Right Of Rescission & Living Trusts

Question:

I realize that if title is vested in the name of a living trust, the right of rescission does not apply, but what if we have the borrowers also sign documents individually as well as trustees of the trust. Would the ROR then apply?

Answer:

The right of rescission only applies to the owner of the principal dwelling. The right of rescission doesn't apply to the borrower. Oftentimes, the owner and the borrower are the same, so this distinction is sometimes overlooked.

When determining whether the right or rescission is applicable, look to the owner of the principal dwelling. If the owner is not a natural person, then the right of rescission does not apply. Don't get distracted by the borrower; it's only the owner of the property that matters.

To answer your specific question, if you have two natural persons and a trust as borrowers, but the sole owner of the property is the trust, then the right of rescission would not apply, since the right of rescission only applies to natural persons with an ownership interest in the real property. Change the facts, and you will change the answer. If the trust and the individuals have a joint interest in the real property (the trust is not the sole owner of the property), then the right of rescission may be triggered, since natural persons have an ownership interest in the principal dwelling. See Reg Z 226.23.

Vendor:

Bankers Systems Inc.