Nominal sales of Cambridge condos jumped to 34 percent of all condo sales in the city so far this year, and mortgage lenders want to know about it.

Twenty-four percent of the 880 condominiums sold in Cambridge in 2012 (or 211 condos) were nominal sales, according to data from The Warren Group, publisher of Banker & Tradesman. As of the end of August 2017, the percentage of nominal sales was up to 34 percent, or 257 properties. The Warren Group defines nominal sales as those with a sale price of $1,000 or less.

Protecting the family home is an important component of estate planning. In the event the owners enter a skilled nursing facility (nursing home) and run out of money, the home they own can be an asset to utilize for continued care. One way to avoid having to sell the home is to put it in a trust at least five years before the owner enters into skilled nursing. Since no one can predict the day they need to go, elder law attorneys routinely recommend this be done as soon as possible. Several local elder law attorneys attributed the increases in nominal sales to an aging population’s estate planning needs.

Once the deed is done, homeowners who put their homes in a trust and have an outstanding mortgage are required to inform their lender about the change in ownership – but how many actually do is difficult to pin down.

“There are no mortgage police,” said Stephen Spano, an elder law attorney with Spano & Dawicki in Saugus. “But there’s a clause in every mortgage that says if you transfer ownership of the property, this mortgage is due and payable.”

Spano doesn’t just advise his clients to inform their lender about the change; he informs the lender for them to ensure it gets done. The Garn-St. Germain Act of 1982 says the lender can’t refuse reasonable changes and it’s typically not an issue.

Elder law attorney Sasha Golden of Golden Law Center in Needham also said the majority of clients who come to her for estate planning have already paid their mortgages off, but for those who haven’t, she advises them to notify their lender if they elect to put their home in a trust. Often she notifies the lender for them.

Golden and Spano both said that there are many attorneys who do estate planning for their clients who are not elder law specialists, and who are often less diligent about lender notification. Spano specifically said notifying the lender of the change should not be left up to the client.

“Before we put a house into a trust, we do a title search, and we reach out to the lender,” he said. “Many of my clients are older and also very busy. They don’t necessarily understand the significance of telling the lender. I see myself as a trusted advisor and a scrivener, not just a scrivener, so I do it for them.”

In reviewing the title, Spano is able to identify and correct problems for roughly half the clients who put their homes in a trust, clearing the way for  the ultimate sale of the property. About half of the title flaws he finds are relatively minor, but the rest are fairly serious.

Forced Refi

Statewide, about 14 percent of all residential sales are nominals. The figures vary widely by town and by property type, but a review of sales data from The Warren Group shows that generally speaking, nominal sales are more common in more affluent communities. Cambridge and Nantucket are both well above the state average at 34 percent and 32 percent, respectively.

Changing ownership of a property can cause other problems, even if the lender doesn’t call the mortgage due, said attorney John Gosselin of Gosselin & Kyriakidis.

“Technical title defaults generally are uncommon but they can foul up servicers because insurance certificates are often wrong (wrong insured), divorce can change the credit profile for the lender without notice and foreclosure can be delayed,” Gosselin wrote in an email.

As long as the mortgage payments are being made on time, the lender may never find out and may have little interest in these changes in ownership, especially in a declining interest rate environment like the last few years. When rates increase, as they are expected to do, lenders should take more of an interest.

“As interest rates go up, lenders are going to become more interested in policing this,” Spano said. “Imagine if someone was sitting on a 3.5 percent mortgage and they violate the terms of the mortgage by putting the home in a trust. Then rates jump to 6.5 percent. It’s then very much in a lender’s best interests to force the borrower to refinance.”

Mortgage lenders at Eastern Bank and Citizens Bank did not respond to requests for comment.