Understanding Trust-To-Deed™

The information on this page is intended to help buyers and professional advisors understand the Equity Holding Trust™ process inside the H.O.M.E. program.

Overview:

Trust-To-Deed™ functions as a wholly legitimate and practical means for transferring the benefits of Fee-Simple real estate ownership, and is based upon the centuries old Land Trust, which came to be known in the US in the late 1800’s as the Chicago Title Illinois Land Trust.

The structure of this trust — where the Beneficiaries share Power of Direction and use a Professional, Non-Profit 3rd Party Trustee — serves effectively to shield real estate ownership from public view in that only the deed to the 3rd-party nominee (the Trustee) is recorded in the public record, while only the unrecorded, privately held trust document contains the identities of the trust’s beneficiaries, and which document remains unavailable to any inquiring party, absent a full court order and official deposition.

The objective of this technique is for an owner of real estate to ethically and legally impart ownership rights and privileges to the future buyer, without the necessity of new mortgage financing or any particular bank-imposed credit requirements or restrictions. Trust-To-Deed™ allows owners, investors and full payout lease-tenants to quickly and safely benefit from the Fee-Simple benefits of real estate ownership, including tax deductions merely by being named as bonafide co-beneficiaries with specific duties which are carefully delineated within the trust.

With Trust-To-Deed, legal title to real estate is temporarily vested in a 3rd Party, Licensed and Bonded, Non-Profit Corporate Trustee.

The underlying Consumer Protection Trust documentation has been in use in the United States for over 100 years and is accepted in all 50 United States.

The temporary transfer of a property’s title to an inter-vivos trust does not violate any lender’s alienation (“due-on-sale”) admonitions (see 12USC1701j-3).

Trust-To-Deed does not compromise any provision of the Wall Street Consumer Financial Protection Act (“Dodd-Frank”) regarding Seller-Financing. This is despite the fact that virtually 100% of all benefits of fee-simple ownership are being conferred upon the acquiring party, yet without a title transfer to, or formal loan-assumption by, that party.

Trust-To-Deed does not involve the sale, purchase or mortgage financing of real estate. Neither does the documentation involve an option to buy real estate or any extension of credit.  There is no involvement with any section within the Federal Truth-in-Lending Act (TILA); the Homeowners Equity Protection Act (HOEPA); the Real Estate Settlement Procedures Act (RESPA); or the Fair Credit Reporting Act (FCRA).

Terminology and Participants

Trustee Nominee

The title-holding entity, ie a professional 3rd party, non-profit charitable 501(c)(2a) corporation, acting solely for the benefit of its members. (The “members” are the beneficiaries of the trust(s) held by the trustee).

Investor-Intermediary Co-Beneficiary

A party (Nascent Equity, LLC) acquiring interest in the trust for investment purposes. (Also known as the “Secondary, Non-Resident Beneficiary”).

Resident Co-Beneficiary

A party appointed by the trust’s beneficiaries who will live in the property under a triple-net occupancy agreement and be responsible for ALL payments, expenses, upkeep and repairs.

The Trust-To-Deed™ HOME Buying Process:

HousingNC, having been appointed Investor Co-Beneficiary of the Consumer Protection Trust and assuming all responsibilities for the property’s payments, taxes, insurance, etc., appoints a third party as the trust’s Resident Beneficiary, who, in exchange for all rights, privileges and benefit of homeownership, agrees to live in, and assume all responsibilities of the trust property; being thereupon granted a percentage of the trust’s beneficiary interest (i.e., from ten to ninety-percent), which percentage becomes that party’s stipulated share of net proceeds to be received upon the trust’s termination and disposition of the property (i.e. following sale or re-finance).

What Happens at Inception:

1.  An owner’s property is vested in (deeded-to) a fully licensed and bonded third-party corporate trustee, whereby the owner of record becomes the sole-director of the trust with full power of direction of the actions of the trustee, and all responsibility for the property’s management maintenance and ultimate disposition.

2.  An Investor-Co-Beneficiary (an acquiring party) is assigned a beneficial interest in the trust (from 10% to 90% of such interest).

3.  A Resident Co-Beneficiary (a party who will live in the property, covering all costs) is assigned a 3rd beneficiary interest in the trust (i.e., in any percentage the Investor Beneficiary would choose to relinquish).

4.  A Beneficiary Agreement (analogous to a Partnership Agreement) is executed by and between all parties, identifying each beneficiary’s rights, privileges and responsibilities.

5. The property is then leased to the Resident Co-Beneficiary through a Triple-Net, All-Inclusive Occupancy Agreement. The payment obligations under this agreement encompass mortgage principal and interest, maintenance costs, relevant property taxes, insurance premiums, and any applicable HOA dues.

6.  All payments and disbursements, and payment-record-keeping responsibility is turned over to a bonded collection service that is provided and funded without charge by the trustee entity.

What Happens at Termination:

No less than six-months prior to the trust’s scheduled termination date, the Resident Beneficiary is given the first right to purchase the trust property at its then Fair Market Value, minus any moneys owed to that party by the Trust at the time of purchase.

The Investor Beneficiary has the second right to purchase the property under the same parameters as the first.

The third right to purchase goes to the First Beneficiary who needs but take the property back and place it on the market for sale, or deal with it in any other manner they might choose.

What happens when the property is purchased by a trust beneficiary or sold on the open market:

1.  First, all encumbrances are retired (paid-off) on behalf of the Grantor (seller/owner of record).

2.  Then all costs of re-marketing and sale (or other disposition) are covered (e.g., escrow, title, commissions, etc.)

3.  Next, each beneficiary receives a refund of any initial non-recurring expenditures having been paid-in at the trust’s inception.

4.  Finally, all net proceeds from the sale are distributed to each beneficiary in proportion to their respective percentage of beneficiary interest in the trust.

Ownership Rights and Benefits:

In this unique process, the Home Ownership Benefits that accrue to the Resident Beneficiary include:

1.  Unimpaired Land Use.

2.  Full Use Occupancy of the Property.

3.  Quiet Enjoyment.

4.  Income Tax Deductibility (Mortgage Interest and Property Tax).

5.  Economic Appreciation Potential.

6.  Equity Build-Up from mortgage principal reduction.

7.  The right to let or sublet (i.e. lease or sublease) or to vacate the property at the trust’s termination (or sooner if all parties are in agreement).

8.  Perhaps equally important; Pride of Ownership and a place to call “Home.”

Additional Protections and Advantages: While virtually 100% of all rights, privileges and benefits of real estate ownership are being passed from an owner of record to another party, the transfer does not constitute any of the following:

1.  A sale of the real estate.

2.  A purchase of the real estate.

3.  Creation of a mortgage or extension  of credit.

4.  An option to buy at a reduced or adjusted price.

5.  An Executory Contract.

6.  A contingency sale of the real estate.

7.  A disguised security agreement, or equitable mortgage.

8.  A partnership, corporation or business trust.

Compatibility With Federal Regulations and Admonitions:

Trust-To-Deed™  is wholly compatible with all existing regulations that would/could otherwise negatively affect, or be otherwise regarded as being opposed to, “Seller-Financing.” This to say that, although the benefits are the same or superior to a standard deed transfer, the Trust-To-Deed™ method does not constitute a violation of any lender’s due-on-sale admonitions (See FDIRA 12USC1701j-3): Nor is there a compromise of  Dodd-Frank Wall Street Reform and Consumer Protection Legislation.

For complete explanation of Title-Holding Land Trusts, visit this page.

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