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How does a Warranty Deed to Trustee help in Pre-Foreclosure??

As many know because of the great number of homewoners defaulting on their mortage payments, many homes are going into pre-foreclosure.

Other than pay the money owed, many of these homeowners don't know what to do about their unfortunate situation.

Some list their home with a Realtor at a lower than market price in the hope that the lender will accept a Short Sale. I think this is probably the wisest thing to do.

Now there are others that are approached by people that claim to save their home from foreclosure. The homeowner is advised to transfer the property to a trust via a Warranty Deed to Trustee giving full control of the property to this trustee.

A client of mine is in pre-foreclosure and, without seeking anyone's advice including mine, entered into such an agreement.

Does anybody know the mechanics of this so called "saving your home" technique?

I searched AR and the web but couldn't find much.

I would greatly appreciate your input!

Thanks in advance!

Posted by Orlando Homes Armando Rodriguez Real Estate & Mortgage Broker-GRI on 12/08/2007 06:46 PM

Comments (8)

trustee deed

8 Comments on How does a Warranty Deed to Trustee help in Pre-Foreclosure??

DEC

2007

Transferring the property to a Trustee does not stop a foreclosure. The trustee does not automatically get full control of the property; the trustee acts upon direction from the benficiary. Homeowners have to be careful NOT to assign their beneficial interest in the property (a separate form)

DEC

2007

More than likely what is happening is that the seller transferred title to a land trust in order to hide a transfer from the lender. There is an exception to the Due On Sale clause in the loan that says the lender cannot call the loan due if the property is transferred into a trust.

The seller transfers the property into a trust and then assigns the beneficial interest of the trust to an undisclosed investor. The lender does not know who actually owns the property and thus supposedly this dodges the whole due on sale issue.

Several real estate gurus like Ron Legrand and Bill Bronchik have taught this technique for years and many investors use it. I don't know if this really fools the lender. I am sure by now most of the lenders have caught on to this trickery.

Wendy and Rob, Thank you both for your informative comments!

I'm not sure how they keep it a secret from the lender since they record the Trusttee Deed.

The other thing is that in the Deed the Grantor/seller says that s/he is transfering title FREE of all encumbrances except for taxes!? That can not be true.

You would be surprised what people do. They make the seller sign all types of paperwork including disclosure documents waiving alot of rights, limited power of attorney, etc. They make the deed look like the transfer is just for the seller to the seller's trust, then they assign the beneficial interest off the record. Just do a google search about this subject and you will find out what really is going on.

MAR

2008

I have a seller who signed such a deed of trust to avoid foreclosure. An attorney (without the benefit of reviewing all the transactional paperwork) suggested fraud was involved. A google search to learn more brought your blog - but no further answers. If someone can give a more descriptive answer as to how foreclosure is avoided and what happens to the seller, I would appreciate it!

SEP

2008

Savvy investor use this tool to Negociated Short Sale with Lender at a discount price and sell it to the final owner without break the chain of title and avoid title seassoning for the new buyers.trustee has all the right to sell the property without asking beneficiaries and having the limited power of attorney they do not need permision from original beneficiaries to sigh legally an assigmenbt of beneficiaries to them.

Seller sold the house on a short Sale and they profit from Peoples miss fortunes , at the end it just business, Owner can not keep the property and have to sell it and they do that most of the time if they find anothe investor or and end buyer to transfer title without have to do a Double closing .

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