SECU has Ridiculous Policy on Living Trusts
I have long known that the North Carolina State Employees Credit Union (SECU) refuses to refinance any residence owned by a revocable living trust. Their explanation is that they do not have the legal expertise to determine whether the trust affects the borrower's legal title and powers to the property. Other lenders solve this by having an attorney (usually the one who drafted the trust) certify that the trust will not adversely affect the loan transaction.
For my clients that chose to work with SECU, we would simply deed the house out of the trust to the client, and then after the closing, deed it back to the trust. Some trouble and expense, but nothing major.
Last week, a client of mine had been told by SECU that she could refinance without using an attorney or updating her title insurance. However, when they found that the home had been transferred in and out of the trust, they required that she use an attorney for the closing and obtain updated title insurance. This will end up costing her another $800 or so.
I spoke to Hill Scott, with SECU in Raleigh, on behalf of my client, but my pleas fell on deaf ears. I asked to speak to an attorney with SECU (someone who can understand what a revocable living trust is), but was told by Mr. Scott that SECU has no attorneys on staff!
Bottom line - If you have titled your home in your living trust, and insist on working with SECU when refinancing your mortgage, be aware that the costs of the transaction may increase significantly due to SECU's inane policies.
Does deeding the property back and forth between the individual and the trust trigger the "due on sale" clause in the mortgage?
RESPONSE: No, due to the Garn-St. Germain Act.
Apparently, it's fairly common for real estate to be placed in living trusts, and insurance companies are not notified that they are in trust.
Competent attorneys would necessarily be aware of the need to notify insurance companies, but not all attorneys are competent, or perhaps they capitalize upon the lack of acknowledged status to play both ends against the middle - hoping to misappropriate property placed in trust while leaving the beneficiaries stranded in the event of hazard or theft.