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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, if that will make the loan due?

By Aaron K. on 12.15.2018

Hello Aaron,

I cannot give you legal advice, but I would wholeheartedly recommend your parents have the documents reviewed by an attorney before they make any changes to the title.  Under Section 9 of the Deed of Trust, there are multiple grounds listed for acceleration of the debt (for calling the loan due and payable). 

The typical reasons for calling the loan due such as death of all borrowers, non-occupancy, default under the Security Agreement (i.e. non-payment of the taxes and insurance, etc.) are included as valid reasons to call the loan due and payable but I would pay specific attention to ii) based on your question which I have printed for you below from a current Deed of Trust (documents are subject to change but this is a current version):

 

Grounds for Acceleration of Debt.

(a) Due and Payable. All sums secured by this Security Instrument shall be immediately due and

payable if:

(i) Borrower dies and the Property is not the Principal Residence of at least one surviving

Borrower; or

(ii) Borrower voluntarily or involuntarily conveys all or any part of his or her 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 a Principal Residence and retain title to the

Property: (A) in fee simple, (B) a life estate, or (C) a beneficial interest in a trust owning all or part

of the Property; or

(iii) the Property ceases to be the Principal Residence of a Borrower and the Property is not then

the Principal Residence of at least one other Borrower; Provided, however, that temporary

absences of all Borrowers from the Property not exceeding sixty (60) consecutive days shall not

cause the sums secured by this Security Instrument to become due and payable; or

(iv) for a period of sixty-one (61) consecutive days or more, but less than one year, all Borrowers

are absent from the Property without notifying the Lender of their absence and without making

arrangements satisfactory to the Lender to maintain the Property during their absence; or

(v) for a period of twelve (12) consecutive months or more, a Borrower fails to physically occupy

the Property for any reason and the Property is not the Principal Residence of at least one other

Borrower.

(b) Other Grounds. Lender may, at its option, require immediate payment in full of all sums secured

by this Security Instrument if an obligation of the Borrower under this Security Instrument is not

performed or Borrower is otherwise in default under this Security Instrument or the Loan Agreement,

and Lender’s security is jeopardized.

(c) Notice to Borrower. If one or more of the events in Paragraph 9(a)(ii) - (v) occur, Lender shall

give Borrower a notice in accordance with Paragraph 16 and applicable law that all sums due under

the Loan Agreement and secured by this Security Instrument are immediately due and payable. If

Borrower fails to pay these sums immediately upon receipt of the notice without any additional grace

or cure period, Lender may invoke any remedies permitted by this Security Instrument without further

notice or demand on Borrower. If Lender exercises its option under Paragraph 9(b), Lender shall give

Borrower the notice of default and opportunity to cure pursuant to Paragraph 23.

(d) Trusts. A conveyance of a Borrower's interest in the Property to a trust in which that Borrower is

the beneficiary, or a conveyance of a trustee's interest in the Property to at least one of the original

Borrowers, shall not be considered a conveyance for purposes of this Paragraph 9.

 

The documents are different from the HUD documents.  Whereas the loan documents for the HUD HECM mortgage specifically state that as long as at least one of the original borrowers remain on title, additional individuals may be added as well, and the conditions of the loan are met, this Deed of Trust is worded differently.  I think your attorney will explore making you the successor trustee and leaving the title in a trust in which your parents are the sole beneficiaries of the trust for as long as they live but again, I cannot advise you in this matter and that is entirely up to your parents and their legal counsel.

 

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