This is more out of an abundance of caution.
My elderly father, who isn’t doing too well healthwise, is going to refinance his house soon (30yr fixed conventional - house is in California), and then gift it to me.
I understand that lenders stand to lose money if someone refinances a house with them, and then refinances again with someone else within 4-6 months, and that they sometimes even write temporary, perhaps 6 month, prepay penalties into the loan to guard against this.
What we’re not clear on is, if he :
Sept 2020: Refinances the house
Dec 2020: Transfers/gifts the entire house to me. House is primary residence for both of us. I will not refinance the house or assume the loan for at least several years. (We both decided the home may have to be gifted before the end of 2020, instead of passing through inheritance, for reasons beyond the scope of these questions.)
... would there usually be anything in a standard refi contract that could complicate the gifting of the house?
This probably isn’t relevant, but the house is in his revocable living trust - he is the trustee, I am the beneficiary. We are aware of the tax implications, such as that there is no step-up in cost basis with this gift.
It is my understanding that:
-The Garn-St. Germain act permits parent to child gifts/transfers of a home without the loan being called.
-The home ownership and the financing are two separate things, and that the loan can remain in my father’s name.
Our concern is that when a refi lender tries to sell a loan, Fannie May/Freddie Mac might check for a change in ownership of the house since the refi closed, and possibly have an issue if it changed. And if this is true, that refi lenders might write something into their contracts (possibly in fine print somewhere) to discourage the transfer/gift of a home before they are able to sell the loan to Fannie May/Freddie Mac.
As mentioned earlier, for the case of someone refinancing again within 4-6 months, they actually do sometimes do this. But do they do this for only an ownership change?
Our questions are:
#1 Would the home owner’s insurance company care about any of this? Are they involved in any way which could complicate/prevent this gift?
#2 Most importantly, and the main question: Do lenders sometimes write anything into a refi loan, in California, that the house can not change ownership through gifting for a certain amount of time without penalties? (Again, I understand there may be prepay penalties if the home is refied within 6 months, I am referring only to a change in ownership.)
Our guess is the gift will be fine and without any issue - I’ll take ownership of the house, the loan will remain in his name, and there will be no penalties/issues from the refi lender for the gifting of the house 2-3 months after the refi. We just wanted to verify this before we look further into refinancing.
Thank you.
