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Choosing a Qualified Probate Fiduciary Mortgage Lender

If you’re the fiduciary (executor, administrator or trustee) of an estate or trust and have a financing plan in mind, you’re now about to decide on a mortgage lender.

Making loans to probate estates and trusts is a specialty lender market. There are only a couple of these specialty lenders in California.  While these loans aren’t always complicated, many (if not most) require the assistance of a legal professional to help with giving proper legal notices, trust documents or getting court approval.  Few lenders have the patience, expertise and experience to deal with these matters

Banks don’t make probate fiduciary mortgages because:

  1. Non-conforming loans are usually outside their lending charter guidelines
  2. Probates are often too complicated and requires much expertise
  3. The total market and average loan size is too small to be profitable
  4. They can’t resell the loans in the secondary (conventional) mortgage market

Frankly, due to the low volume of these type loans and simple laws of supply and demand, the service is more expensive than conventional bank financing. Due to recent changes in licensing laws, a number of loan brokers are changing their strategy to offer loans to a broader spectrum of borrowers, and will sometimes imply that they fund fiduciary mortgages when the facts are otherwise. Consequently, it’s a niche or "boutique" market. 

This explains why inexperienced loan officers happily take your loan application but stop keeping you updated or even returning your calls after they’ve discovered that they have no idea how to make a loan to an open probate estate or trust.

If your long term plan calls for keeping the property, you ought to read the Special Report: “What’s YOUR Financing Plan?” so better familiarize yourself and the heirs or beneficiaries as to other suggestions as well as better manage everyone’s expectations.

Some Do’s & Don’ts:

  1. Do look for competence in a lender, not the promises of a loan rep.
  2. Do ask for as much proof of their expertise, such as speeches at legal groups, print articles and referral letters from legal professionals.
  3. If you have any doubt, do ask your attorney for a referral.
  4. Do consider borrowing less than the maximum available to keep costs lower.
  5. Don’t ignore just selling something (stocks, jewelry, car, etc.) to reduce or eliminate the need to borrow.

Seven Questions You Should Ask Before Choosing a Lender:

  1. 1) Will the lender require the property to be transferred to an individual in order to actually fund?
  2. 2) What percentage of the loan officer’s business is devoted to working with attorneys and their clients?
  3. 3) How many fiduciary mortgages does this loan officer close every month?
  4. 4) How long has the loan officer been working with estates and trusts?
  5. 5) Is the written loan proposal in the name of the probate estate/trust or in your name as an individual?
  6. 6) When problems come up, does the lender have a practical solution or do they seem puzzled or flustered?
  7. 7) Does the loan officer appear to guide the attorney and their legal staff by providing assistance in coordinating your loan with the court and title insurance company?

With the help of a knowledgeable lender, borrowing can be much more attractive alternative to selling the probate or trust real estate in order to provide liquidity or to buy out certain heirs or beneficiaries.  Allow plenty of time for everyone involved to ask their questions, express their concerns and be heard.