Board Topic: irrevocable trust as purchaser
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irrevocable trust as purchaser

Posted by: diegobritt Dec 16 2004, 09:30 PM
My first post here. Thanks for all info!

I have a client purchasing residential property on a 10-31 exchange using an Irrevocable Trust as the principal on the mortgage. The lender I've always used has said they may not be able to close as it's an irrevocable trust and they can't foreclose on an irrevocable trust. They will not accept PG's from the trust's members either.

Can anyone shed any insights into this situation or ideas if you've had the same problem before.

Thanks in advance.

Diego Britt

Posted by: loanuniverse Dec 17 2004, 08:43 AM
Diego:

Honestly, I could not answer. If the borrowing entity were something out of the ordinary such as the trust you mention I would probably have to do a couple of things.

1- I would contact the SVP of credit who would be smart enough to not give me an answer to this question and pass along the question to outside legal counsel {we probably deal with half a dozen attorneys that review documentation for us}. The attorney would be smart enough to answer ”it depends, the documents need to be reviewed” not only so that he can give the correct opinion, but to bill us several hours of work.
2- We would make the loan subject to the satisfactory review of the trust documents.

I do not see why they could not foreclose on the property. You are not foreclosing on the legal entity, you are foreclosing on the property. But I am not an attorney and you need to run your question by a local real estate attorney.

Posted by: diegobritt Dec 17 2004, 11:22 AM
thanks for your reply, I appreciate it.

Hopefully someone reading will have had some personal experrience with the same issue regarding an irrevocable trust. I know there are banks which have financed deals with this sort of entity, I'm just hoping to arm myself with more info before speaking to them again.

Thanks again,

Diego

Posted by: loanuniverse Jan 9 2005, 11:31 PM
It just so happens that my employer sent me to some training recently about titles, and the attorney giving the seminar mentioned that Trusts could not be borrowers, but the trustee could…….. Nevertheless, you mentioned that there is already a loan out to the Trust for one of the properties so that confuses me. After all, the lender would have the documents drafted by an attorney when real estate is involved.

You really need to consult an attorney on this.
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