Am I correct in understanding that if a primary residence is in title of a Trust, that there is no Right of Recission applicable?

What sort of trust?

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.

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.

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.

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.

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?

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.

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.

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??

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!

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.

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.



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.

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!

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?

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.

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 It sure sounded to me like the revocable trust may have been the only borrower.

That was my thought too...lending soley to a revocable trust.