Living Trust - Applicability of TILA

I found previous threads where the consensus answer was that TILA does not apply to loans secured real estate held by a living trust, even if it is the primary residence of the grantor.

I'm curious - how do those of you who advocate that TILA does not apply to living trusts reconcile your position with the decision in Amonette v Indymac Bank (515 F.Supp.2d 1176)from September 2007?

In this case, the trustee (who was also previous owner of the real estate and settlor, and the property in question was her primary residence)of a revocable living trust sued a bank and its alleged agent, claiming violations of the TILA. The bank moved to dismiss. The U.S. District Court, Samuel P. King, Senior District Judge, resolving an issue of apparent first impression, held that the trustee had standing to sue for TILA violations. The judge reached this conclusion based upon statutory construction, the obvious intent of Congress and deference to FRB guidance and definitions.

In performing a Google search of Revocable Trust TILA, there were also several legal newsletters from various firms citing the case and recommending that TIL disclosures and Rights of Recission be given to all loans secured by living trusts.

Are people ignoring this case? I can find no evidence that it has been overturned, am I correct? I previously tried to resurrect an old post - but no one answered.

We have always had loans to revocable trusts signed by both the trustees and the individuals to protect our lien position if the property were taken out of the trust. Therefore, we give all the disclosures, ROR, etc. Cases like the one you cited serve to prove our attorney was right in recommending this course of action several years ago.

I always recommend to my clients to be safe and disclose in these situations because the trust can be revoked. At a minimum, I tell them to discuss with legal counsel if they want to NOT disclose.

It is such a borderline situation it is not worth taking the risk, especially when the solution is simple.

Thanks for your supporting comments. It has been our long-time practice also; however, I was recently challenged by someone citing comments/threads seen here.

Counsel quashed the internal challenge with this case, but as a long-time lurker, I thought I should let people know about this decision. I remember one of the threads in question indicated they had never seen a court case about this topic.

During a recent review of HELCs, I came across one made to a living trust in which no ROR was given. Based on your comments and cited legal case, I wonder how many banks do provide a ROR when a trust is the borrower.

In our case, the initial application was from the individual beneficiary of the trust, who also happens to be an elderly woman. The dwelling taken for security is her primary residence. I'm not sure why the loan was made to the Trust and not her, but I would feel more comfortable if we had given a ROR.

Any other thoughts on this.

Thanks.

bb

Are you applying HPML & escrow rules to a trust as well?

No we don't escrow and our product is not a HPML.

I did find another similar HELC where we had a consumer application, but loaned to the trust. Again, we did not do the ROR, but we did do all the other consumer disclosures, including the credit score disclosure.

The lack of consistency makes me very nervous. In addition, the trust applicable to the elderly lady appears to have no income and no assets other than her dwelling.

bb