Right of Recission

Would a loan to refinance a primary residence, where the borrowers and the Deed of Trust are in the name of a trust(John and Jane Doe, Trust) require the right of recession? I looked at Reg. Z but could not find anything pertaining to trust.

You won't find anything specific in Reg Z pertaining to a FAMILY Trust. Reg Z says tht Land Trusts are exempt from Reg Z.

This is a topic of some debate. If the loan is to the trust itself, with no individuals as co-borrowers, some lenders go the conservative route and disclose anyways including the Right of Rescission.

I know that Harland Financial (LaserPro) has taken the interpretation that if the loan is only to the trust, then it is exempt from Reg Z disclosures including ROR. I know of a few law firms that have taken that interpretation as well. In addition, there is either a "secret" letter, or a well known "verbal" interpretation from the Federal Reserve that says a Trust is not subject to Reg Z.

HOWEVER - if you make the loan to the Trust AND the trustees (or trustors), then your loan is subject to Reg Z disclosures and ROR. And here's where it can get tricky. I have heard the Fed has stated that if the loan is to an individual, but the property is owned by the trust, then ROR must be obtained from every BENEFICIARY who lives in the home.

It's a very gray and fuzzy can of worms at the moment. It would be nice if the Reg Z commentary would simply address the situation clearly, once and for all. But no, the proposed commentary is instead going to look at friggin' Overdraft Charges as potential finance charges ripe for disclosure.

Mark my words, if that happens, you will one day see the very sad news story about the widow who was denied the insurance payout because the last premium check bounced when the bank was unable to overdraw the account by $1.

I am now stepping off the soapbox. Thank you...