A borrower wants to transfer a recently closed property into an irrevocable trust. We do not allow property to be held in an irrevocable trust and informed the borrower that we would call the loan due and payable (as allowed in our note) if this transfer to the irrevocable trust occurred.
However, the borrower hired an attorney and the attorney is citing a 1982 law (Garn-St. Germain Depository Institutions Act) which states, "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…". I had never heard of this Act until recently.
This Act seems to state we cannot call a loan due and payable if the property is transferred into a trust. How do I reconcile what seems to be conflicting information? On one hand, the note says we can call the loan due and payable if the property is transferred into an irrevocable trust yet this 1982 law seems to state otherwise.