The Equity Holding Transfer™ as a Bridge-Funding Device
Provide Ownership Benefits Prior to Loan Approval, Down Payment, or Title Transfer
The EHTrust Transfer™ is a private, trust-based transfer structure that allows one party to receive the benefits of real estate ownership without immediate title conveyance or mortgage qualification. In this model, property is deeded into an Equity Holding Trust™ (EHTrust™) and beneficial interest is shared between the original owner (Settlor Beneficiary) and an acquiring party (Investor Beneficiary).
This system offers a legal pathway to transfer use, economic benefit, and homeownership-like advantages without violating due-on-sale restrictions, while preserving asset protection and providing a clear, contractual exit if financing is not secured.
What Is Bridge-Funding in the EHTrust™ Model?
Bridge-funding, in this context, refers to the temporary transfer of real estate ownership benefits—not title—while a buyer awaits mortgage approval, gathers down payment funds, improves credit, or satisfies lender conditions.
The acquiring party (typically a future homeowner or investor) is assigned a beneficial interest in the trust. If the party intends to occupy the property, a separate lease agreement is executed between the Trustee and that party under direction of the trust. This bifurcation keeps occupancy rights contractually distinct from trust ownership rights, helping avoid regulatory pitfalls.
Ownership Benefits During the Bridge Period
The acquiring party may receive the following benefits under the EHTrust™ and Beneficiary Agreement:
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Right to occupy (via separate lease)
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Quiet enjoyment and control
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Income tax deductions for mortgage interest and property taxes, per IRC §163(h)(4)(D) and Rev. Rul. 92-105
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Potential appreciation and equity offset based on trust terms
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Structured payment responsibilities covering mortgage, taxes, insurance, and maintenance
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Trustee-managed accounting and disbursement services
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Protection from foreclosure risk or equitable claims if the agreement is terminated
These benefits are tied to the Beneficiary Agreement, not to title or a lease-to-own model.
The Process
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Title is deeded into trust.
The original owner vests title in a bonded third-party Trustee. -
Beneficiary interests are assigned.
The acquiring party is granted a beneficial interest and agrees to cover property-related expenses under the Beneficiary Agreement. No deed or mortgage assumption occurs. -
Occupancy (if applicable) is granted via separate lease.
If the Investor Beneficiary intends to reside in the property, a standalone lease is executed under the Trustee’s authority. This maintains legal clarity and separation of rights. -
Exit terms are defined.
The agreement sets a fixed term for the bridge arrangement, after which the occupant must obtain financing, purchase the property, or vacate. The Settlor may optionally extend the arrangement. -
If financing is secured, the property is sold.
Upon loan approval, the property is deeded out of trust to the acquiring party. Any trust-held contingency funds may be applied toward closing. -
If financing is not secured, the trust may terminate.
Failure to perform allows the Trustee to remove the Investor Beneficiary without foreclosure. Because the beneficiary never acquired title, no equity claim is possible.
Legal and Tax Considerations
The IRS recognizes co-beneficiaries in land trusts as “owners” for purposes of mortgage interest and property tax deductions if they bear the burden of payment and risk (IRC §163). This supports the deductibility of those costs during the bridge period.
This model also avoids triggering the due-on-sale clause under federal law (12 U.S.C. §1701j-3) because title is transferred to a trust where the borrower remains a beneficiary and retains control. Courts have upheld this exemption when structured properly.
Title 12 CFR §591.5, while often cited as contradictory, has no binding legal force as it was never enacted into law, per Title 1 of the CFR and affirmed by the Law Revision Counsel of the U.S. House.
Application Example
A buyer with recent credit issues is approved “with conditions,” including waiting six months and showing reserves for a down payment. Rather than lose the property, the seller places it in trust, allowing the buyer to contribute monthly, live in the property, and build a Contingency Fund. These funds may be used later toward closing, documented as an offset in the trust records—not as equity.
The Beneficiary Agreement governs the parties’ contributions, obligations, and default consequences. All rights revert back to the Settlor unless financing is completed on time.
Conclusion
The Equity Holding Transfer™ is a powerful tool for bridge funding without violating federal lending regulations or creating enforceability issues. It offers flexibility to buyers, safety to sellers, and clarity to lenders when executed with proper documentation and separation of rights.
This is not legal advice. Always consult qualified counsel when implementing trust-based real estate transfers.