I searched this topic but the responses were so varied and some were from really long ago so I was hoping to get some guidance.

Who gets ROR when a Trust is involved?

Scenario 1 - Loan to Jane Doe. Home is owned by Jane Doe Revocable Living Trust. Jane Doe is the Trustee and the Settlor. The home is Jane Doe's primary residence.
> Jane Doe gets ROR - Yes or No?
> Jane Doe, Trustee for Jane Doe Revocable Living Trust gets ROR - Yes or No?
(Technically Jane Doe is getting all the loan documents, but we obtain an acknowledgment signature for the ROR that they were given 2 copies, hence the questions above)

Scenario 2 - Same as above but the Loan is to Jane Doe Revocable Living Trust instead?
> Jane Doe gets ROR - Yes or No?
> Jane Doe, Trustee for Jane Doe Revocable Living Trust gets ROR - Yes or No?

Scenario 3 - Loan to Jane Doe. Home is owned by Jane Doe Revocable Living Trust. Jane Doe is the Settlor. John Doe is the Trustee. The home is Jane Doe's primary residence.
> Jane Doe gets ROR - Yes or No?
> John Doe, Trustee for Jane Doe Revocable Living Trust gets ROR - Yes or No?

Scenario 2 - Same as above but the Loan is to Jane Doe Revocable Living Trust instead?
> Jane Doe gets ROR - Yes or No?
> John Doe, Trustee for Jane Doe Revocable Living Trust gets ROR - Yes or No?


Also, since the Trust is revocable, should Jane Doe individually be on our Deed of Trust in case she revokes the Trust, or is putting only the Trust ok?

Thanks in advance.

The only one that can answer this series of questions with any certainty is the CFPB. They really botched that addition to the commentary and gave absolutely no clear guidance.

As far as who signs the DOT, that would depend on who the vested owner might be and if the trust, whether the trust allows the trustees to pledge the property.

As far as the trust being revoked, it would not be the security interest you would have to worry about, it would be the note if you are only lending to a trust that no longer exists.

You might want to refer to the signing requirements for an inter-vivos trust in the FNMA selling guide, as what is good for the secondary market is probably good for any portfolio loan, unless your title company is requiring something different.

Thanks for the response. I'll send my question to the CFPB but I have never found them to be helpful. They just quote me the regulation that I already researched and am still not clear as to the interpretation.

Well, the commentary itself does not really address the "who" part, just whether a loan to such a trust is covered.

Then, in the commentary they say: A number of industry trade association commenters noted that proposed comment 3(a)- 10 was ambiguous in its application to trusts with multiple beneficiaries. Specifically, the commenters asked for clarification with respect to which beneficiary should receive the disclosures required by proposed § 1026.19(e), (f), and (g), and which beneficiary has the right to rescind the transaction under the conditions described in § 1026.23.

The CFPB responded: The proposed comments are intended to clarify that the benefits of the disclosures required by § 1026.19(e), (f), and (g) extend to any consumer involved in a transaction that in substance extends consumer credit, regardless of whether that consumer is the direct mortgage obligor or a beneficiary of a trust to which such credit has been extended. With that rationale in mind, the Bureau believes that the intent of the comment is to clarify that those provisions of Regulation Z that apply to consumers will also apply to trust beneficiaries who are in essence acting as consumers.

So, since they have no idea how things work in the real world and they throw around "beneficiary" like it is always a sure thing - who knows what they mean until this is challenged in court. Does that extend to all current beneficiaries since they have a interest in the trust assets? Would that include children that live in the primary dwelling?

I understand the premise, their execution was terrible.

I think it's pretty settled law that any named beneficiaries of a revocable trust (the type typically associated with estate planning and tax strategy) other than the grantor(s) during their lifetimes have no legal claim to the trust and could not be "consumers" under the CFPB's tortured explanation. Perhaps with its hands in the Fed's deep budget pockets, the Bureau could have engaged some attorneys that understand such trusts when they deigned to mess around in unknown territory.

Yes - that is probably true John - I did take that a little to the extreme, but it still does not specifically answer who the RofR is delivered too. Is it delivered to the individual(s) as trustee(s) or the them as individual(s) or both. That becomes even more dicey when you require signatures. In what capacity do they sign for acceptance. I think they would just receive the RofR as individuals and you would treat the trust like a disregarded entity, but then if the trust is the borrower, that is probably not how the LE/CD is sent up for acknowledgement. I can tell you that some of the investors are all over the board on this issue and a lot of LOS doc prep systems are not set up to handle all the various scenarios of borrowers/settlors..

I ended up contacting our Relationship Manager at Fed about the above scenarios #1 and #3 only (because I later saw we have a prohibition in loan policy that we never accept a revocable trust as the borrower).

Their guidance was:

For scenario #1, you can’t to wrong by issuing an ROR to Jane Doe and Jane Doe, Trustee for Jane Doe Revocable Living Trust gets ROR (as she is the Trustee of the Trust).

For scenario #3, once again based on the info you provided, we believe an ROR should perhaps be issued to Jane Doe (given that the loan is to Jane Doe) and also to John Doe given the fact that he is Trustee of the Trust.

I also sent this question to a third party we retain for compliance advisory services. Their guidance was similar -

There is a difference in how the Truth in Lending Act and the regulation define who is entitled to the right to rescind, so we recommend that you provide the right of rescission to any obligor and any person who has an ownership interest in the property have the right to rescind. When a trust is involved, obviously a trust cannot have a principal dwelling but Comment 2(a)(22)-3 states:
3. Trusts. A trust and its trustee are considered to be the same person for purposes of this part.

So where a trustee resides in the property as their principal dwelling and the trust owns the property, the transaction will be rescindable (unless an exception applies). Whether the trust and/or the settlor has an ownership interest the property in a revocable trust depends on state law so I cannot really answer each specific scenario.

#1 - Because the loan is secured by the principal dwelling of the trustee it is rescindable. Because the trustee has an ownership interest in the property, the trustee gets the right to rescind. Because Jane Doe (individual) is the obligor and she lives in the dwelling, she get the right to rescind. I would provide two separate RoRs to her, one as trustee and one as the individual.

#3 - Because Jane Doe is the obligor and lives in the home as her principal dwelling, she has the right to rescind. Because John Doe has an ownership interest, he has a right to rescind. I would provide the RoR to both.