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#1861473 - 10/15/13 05:22 PM Right of Recission for a Trust
CDS Offline
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Am I correct in understanding that if a primary residence is in title of a Trust, that there is no Right of Recission applicable?

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Lending Compliance
#1861476 - 10/15/13 05:27 PM Re: Right of Recission for a Trust CDS
rlcarey Offline
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What sort of trust?
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#1861500 - 10/15/13 06:04 PM Re: Right of Recission for a Trust CDS
CDS Offline
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It is a Living Trust. Borrower is the trust, wife is the Trustee, living in the home. Husband, also living in the home is not named as a trustee.

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#1861514 - 10/15/13 06:16 PM Re: Right of Recission for a Trust CDS
rlcarey Offline
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Talk to your legal counsel. Courts in some jurisdictions have basically treated such revocable living trusts as really non-existent when it comes to Regulation Z and therefore there is no exemption from Reg Z requirements.
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#1861539 - 10/15/13 06:48 PM Re: Right of Recission for a Trust CDS
Beagles22 Offline
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If your bank doesn't get a legal opinion, better to be safe than sorry and give the right of recission. Randy is right, in our neck of the woods the court says they have this right.
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#1861574 - 10/15/13 07:21 PM Re: Right of Recission for a Trust CDS
CDS Offline
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So if I give the R of R, would only the trustee sign by herself? She and her husband live in the home, but he is not a trustee.

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#1861599 - 10/15/13 07:47 PM Re: Right of Recission for a Trust CDS
rlcarey Offline
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Both, if you are going to do it. It is the primary residence of both individuals.

You really aren't making the loan to a revocable trust are you?
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#1861620 - 10/15/13 08:05 PM Re: Right of Recission for a Trust CDS
CDS Offline
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It doesn't state that this trust is a revocable trust - only that it's a Living Trust. Are all living trusts revocable? If the property is in the name of a trust, we prepare the loan docs in the trust's name.

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#1861624 - 10/15/13 08:22 PM Re: Right of Recission for a Trust CDS
JWills, CRCM Offline
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we recently did a heloc for a customer. The property was in the name of her living trust. The loan docs were all in her name individually with the exception of the mortgage as the property is in the name of trust. Our last compliance review cited us for giving the ROR.
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#1861671 - 10/15/13 09:57 PM Re: Right of Recission for a Trust CDS
rlcarey Offline
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CDS - You haven't seen the trust documents? How do you know the trustee can even pledge the collateral for the stated purpose of the loan?


JWills - Our last compliance review cited us for giving the ROR.

Get new compliance reviewers. It would never be a violation to give a RofR when not needed and if you live in specific jurisdictions, the courts were on your side. What sort of violation did they cite you for and did you get the specific regulatory citation supporting that finding??
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#1861692 - 10/16/13 12:58 PM Re: Right of Recission for a Trust CDS
JWills, CRCM Offline
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ricarey-This was not an exam, just our independent compliance quarterly review. This is the way it was wrote up:

(We selected two open end real estate loans. Where applicable, we reviewed for adherence to Reg B ECOA, Reg Z TIL, Respa.
We noted one instance where rescission was provided when not required-borrower is an individual but property owner is a trust.)

This was just our exit doc, I am waiting on the final report.

You are saying that it would NOT be a violation to give the ROR? If you can point me in the direction where I can find that as proof, I will do battle.

Thanks very much!
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#1861707 - 10/16/13 01:38 PM Re: Right of Recission for a Trust CDS
Kathleen O. Blanchard Offline

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Is that stated as a violation or just a statement of fact, that ROR was provided when not required?
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#1861714 - 10/16/13 02:08 PM Re: Right of Recission for a Trust Kathleen O. Blanchard
JWills, CRCM Offline
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Originally Posted By: Kathleen B
Is that stated as a violation or just a statement of fact, that ROR was provided when not required?


It was noted as a low finding. Generally when we reeive the final report, it will give the area of the Reg.
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#1861741 - 10/16/13 02:37 PM Re: Right of Recission for a Trust CDS
Truffle Royale Offline

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Originally Posted By: CDS
It doesn't state that this trust is a revocable trust - only that it's a Living Trust. Are all living trusts revocable? If the property is in the name of a trust, we prepare the loan docs in the trust's name.


There is no 'all' when it comes to trusts. You either need to read the trust docs inhouse or get a Certificate of Trust that should address FNMA Eligibility Criteria points listed below.

1. The identity of the grantor/trustor/settlor, beneficiary and trustee;
2. The powers of the trustee (e.g., mortgage the subject property);
3. That the subject property is held by the trust;
4. That the trust is revocable;
5. That the trust was created and became effective during the lifetime of the original grantor/trustor/settlor.

Randy, FNMA guidelines do not allow loans to be made to irrevocable trusts.

Quote:
we recently did a heloc for a customer. The property was in the name of her living trust. The loan docs were all in her name individually with the exception of the mortgage as the property is in the name of trust. Our last compliance review cited us for giving the ROR.


Auditors are different from examiners and what you wrote, JWills, sounds like just a notation and probably a caution to be aware for future incidents. It's not a violation to give the RoR even when it's not required. But you could be bound by it if you give it, so make sure you give it properly.

As far as doc prep goes, in light of the fact that trust don't have income so you're qualifying based on the individuals; AND that the trust must be revocable which means the borrowers could take the property out of the trust the day after closing, we prepare all our trust loans in the names of the borrowers as individual AND as trustees of the trust. That way we follow all rules for individuals and our lien stays in first position even if they change the trust.

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#1861763 - 10/16/13 03:03 PM Re: Right of Recission for a Trust CDS
JWills, CRCM Offline
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The Mitten State
Thanks Truffle,I think I am going to approach the method of having the individuals and the trustee info on the loan docs.
Appreciate your assistance!
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#1861805 - 10/16/13 03:29 PM Re: Right of Recission for a Trust CDS
rlcarey Offline
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Randy, FNMA guidelines do not allow loans to be made to irrevocable trusts.

I'm confused. When did FNMA come into this picture and why are you telling me this in the context of this thread?
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#1861906 - 10/16/13 05:14 PM Re: Right of Recission for a Trust rlcarey
Truffle Royale Offline

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Originally Posted By: rlcarey
Both, if you are going to do it. It is the primary residence of both individuals.

You really aren't making the loan to a revocable trust are you?
I was responding to this post where you sounded incredulous that the OP would be lending to a revocable trust.

Most lenders I know use FNMA DU and write to FNMA guidelines. So I wanted to make it clear that I used the FNMA rules to base my reply on.

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#1861920 - 10/16/13 05:30 PM Re: Right of Recission for a Trust CDS
rlcarey Offline
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I was responding to this post where you sounded incredulous that the OP would be lending to a revocable trust.

I would be if it was true smile It sure sounded to me like the revocable trust may have been the only borrower.
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#1861927 - 10/16/13 05:43 PM Re: Right of Recission for a Trust CDS
RR Joker Offline
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That was my thought too...lending soley to a revocable trust.
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