Can You Transfer Your Home With a Mortgage to a Trust Without Jeopardizing Your Bank Loan?

HNWElder Care Law, Real Estate, Landlord/Tenant, and Zoning

There is a Federal law called the Garn-St Germain Act.   Federal Regulations exempt transfers to trusts in which the transferor or a member of the transferor’s family is a beneficiary. For example, borrowers may place their homes in their own trust without triggering a due-on-sale clause found in mortgages.  The regulation reads “A lender may not exercise its option pursuant to a due-on-sale clause upon a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.” (12 U.S.C. 1701j-3(d)(8).

Some attorneys are under the impression it only applies to revocable trusts, not an irrevocable one.

I’ve always operated under the belief Garn St. Germain only applies to revocable trusts, since the grantor retains the right to revoke the trust, so a grantor never fully relinquishes his or her legal right(s) and equitable right(s) to the property.

The Garn-St. Germain provisions certainly appear to cover transfers to certain irrevocable trusts, such as income-only trusts, but to date I have not had occasion to approach a bank to obtain permission for such a transfer.

On the other hand, loan officers and supervisors at several institutions confirmed, with a wink and a nod, that as long as the mortgage is paid and the trustee doesn’t look to refinance, the lender would have no reason to check the land records.  In other words, the transfer would be a non-event, unlikely to garner the lender’s attention, unless and until the property is being sold.  At that point, the mortgage would be due in any event.

If you are looking for additional details on this topic or if you require advice about your situation, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at  Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Elder Care Attorney

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