1. What occupancy’s are allowed? We allow vesting in entities for all transaction types and occupancies.
2. Available Products? Vesting in entities is available on all products.
3. What types of entities are allowable for vesting?
We will vest in entities including trusts (revocable and irrevocable), LLC’s, partnerships & corps. For an irrevocable trust, we will need to review to ensure it’s not too restrictive so you will need to send to us in advance.
4. Who signs the documents?
In a trust, the borrower will sign the note in their individual capacity. Depending on the terms of the trust, the trustee may or may not also sign the note. The trustee alone will sign the Deed of Trust. The term of the trust must be at least 30 years, which cannot be met on irrevocable trusts most of the time and they cannot be modified so it will need to be reviewed. The trust must clearly benefit the beneficiaries of the trust who are typically the borrower and must contain terms that allows the trustee to borrow, mortgage property and guarantee debts of the beneficiary (borrower).
In an LLC, at least one member in the LLC must sign the note as an individual. The member must be a natural person owning a membership interest of at least ten percent (10%).
In a partnership, a partner would have to sign the note as an individual. The partner must be a natural person owning interests in the partnership of at least ten percent (10%).
In a corporation, a director would have to sign. The director must be a natural person and must be a shareholder owning more than ten percent (10%) of the outstanding shares of the corporation.
5. Who is the qualifying borrower?
While title may be vested in an entity, the borrower must be a natural person who completes the loan application and whose social security number, employment, assets and credit are used to qualify for the loan. The borrower is personally responsible for the indebtedness.
6. Who is the Mortgagor?
The entity with vested title in the property is the mortgagor. The mortgagor will sign the Mortgage/Deed of Trust and any related Riders.
7. So the note will be in the individuals name and the DOT/Mortgage can remain in the business name? Exactly.
8. I am wondering who the 1098 names as the payer of the mortgage interest?
It would be issued in the name of the individual who qualified for the loan, not the entity.
9. What types of trusts are acceptable?
Inter-vivos revocable trusts are always acceptable. We allow irrevocable trusts if the term extends beyond the term of our loan but those can’t be amended to meet our requirements (the instances where you run into trouble on these is when one of the settlors has died but we can still review it for possible qualification). We can always review the trust with a $250 upfront fee.
10. The loan is in his name as an individual but you will allow him to vest in his entity?
Yes – the borrower signs the note as an individual and signs the DOT in their capacity within the entity.
11. If we did not disclose the $250 review fee in the beginning, can we do a change in circumstance to add this fee? Yes.
12. What documentation do you need to vest in an entity?
The borrower will want most of the documentation waived, we do not allow it.
An opinion letter from the entities legal counsel for all entities with the exception of a trust. (Sample Available)
Filed Articles of Organization/Certificate of Formation, including all amendments (or equivalent document required by the state to register an entity).
Certificate of Good Standing (or equivalent document) issued from the state in which the entity is organized, an internet printout will not be accepted. The certificate cannot be dated more than 60 days prior to closing.
Signed Operating Agreement, including all amendments, attachments and schedules, if any. The Operating Agreement must provide the term of the entity and have a stated purpose that will allow ownership of property, the right of the borrower to mortgage property.
Resolution of Unanimous Consent of the members/partners of the entity. The resolution must specifically identify the property, approve the mortgaging of said property and the execution of documents to effect said mortgage. The resolution must also designate a individual who shall execute all documents on behalf of the entity and include a witnessed incumbency signature section (designated individual provides sample of his/her signature). (Sample available)
A complete List showing all individuals with ownership and their respective ownership interests.
If the property is located in a state other than the state in which the entity is organized, the following documents issued from the state in which the property is located shall also be provided:
A filed Certificate of Authority (or equivalent document) showing the entity is properly registered in that state
A Certificate of Good Standing (or equivalent document) dated within 60 days of the loan closing
If the entities ownership includes a non-natural person, documents concerning that entity may also be required to be submitted for review. Please note: None of its members can be foreign entities.
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