I have purchased homes subject to the mortgage for 30 years and just had my first one called due. I feel the banks have started to crack down because they want the money back from these low interest loans to re-lend at a current high rate. This would be hundreds of billions of dollars in additional profit for the banks and worth their effort to pursue. The loan was not called due because of placing it in a trust, but because the Mortgagee moved out of the home after the trust was created. This “non-owner occupied” sentence in the trust exception law, is a little know section of the Garn-St. Germain Act that I had never noticed before. It is there. section : 12 U.S.C. 1701 j-3 (d) item 8 exception which states:
I believe the banks are getting their info from the notification by the insurance companies when the policy changes to a trust and a rental policy. The new policy has to state it is non-owner occupied for coverage. Luckily I am in a position to pay these off if needed, but this could be a huge can of worms for anyone buying homes subject to the mortgage in a trust.
Are you aware if this issue and have you a solution?
No, i have not heard of this happening a lot….at least not yet. Your point is well taken that the lender’s attitude may be changing with the increase in interest rates. I understand the problem as you stated it and offer this solution. When forming the trust (or even after the fact, changing the name of the trust) use the name of the seller (e.g. The Smith Family Trust) then, when you change the insurance over it will be in the name of the Smith Family Trust (no matter who is the beneficiary). It is unlikely the lender will drill deeper down to discover who the beneficiary is and the loan will stay in place.
Mr. Land Trust