How often do lenders look up changes in title?

Question

Alicia Cox advocates putting a sub2 deal property in a land trust (from the seller) before buying it.

William Tingle advocates not confusing the seller with the additional paperwork and creating a potential tough discussion in front of a judge. He suggests the land trust just buy the property. This of course records a change in ownership.

I think I side with Tingle's position more. I wanted to ask you guys how often Lender's even look up title changes on properties they have liens on. I understand the updated payer and insurance adjustments will tip them off anyways but am still curious about the actual lookup/review process that goes on at banks.

Account Closed · Answer

Hiding a Sub To transaction is a disaster waiting to happen in my opinion. I prefer the "Open and Notorious" approach. I take the property in my LLCs name, I go through title and escrow and I have them record the deed. I have disclosures the seller signs stating that the DUE on sale exists, we're not taking the loan out of their name and if a problem arises they agree to help resolve the problem. Though, I don't call up the bank and shout in their ear that I just took title.

Why would I do things that way?

1. I have nothing to hide, it's perfectly legal.

2. If there is a problem in the future I want to be notified.

3. Lenders will start looking for notes to call due when interest rates reach a certain level. It is easier to do a search for all loans with the word "Trust" in it, than anything else, so that is what they will do.

4. The due on sale clause says the lender "may" call the loan due, it doesn't say "must" call the loan due. I've negotiated loans over that issue and won.

5. I never miss a payment.

6. I have reserves in case I need to cover a few months because it isn't rented out.

7. I have several ways to satisfy the lender in the event they call the loan and won't work with me to assume the existing financing.

8.  Asset protection is a good thing, playing with lenders about ownership is a bad thing. IMHO