Probably not. While the Garn-St. Germain Act does state that the transfer of a property into a trust, in very limited circumstances, cannot be used to can’t a mortgage’s due-on-sale clause, the truth is that this exemption does not apply to most investor transactions. Subject-to investors should always be aware of the due-on-sale clause and be prepared in case a loan is ever called due.

So why won’t a trust help? Well, the Garn St. Germain Act says that “a lender may not exercise its option pursuant to a due-on-sale clause upon … a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property[.]” So, if the property is placed into trust, and the beneficial interest is assigned from the borrower to anyone else, then the Garn St. Germain Act doesn’t apply. Or: if occupancy changes after closing, then the Garn St. Germain Act doesn’t apply. And if the Garn St. Germain Act doesn’t apply, then the lender can call the loan due. It’s as simple as that.

There are times where a trust does serve a legitimate investment purpose. For those times, we recommend Freeport Title and Guaranty.