Home / Questions / If they wish to convey their equity in the property to me via a Trust, will that make the loan due?

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From America's #1 Rated Reverse Mortgage Lender

My parents are applying for a Private reverse mortgage through FAR's HOMESAFE program. They want to know if they later wish to convey their equity in the property to me via a trust and if that will make the loan due.

By Aaron K. on 12.15.2018

Hello Aaron,

I want to emphasize the importance of consulting with an attorney before making any title changes, as modifying ownership could trigger loan acceleration. While I cannot provide legal advice, Section 9 of the Deed of Trust outlines several conditions under which the lender may call the loan due and payable.

Common reasons include:

The passing of all borrowers
The property no longer being the borrower's primary residence
Defaulting on the security agreement (e.g., failing to pay taxes or insurance)

However, I want to highlight Clause (ii) in the deed, which addresses title transfers:

"All sums secured by this Security Instrument shall be immediately due and payable if the borrower voluntarily or involuntarily conveys all or any part of their title to the property, unless the sale or conveyance is to one or more of the original borrowers who signed the loan agreement and continue to occupy the property as their principal residence."

This means that transferring title to anyone other than an original borrower may cause the lender to demand repayment.

Trusts and Reverse Mortgage Eligibility

The wording in your loan documents may differ from a HECM reverse mortgage, where HUD allows borrowers to add people to the title if at least one original borrower remains and the loan conditions are met.

Your attorney may suggest appointing you as a successor trustee while keeping the property in a trust where your parents remain the only beneficiaries for the rest of their lives. However, since loan agreements vary, this decision should be carefully reviewed by your parents and their legal advisor before making any changes.

For more information, check out: ASK ARLO! - Reverse Mortgage Trusts

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