Whitecap Properties, Inc. Land Trust System

Foreclosure Rescue Homeowner Benefits

Options to Foreclosure

There are few options for people in foreclosure. This is especially true for those who want to remain in their home. The Whitecap Investment Land Trust System is an option that you need to consider if you are in this situation.

There may seem to be only four options when you are in foreclosure:

Payoff the past-due payments to the bank and keep your home;

Refinance your home and payoff the lender;

Rent the house out and hope you get enough up front to bring the payments current, and that you can get enough per month to continue to cover the payments;

Sell your home before it's too late.

If you have decided that your first choice is to stay in the home, and yet you are not in a financial position to pay off the past-due payments and are unable to refinance for personal, credit or financial reasons, you may still have an option. It can all happen quickly, legally, and without a new loan or loan assumption.

This is a little known option open to those facing foreclosure. The program entails finding an investor to become a partner with you in helping you stop the foreclosure. The investor, in exchange for a beneficial interest in the trust into which the property will be placed, will bring in enough cash to catch up the past ¬due payments. The title of the property is put into a specialized revocable inter¬-vivos trust. You keep the equity in the home. A portion of the trust's beneficial interest is conveyed to the investor (instead of selling any of the real estate itself). A set period of time is allowed for you to either refinance or sell the property. The property will be refinanced or sold at the market value at the time of the refinance or sale (determined by an appraisal).

You can choose to allow a third party resident to live in the house and take over your payments and maintenance issues, or you can continue to live in the house. If you continue to live in the house, your payments for a year will be less than you are paying now. At the end of the set period of time, you can either refinance the house or sell it. The investor beneficiary will first receive his refundable contribution to the trust. You would receive your beginning equity; and then you would split with the other beneficiaries any additional equity in the property. This is a very good option for many situations, and should be explored as early as possible in a foreclosure cycle.

There are other benefits to using this Whitecap Investment Land Trust System. • PRUDENT & MOST PROFITABLE – It can eliminate the need for standard renting, leasing or optioning-out. • EASY LANDLORDING - If you choose to allow someone to reside in the home, it eliminates costs of negative cash-flow, maintenance & vacancies. • TAX DEFERMENT - A Land Trust transfer is a "contingent sale," possibly deferring capital gain for years. 1031 Like Kind Tax Deferred Exchange privileges can remain intact. • ASSET PROTECTION - The Whitecap Investment Land Trust System may shield against tax-liens and creditor judgments. • THE LOGICAL WAY OUT – It can be an excellent alternative to any Short-Sale or Foreclosure by wholly avoiding the lender approval process, averting any tax on debt-relief, and gives time to repair credit injury.

The Beginning

First, you must fill out a Whitecap Investment homeowner information form to determine whether the property will meet our criteria for the Land Trust. This form will ask you for information on the property and the encumbrances (mortgages, liens, etc.) on the property, as well as information on taxes, homeowners or condo associations, and any other monthly payments attached to the property.

If your property matches our criteria, you will receive an Offer that sets the Mutually Agreed Value on the property. This amount will generally be similar to the amount you would receive if you sold your house through a real estate agent and paid closing costs.

An investor will be located that is interested in the transaction.

A title search will be conducted to determine that the title of the property is clean.

A closing will take place in which all legal documentation is signed, and the title of the property is transferred into a specialized revocable inter-vivos trust, of which you will be a beneficiary, as will the investor. A trust termination period is set at that time to allow you to refinance or sell the property (usually 1 to 3 years).

The investor will bring in sufficient funds to bring the loan and other past-due obligations current. The banks, tax authorities, homeowner's associations, and all others who have past-due payments and liens on the property will be brought current.

The Middle

You may sign an Occupancy Agreement with the Trustee and continue to reside in the property.

If you are in foreclosure and choose to stay in the house, your monthly payments will be decreased by about 5% per month.

Your payments are made directly to the Trustee. The payments will include all monthly obligations (tax impounds Insurance, and principle & interest).

An additional option maybe to lease the property out to another tenant if that is more desirable.

The End

At the end of the trust period, if as a tenant you choose to remain in the property, you will refinance the property at the appraised market value, and the title will be transferred back to your name and the trust terminated.

