Hello. For years I have had compliance concerns regarding loans involving Trusts in the Secondary Market arena. I am unsure if others face this and if they have any similar concerns or solid guidance.
Jane Doe (individual/natural person) applies for a loan in her name. It only shows her on the 1003 (except that the title of the home will be in the trust), the Demographic Info is collected on her, the loan is underwritten based on her personal income, the TRID docs (LEs and CloDs) are issued to her (individually) as the borrower.
HOWEVER, the Note and Mortgage are prepared showing the borrower is the DOE TRUST (simply because the trust owns the home).
This makes no sense to me, yet over the years, and at various FIs, I am told by the Secondary Market that "this is how the investors require it". (I am still in the court that: investors don't trump federal regulations...).
In my opinion, the individual/natural person JANE DOE applied for the loan and the only borrower is JANE DOE.
The GRANTOR of the collateral is the DOE TRUST, signed by its Trustee(s) (likely Jane Doe).
Therefore, all docs including the NOTE should be signed individually by natural person JANE DOE.
Only the Mortgage (and any other security docs) would be signed by the DOE TRUST and would be signed in the capacity of GRANTOR of the collateral to our borrower JANE DOE.
I'm thinking either: (1) the Note/Mortgage are in legal trouble; or (2) the 1003/ECOA, DI/HMDA, and LEs and CloDs/TRID all contain violations for disclosing and reporting the wrong borrower.
Compliance - A Painful Addiction
All comments are mine & should not be taken as legal advice.