Re: DOS Texas

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Posted by Lonestar on March 14, 2010 at 20:53:12:

In Reply to: Re: Land Trust Questions For Mr. Butler posted by David Butler on March 09, 2010 at 16:43:25:

An trust attorney here in Texas says land trusts are valid in Texas, and that title companies will insure them.

He also states that one big advantage is using a land trust as an alternative to lease-options, which have become high-risk in Texas since some changes to the Texas Property Code several years back. But he says that any trust created for the purpose of avoiding a due-on-sale clause must meet the criteria stated in PART 591C PREEMPTION OF STATE DUE-ON-SALE LAWS of the FDIC Chapter 8000 Miscellaneous Statutes and Regulations, which states:

A transfer into an inter vivos trust in which the borrower is and remains the beneficiary and occupant
of the property, unless, as a condition precedent to such transfer, the borrower refuses to provide the
lender with reasonable means acceptable to the lender by which the lender will be assured of timely
notice of any subsequent transfer of the beneficial interest or change in occupancy.

The attorney says that accordingly, the federal exception to lender enforcement of due-on-sale clauses is limited to properties that are owner-occupied. If the owner moves out and someone else takes occupancy, the loan can be called. It is a small but present risk. He also says this may not matter, as, in his opinion, lenders are not generally inclined to accelerate otherwise performing loans, even if a lender knows that the property has been transferred. They are not in the business of foreclosing and owning property. He is aware of some lenders occasionally sending letters threatening acceleration and foreclosure if a new owner does not formally apply to assume the existing loan, but he says it is generally not in the lender’s best interest to follow through on this. So it has about the same result as a "subject-to"? Trying to get a better handle on this. What's your take?

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