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r/realestateinvesting•
badmonkey7

My deed is in a trust and the bank won't give me a HELOC.

As the title says. My wife and I went to our local credit union today to open a HELOC with our primary residence that we own outright. During the paperwork part the banker said that they can't lend when the deed has the property under our joint trust. It has to be under our names.

The part I don't understand is that my wife and I are listed as deed trustees, so I don't see the difference but the bank does...

At this point I am considering transferring the deed from our living trust to ourselves and just save the hassle of shopping for a bank that doesn't care.

Has anyone else come across this? What did you end up doing?

I'm aware that any legal advice from internet strangers doesn't make up for chatting with a lawyer, but I was hoping someone could give some guidance. In case it matters; I live in NC which is a closing attorney state.

Thanks!

Edit; After speaking with an attorney it looks like the quit claim is definitely an option (also the cheapest if I'm willing to DIY). I also talked to the closing attorney that signed when I closed on my home last year and he'll change the deed and file it for about $180. This is significantly less than the $700 the bank wanted!

Posted Aug 21, 2019, 4:42 PM UTC · edited

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RonBurgundy2000•

Are you also the trust beneficiaries? Draw up a quit claim deed from trust to you, take out loan, quit claim it back.

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badmonkey7OP•

That's an interesting idea. Are there fees associated with that? A transfer will run about $200-400.

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MisterHonkeySkateets•

I’ll send you the qcds right now via email.

If you move the ownership, the lender may and likely will call your loan in full. Im not sure how to simultaneously close on that, above my area of knowledge

2
valunti•

Recourse. Trusts create a lot of problems for lenders. Lot of paperwork that has to be examined and validated.

  • What kind of trust is it?
  • Does the trust have authority to borrow money? Pledge assets?
  • What powers are given to the trustee in the trust document?
  • Does the trustee have the power to bind the trust?
  • Who must sign for the trust? All trustees?
  • Does a beneficiary of the trust need to sign?
  • A revocable trust, can be revoked and assets disbursed, leaving no trust from which to collect on a debt. Does this leave the lender with no recourse? Then you need a personal guaranty from all borrowers, surety waiver, etc...
  • What about deficiency rules?
  • Some of this can be ameliorated with a certification of trust
  • Foreclosing on a trust brings its own set of headaches

So, yes some lenders are going to be quite wary of lending to a trust. Especially a credit union often simply doesn't have the resources or institutional knowledge to make such loans.

Try some other banks.

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badmonkey7OP•

The reason I don't want to try other banks is because I am currently working with the state credit Union. It's essentially a no cost loan up to 70% LTV or $250k. The money is so inexpensive, that I'd rather figure out how to fix the deed on the front end.

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RonBurgundy2000•

If you have someone that can draw up the quit claim deeds (attorney or title company), then likely just the recording fees. You should make sure you’re not violating any type of due on sale/assignment clauses associated with your new loan.

3