. The property is now in the trust. There is nobody else in the trust. All perfectly legal because of Federal Law and the Garn-St Germain Act of 1982.

    Now we have a buyer that wants to by the house an we make him an RB.

    The RB is now a beneficiary of the trust.

    They are not in the trust.

    If they want to buy the house, they look for a lender. The lender approves them and gives them a loan. The don’t have to pull the RB out of the trust to give them the loan because they were never in it. The are only a beneficiary of the trust.

    #28099
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    @Rick wrote:

    The title is conveyed to the trustee in trust.

    So the title is in Trust. That’s it. The property is now in the trust. There is nobody else in the trust. All perfectly legal because of Federal Law and the Garn-St Germain Act of 1982.

    Now we have a buyer that wants to by the house an we make him an RB.

    The RB is now a beneficiary of the trust.

    They are not in the trust.

    If they want to buy the house, they look for a lender. The lender approves them and gives them a loan. The don’t have to pull the RB out of the trust to give them the loan because they were never in it. The are only a beneficiary of the trust.

    A few corrections…

    Yes, the properties title is conveyed to the Trustee but neither the Trustee, Property or Beneficiary is “in the Trust”. The Trustee is the legal owner of the property holds the tilte outside of the trust and, the Beneficiaries are beneficiaries “of the trust”, not in the trust. The beneficiaries DO NOT own the Trust. The only own or have an interest “in a trust” which is nothing but a document since the trust itself does not own the property. The beneficiaries also do not have any relationship to or with the Trustee except that of Beneficiaries. This is totally opposite of a Family Type Living Trust where typically one of the beneficiarie is also the Trust and both Trustee and Beneficiaries own the Trust which owns the property.

    In the case of a Family Inter-Vivos Trust, the property IS IN TRUST and is owned by the trust, not the trustee. Since the Beneficiaries and Trustee “own the trust” and not just an interest in the trust. It is “as if” they each individually own the property. Place a property in a Family Type Inter Vivos Trust is a huge Asset Protection MISTAKE! Its only function is that of Probate Avoidance.

    #28100
    Avatar of rick
    rick
    Participant

    Thanks for the clairification, Scott. I understand and still make mistakes when using the words ‘in” ‘into” “in the” “of’ etc. I wasn’t very good at english, however I can build really good. My explainations would be more detailed if I could type faster than 20 word a minute. (Top speed) :roll:

    #28101
    Avatar of tmynar
    tmynar
    Participant

    I am from Texas and even I understand that the buyer is not “in the trust”, but I don”t understand what SOL stands for.
    Thomas Mynar

    #28102
    Avatar of mtnwizard49
    mtnwizard49
    Member

    SoCalGal,

    You are correct about having to dismiss the trust before refinancing, as I have done that on several occasions. Although I think you missed the boat on one major issue, Joe Cain did explain that in detail prior to his suggestions that I, too, found a bit condescending (and I love Joe). I applaud your persistence and continuing quest for clarity on certain issues and I apologize for the tone of some of the contributors to your queries. Keep the faith.

    #28103
    Avatar of socalgal
    socalgal
    Participant

    So you are not finding properties because you believe the deal will blow up when the end buyer is approved for a loan and the lender comes back with the condition, Insufficient Title Seasoning?

    It’s not a matter of not finding properties. Before I make an offer on a property to flip, I must factor in all costs, including holding costs and the expense of flash funding. If a trust is an effective circumvention of an end buyer’s FHA seasoning requirements (12 months for conforming), I’d save myself $X in holding costs and wouldn’t need flash funding. If a trust isn’t an effective circumvention–and we have reason to believe it’s not–then I must factor in longer holding periods and flash funding. A longer holding period and the use of flash funding can make a good deal marginal or even not worth doing.

    The EHT method you paid 6 Grand for is mainly for taking over existing loans without triggering the DOS clause using the Federal Law loophole in Garn St. Germain.

    I’m not the least bit concerned about the due on sale clause, nor should anyone else be, in my opinion. I’ve never heard of anyone encountering problems with DOSC. DOSC is a total non-issue and certainly not worth paying six grand to learn how to overcome, nor a couple thousand dollars for NARS to prepare the paperwork.

    Please let us know that you and Dave continue to experience no problems when the effect of Fannie’s new seller title seasoning guideline kicks in with a vengeance. If you don’t mind staying with the transaction for several years, of course you won’t experience problems, but then you don’t need a NARS trust, anyway, in that event.

Viewing 15 posts - 1 through 15 (of 19 total)

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