Quit claim to a Trust/Foreclosure [Complicated]?

Question

Hi, I was thinking about Quit Claiming the home I live in to a Trust as a way of preventing my home from being taken from me. I am TOTALLY 100.00% current with my mortgage on my own home. I am running the risk of being foreclosed on some investment properties. I don't want deficiency judgments from my impending foreclosures to lead me out of my home.

I know that usually with a deficiency judgment, all they'll do is attach my home property and I'll have to satisfy that upon the sale or refinance of the property. I don't want that to even happen at all. I want to protect the property I live in and that I am current on.

Also, I have 1 investment property that I'm totally current on, could I Quit Claim that to another Trust? Thanks.

Answer 1

Here’s something for you to consider…
Every mortgage I’ve ever seen has a ‘due on sale clause’ so if you transfer the title, the mortgage company can (and likely will) accelerate the debt and call the mortgage due in full, which means you’ll have to pay off the entire balance of the loan.

Answer 2

You can transfer your properties to a trust -- either via quitclaim or warranty deed. The difference is that in a quitclaim deed you are making no claims that you have proper title, and no claims that you guarantee the integrity of the property -- a quitclaim deed just transfers whatever ownership you have.

However, this may or may not help. Some states have laws that consider any transfer within a certain period to be fraudulent (and void), when the purpose of the transfer is to avoid a debt. Especially if the trust is revocable and does not contain a "spendthrift" clause limiting the ability to get at the trust assets.

So, while the practice of transferring to a trust is a good idea if done early enough, the process may be much more complicated depending on the specific state laws. Consult with an attorney in your state for details.

Answer 3

First, I would talk to a real estate lawyer so you could review the agreements together. A $1,000 consultation might save you a $200,000 headache.

Secondly, have you received any notices at all from your lender regarding your home? The "risk" is always there but I find it hard to believe that the lender would want to foreclose on a house when it is 100% current. They are not in the business of owning homes, especially for current mortgages.