Equity Line to husband and wife individually. Home is held in a Revocable Living Trust. Our doc prep system says that rescission is not applicable. Our loan reviewers dispute. My thought process is that it's not applicable because the "trust" isn't an individual.

Any help? Thank you.

I agree with you. The Trust is not a "natural person" and the Trust "owns" the property.

For what it's worth, I agree: Not appilcable.

You're entirely correct. We see this all the time in Private Banking. It's sometimes hard to make folks understand the difference between a revocable trust and a person. It's such a close relationship that in many eyes it's just the person. But...the trust is a seperate entity. As long as it owns the home, and the docs reflect the trust as the borrower, you're covered.

I don't agree ... revocable trust with husband and wife as grantors and trustees and beneficiaries is really indistinguishable from the individual and can use their social security number. It is in substance a loan to them for personal, family or household purposes. Some trusts, like a land trust, also get treated that way for RoR purposes. I believe the safe thing is to treat these as rescindable.

Revocable Trusts: do you have the trustees sign a document stating that the trust hasn't been revoked before closing the loan?

Actually, you better have the trustees and/or beneficiaries sign as individuals also. If you make a loan to a revocable trust and it is revoked - you got nothin' baby!!

Thanks - now I'm even more confused . The trust owns the property so no rescission but the trustees and/or beneficiaries should sign all of the loan docs or only the mortgage?

Only the titled owner (trust) would have to sign the mortgage. Only the obligors have to sign the note. As far as a statement regarding whether the trust has been revoked, I would let the title company worry about that. It's up to them to guarantee that you have a proper lien.

But if you want to collect without forclosing on the property if a revokable trust dissolves - from purely a credit standpoint - I wouldn't make a loan solely to a revokable trust (which it doesn't sound like you are).

Here's a tricky one- If the beneficiaries of the living trust have homestead rights, would they have the right to rescind? (Having an ownership interest in the property)

If the loan was made to the trust, it would not be subject to Reg Z, so there would be no rescission available, regardless of ownership rights.

If homestead rights are that they live out their lives there - thats all that is- they do not own the property - the title is not in their names- they don't have the right to rescind.

Why not error on the side of caution and permit rescission? Especially if the individuals are responsible for the Note and they are Grantor/Trustees of their Living Trust. We have been doing this for years and no auditor has ever questioned this procedure.