Estate Trusts and Credit File

[Tiersha]

Wandering outside the mental box of typical trusts questions.

If a mortgage property is transferred to a trust via deed change that makes the trust responsible for the debt/note associated to the property but the original note holder credit report shows them as the note holder still yet they can prove they don't own the property /note in question because the debt was transferred...then how does that affect your credit file if you go to dispute that acct?

When property passes to a trust and a trust becomes responsible, then when the property transfers to a beneficiary then that beneficiary becomes responsible...since the responsibility, debt and names of controlling parties change, wouldn't that by proxy also change the credit profile? I.e. the original note holder should show as no longer responsible for that debt therefore it shouldn't be on the credit profile.

I mean if financial debt transfers from person to a trust then why isn't that same transfer reflected in credit profiles?  The transfer of debt says you don't own the debt.

Just like the bank transfer of loans says they don't own the loans.

Thoughts?

[Spotsy]

Hmmmm...it is a little more complicated then what you are hoping for.  What happened to the original note holder on the property? Did they pass away?  What kind of trust was the property transfered into?  Did the mortgage holder agree to the transfer?  Was the transfer court ordered? 

if the original note holder is still alive, they are still responsible and therefore will still show on their credit. If not...the property may be a part of their estate and into their estate trust.  The mortgage company may want that mortgage paid in full or they may start foreclosure ?  But need more info to understand what' and how these assets are moving. If it was deeded into your name and then transfered into a revocable trust that is created for you, then you are still responsible.  The mortgage company may need to agree to the asset transfer though.

I hope you have an estate lawyer helping you through this?! 

[ForwardLooking]

Not sure what is bringing this question on, but generally you can assign the equity ownership of a mortgage to a revocable trust, but the debt liability remains with the original signatures, meaning it will remain on the original debtor's credit report.  Also, the occupancy of the home being transfered into the trust cannot change either, meaning the original owner cannot transfer their home with a mortgage into a trust and then move out and let their relatives or friends move in without the lender's permission.  If you are looking for a real answer pertaining to a specific need you have, you should get with an estate attorney and let them guide you.  Last thing you want to do is trigger a "due on sale" event and have the property in question taken by the bank.

[Anonymous]

I agree with the above responses, part of the issue being that "trust" is way too general, there are loads of different types of trusts and the type  can certainly influence the answers.   For example, if you put real estate into some types of  irrevocable trust with someone else as the beneficiary, it really no longer belongs to you (and you can be sure that the mortgage holder would want to know about this!)   If you are putting stuff in a revocable living trust, yes, for probate it's not in your name etc, but if you are a trustee it still is really yours and mortgage companies are less concerned once they are informed.  (But get the insurance right!)

[Spotsy]

Ahhh yes... @Anonymous brings up a very important, insurance.  And while you are at it, your local real estate taxing authority may need to be notified or may have already caught it when the title changed.  If you have homesteaded the property, depending on the type of trust you are transferring it into, may affect any homestead savings you receive, if any.