If you choose not to remain in the property, the property is sold on the open market and the trust will be terminated.

At the time of the refinance or sale, the underlying encumbrances and liens on the property are paid off.

The investor beneficiary's refundable contribution is returned to him in accordance with the agreements signed at the original closing.

Your existing equity (based on the Mutually Agreed Value) will be returned to you. You may either apply the equity towards the refinance amount (thereby allowing you to borrow less on the property), or take the equity as a cash payment.

The additional equity - that is, the difference between the Mutually Agreed Value and the appraised value of the property at the time of the refinance or sale - is split as mutually agreed between you and the other beneficiaries.

MORE ABOUT THE LAND TRUST SYSTEM FOR INVESTORS

Because the Land Trust System uses independent holding companies acting as Trustees the cash investor can acquire properties without any management responsibility, loan qualifying, or credit application, while avoiding: negative cash-flow, vacancies and management and maintenance costs ... even the costs of insurance, property and monthly payments are paid by the Trust. The Trustees duties performed can allow a real estate investor to remain passive and to acquire unlimited numbers of cash-flowing properties (even over-encumbered properties), with all of the above benefits as well as all the following profitable advantages: • Upfront monies are collected at start from an incoming resident co-beneficiary. • Existing equity at start for the investor. • Equity build-up from principal reduction by making payments over the term. • Future property appreciation potential • A positive cash flow throughout the term of the land trust. • Negotiation of the income tax write-off for mortgage interest and property can actually increase the net rental income. • The passive tax write-off (Depreciation) throughout the term of the agreement • A “Triple Net” type lease structure that includes all management costs, maintenance expense, repairs, upkeep, taxes and insurance. • Avoidance of capital gains tax imposition for the “seller” upon creation of the land trust. • Avoidance of transfer and conveyance tax (stamps) upon acquisition or disposition of the property.

AT TERMINATION:

In a typical Land Trust transaction, the contract provides for the resident beneficiary to either sell or refinance the property, and pay the investor all monies due from of the proceeds of such sale or other disposition at that time. The sale price at termination is agreed in advance to be whatever the Fair Market Value is determined to be at the time, MINUS any moneys owed to the acquiring party by virtue of its beneficiary interest in the underlying land trust. Such sale price is agreed to be determinable at the trust’s (and lease’s) termination by a mutually acceptable appraisal (disagreements settled by the dissenting party right to order a full M.A. appraisal).

Other benefits to using the Land Trust System

The Land Trust system may be seen an effective legal shield for virtually ANY creative financing objective. It can, in essence be tantamount to a Long Term Lease (i.e., a lease for more than 3 years); a Lease Option; a Lease Purchase, an All Inclusive Trust Deed, an Equity Share Arrangement, or a Land Contract (e.g., Contract for Sale, Contract for Deed, Contract for Warranty Deed, etc.). The Land Trust can meet the objectives and functions of any of these arrangements without the many risks associated with them.

The Land Trust is a title-holding device that allows for easy conveyance of ownership, and incidents of ownership (including tax write-off benefits). In the arrangement, a neutral 3rd party trustee, whose actions in dealing with the property’s title are wholly at the direction of the beneficiaries, holds title to the property. Upon one’s becoming a beneficiary, all or a portion of that beneficiary interest can be sold, traded, transferred or hypothecated by means of a simple Assignment of Beneficiary interest. In that the lender’s security interest is not impinged upon when a property is placed into such a revocable trust, Federal Law eliminates the need of involvement by, or permission being required of, the secured party in the underlying mortgage loan (FDIRA, 12 U.S.c. 1701(d)-3).

Investors may utilize the Land Trust in various ways. For example, any time a seller is willing to remain on the existing financing (keep their names on the loan), the Land Trust becomes an ideal vehicle for acquiring the property conveniently and anonymously. That is, easily, quickly and without Public Notice (Recording), as well as without the potential for the triggering of a mortgage lender’s Due on Sale provision. Land Trust tends, in-fact, to effectively protect the property against liens, suits creditor judgments and even IRS tax liens on behalf of either party. Also avoided are dangerous or unnecessary “Creative Financing” schemes. With all these benefits the Land Trust becomes an ideal acquisition vehicle.

