Legal Question in Real Estate Law in Georgia

Re: real estate trustee

You don't ask a question, but refer to documents no one here has. It also appears you entered into these transactions without knowing what the documents state. The reality is that these deals are horrible mistakes from the beginning. Like virtually all others, you gave away control, if not actual title, to your property while still remaining liable for the debt. Your credit is harmed because you did not pay your obligations, and expected someone else to do so.

Re: real estate trustee

This sounds like a scheme I saw when a Cobb County client came to me in similar circumstances 2 years ago. If it is like the one I saw - the arrangement works something like this:

1. The distressed homeowner, in arrears with the mortgage company, deeds his property to a trust, the trustee of which is the investor who advances funds to bring the property out of default. This transfers the legal interest in the property to the trust. The former homeowner becomes the beneficiary of the trust.

2. The trust leases the property back to the original owner as tenant with an option to purchase. If you evaluate the return to the investors if the option is executed, it�s probably a 300% ROI (or greater). The lease typically has a draconian late fee penalty so that if any monthly lease payment is even one day late the option expires, leaving you as a tenant. The lease payment is typically about 101-105% of the monthly mortgage payment and the trustee acts as a mere conduit. The mortgage is not paid off, it is simply paid via a different mechanism.

3. The former owners (now tenants with an option to purchase) now assign their beneficial interest in the trust to the trustee � giving them the complete ownership, subject to the lease and option to purchase.

All three of these steps apparently happen in the same �closing� conducted by an attorney for the investors/trustee.

The original owner is still obligated to the mortgage company for the payoff amount and any costs allowed in the loan agreement and security deed.

The transfer of the legal interest in step 1 (above) is considered an event triggering a �due on sale clause� that is included in security deeds in Georgia. The mortgage lender is empowered to come after the borrower (original homeowner in this example) for the payoff balance plus costs. The problem is that the mortgage lender typically is unaware of this transaction, and since the stream of payments typically continues (from the trustee instead of the original borrower), the transfer is not detected.

The attorneys involved in such closings are participating in what I regard as unethical behavior. The distressed homeowners are desperate and the investors in such a scheme are taking advantage of their distress and lack of knowledge. This is nothing like a residential real estate transaction where the �closing� is typically a willing buyer and willing seller who each have had advice of lawyers and advisors and understand the transaction.

I can�t give you specific advice on how to proceed in this situation without a lot more information, but I recommend that you contact a Georgia licensed attorney and provide him or her with all the details. Do not hold back information because you are embarrassed at having been drawn into such a scheme.