We have a home loan application in process and found out the collateral is in an irrevocable trust. We cannot make a loan due to this reason. Any ideas for a denial reason?

Why can you not make such a loan? People make them all the time. Does the trust not allow it?

FNMA won't take IRREVOCABLE trusts, Randy. While FNMA doesn't address why specifically, I think it's because the property can't be taken out of the trust so how would you foreclose on it.

Denial code: other - irrevocable trust.

TR - Well, the OP said " We cannot make a loan due to this reason". There was no mention of secondary market considerations. I am well aware of those limitations. I was trying to figure out the real reason.

Guess that never occurred to me because I've never worked anywhere that did loans to irrevocable trusts.

Technically, my home is owned by my trust. When I last refinanced it, we took the home out of the trust, refinanced the loan and then put it back in the trust. Isn't that an option?

Sort of defeats the purpose of establishing a trust.

Yes it does and it's a pain to pull the house in and out of the trust, but my institution couldn't/wouldn't refinance the loan with it being owned by the trust either.

Thank you for your responses! They are all good points for consideration. The grantor is deceased so no changes can be made to the trust.