AS A LONG TERM LEASE: A Co-Beneficiary Land Trust can be set up for up to twenty years, with a Lease of the property to a Resident Co-beneficiary for just under 3 years. The lease with the trust will stipulate that at the end of the original lease term, the tenant may “hold-over” in the property until the end of the trust period, unless evicted sooner. Since an eviction would have to be by mutual direction by ALL beneficiaries: the tenants being one of the beneficiaries, protects him and effectively continues his/her holdover until the termination of the trust.

AS AN A “Wrap-Around”: A seller places its property into a Land Trust, assigning a full Beneficiary Interest to the “buyer,” with the agreement that the property will be leased to the co-beneficiary on a Triple-Net basis for some specified period of time. The property is then scheduled to be sold at the end of the Agreement. Upon sale there is a distribution of proceeds to (between) parties with respect to each of their proportionate shares of Beneficiary Interest. In order to avoid reassessment for property tax purposes, and to justify mutual Power of Direction, we recommend that the shares of Beneficiary Interest remain at 90%: 10% in favor of the “buyer.” Then at the end of the term, the “seller” can forfeit its 10% in consideration of the co-beneficiary’s prompt payment record and strict adherence to the contract.

AS A LAND CONTRACT: (Contract for Deed): Benefits are the same as above.

AS A LEASE OPTION: The property is placed into a Land Trust with the understanding that, at the end of the Agreement, the property will be sold to the Resident Co-Beneficiary for Fair Market Value, minus any and all sums owed to the Resident Co-Beneficiary. In this scenario verbiage is such that there is actually no “Option” per se; and that there is no “bargain buy-out” provision other than “... at Fair Market Value, less amounts due the respective beneficiaries.”

AS A LEASE PURCHASE: Same as above, except that the Agreement provides that the property will definitely be acquired by the Resident Beneficiary at termination irrespective of market conditions, relative values, etc. The Rider in this scenario provides that the co-beneficiary has the obligation to either sell or refinance at termination.

AS AN EQUITY SHARE: Same as above, except that parties share in the Beneficiary interest with the Land Trust investor beneficiaries, with an agreement to share all net profits proportionately at termination.

AS A BRIDGE-LOAN DEVICE (e.g., when a buyer can’t finance, or afford a down payment for several more months or years and the seller may be willing to wait awhile): The Land Trust affords such a buyer the opportunity to live in the property, while paying all costs and enjoying all the benefits and incidents of homeownership, including tax write-off and waiting until financing and outright purchase is possible. In this scenario, the Land Trust is set up to coincide with that point in time when the property can be purchased outright by the Resident Beneficiary.

AS A VEHICLE FOR HIGHER RENTS AND FREEDOM FROM ACTIVE LANDLORD RESPONSIBILITIES AND COSTS: A prudent landlord would be well advised to consider making his rental tenant a Co-Beneficiary in a Land Trust in which the rental property’s title is vested. This will give the landlord an ideal opportunity to trade such items as tax write-off, equity, equity build-up, appreciation and the psychological peace of homeownership, for such commodities as free maintenance, repairs, upkeep, and property management for lower rents. Each one of these “items of trade” has a value, and giving up all or some of each one can more than make up for rent decreases while simultaneously reducing the expense of renting for the tenant.

WHITECAP INVESTMENTS AND AFFILIATES CAN PROVIDE THE FOLLOWING: • All documentation, consultation and trust set up for between 0.5% and 3.5% of the property’s Mutually Agreed Value at inception. • We will speak with your clients, buyers, sellers and brokers at any time at all (at our expense). • Affiliated with the requisite Corporate Trustee and Land Partners (Trustee Fee is collected monthly as a part of the regular month payment). • Bonded collection service (PAC Management or Equity Management). Collection and impounding of all monthly payments, and disbursement to all payees. Legal services (evictions, foreclosure, substitutions, assignments, delivery, etc.) - Fee Schedule upon request

Notes:

Whitecap Properties, Inc. is not a law firm, or an accountancy business. All inquiring parties are encouraged to seek independent legal, accounting advice and representation. 1. A cash investor as used in this document shall mean the investor beneficiary who provides only funds to the transaction and has no other responsibility in the transaction. 2. The word seller in this instance is used to mean the current owner of the property who for one reason or another is placing their property in a land trust.