As previously announced, FHLMC published Bulletin 2017-28 announcing new guidance concerning land trusts (see https://compliance.docutech.com/2017/12/15/compliance-news-fhlmc-bulletin-2017-28-updates-land-trusts-texas-home-equity-loans/). Among these changes included ones permitting lenders to use FHLMC Form 50 as a collateral assignment for land trust mortgages. We created this form and have assigned it to print for loans which will be sold to FHLMC, while still retaining our generic “IL Security Assignment of Beneficial Interest in Land Trust” (Cx4936) for use with loans not sold to FHLMC (see https://compliance.docutech.com/2018/03/19/new-document-il-collateral-assignment-of-beneficial-interest-in-land-trust-cx22151/ for details).
Because it is possible for clients to not know for sure at closing whether their loan will be sold to FHLMC, Cx4936 may still be used for loans which ultimately are sold to FHLMC. If Form 50 is not used, FHLMC does require a collateral assignment to contain the following elements:
“Each beneficiary of the Land Trust who is a Borrower must execute a Collateral Assignment under which the beneficiary:
- Grants the lender named in the Security Instrument and the Note and the lender’s successors and assigns (the ‘Lender’) a security interest in all of the beneficiary’s rights, title, powers and interest in, under and to the Land Trust, the property held in the Land Trust (including any rights to earnings or proceeds from that property), and the Land Trust agreement (including any powers of direction or control over the trustee of the Land Trust or the property) (collectively, the ‘Collateral’);
- Certifies that no prior security interest in the Collateral has been granted;
- Agrees not to make any further assignment or take any other action by which all or any part of the Collateral is transferred in any way without the written approval of the Lender; and
- Agrees that the Collateral Assignment is for collateral security only, that no liability under the Land Trust agreement accrues to the Lender by virtue of the Collateral Assignment, and that signing the Collateral Agreement does not relieve the beneficiary of any responsibility or liability under the Land Trust agreement.” (FHLMC Single-Family Seller/Servicer Guide ch. 5103.7[b][ii][A])
To meet these elements, we will be modifying Cx4936 in the following ways:
- Because the trustee of the land trust is not required to sign the promissory note under FHLMC requirements, we will be revising the recitals to the document to only reference the beneficiary(ies) as being the signatories to the promissory note, when new field “Exclude Land Trust Signature Lines from Note” (FI 121714) equals “Yes.” If this field equals “No”, the current language of the recitals will print.
- Revising the last clause of the first sentence of the first paragraph, revising the last sentence of said paragraph, and revising the second paragraph to expand upon what interests are being conveyed by the collateral and what the beneficiary(ies) liability is under the terms of the Security Agreement as a result of the assignment.
- Adding a new, third paragraph wherein the beneficiary(ies) certify that there is no prior lien on the collateral. This paragraph will only appear when “Lien Position” (FI 1041) equals “First Lien”.
- Adding another sentence to the (current) third paragraph specifying that the undersigned beneficiary(ies) will not make any assignment, or transfer, the collateral without the written approval of the lender.
These changes will take effect immediately to complement the recent land trust signature software changes. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.