Trusts

Inter Vivos Revocable Trust (“Living Trust”) only; no other type of trust is eligible.

An Inter Vivos Revocable Trust is a trust that:

• Is created by one or more Settlors during his/her/their lifetime;
• Becomes effective during the lifetime of the Settlor(s); and
• Can be changed, canceled or revoked by the Settlor(s) at any time, for any reason, during his/her/their lifetime.

The Inter Vivos Revocable Trust must satisfy all of the following requirements in order to be an eligible borrower:

• The trust must have been validly created and duly exists under applicable state law;
• The trust must be established by one or more natural persons, solely or jointly and take effect during his/her lifetime;
• The individual(s) establishing the trust must reserve the right to revoke the trust during his/her lifetime;
• The primary beneficiary must be the individual(s) establishing the trust;
• The trustee(s) is the individual establishing the trust (or at least one of the individuals, if there are two or more) or an institutional trustee that customarily performs trust functions in and is authorized to act as trustee under the laws of the applicable state; and
• The trustee(s) must have the power to borrow money for the benefit of the settlor and mortgage/encumber the security property for the purpose of securing the loan.

• The trust must provide reasonable means to assure the lender that it will be notified of any subsequent change of occupancy or transfer of beneficial interest.

• No provision in the trust agreement can require the Veteran/Servicemember to relinquish possession of the residence.

All Financing Types:

• The entire trust agreement along with all amendments to the trust must be submitted for review.

Note:

• In jurisdictions where statutorily permitted, a Certification of Trust may be submitted in lieu of the entire trust agreement. A copy of the statute or statutory citation must be provided with the Certification of Trust. Excerpts from the trust agreement may be requested if the Certification of Trust does not provide the required information.
• The borrower certification that the documents provided are true and accurate.
• An Attorney Opinion Letter from the borrower’s attorney verifying/answering all of the following:
  • The trust was validly created and duly exists under applicable state law;
  • The trust is revocable;
  • The borrower is the settlor of the trust and the primary beneficiary of the trust;
  • The trust assets may be mortgaged/encumbered as collateral for the loan;
  • The trustee is:
    • duly qualified under applicable state law;
    • the borrower;
    • the settlor (or institutional trustee);
    • fully authorized under the trust documents and applicable law to pledge or otherwise encumber the trust assets;
  • The trust does not contain any terms or provisions creating an unusual risk or impairment of lenders’ rights;
    For FHA Loans, an additional issue to be addressed in the Attorney Opinion Letter:
    • How the trust provides reasonable means to assure the lender that it will be notified of any subsequent change of occupancy or transfer of beneficial interest;

    For VA Loans, an additional issue to be addressed in the Attorney Opinion Letter:

    • That no provision in the trust agreement would require the Veteran/Servicemember to relinquish possession of the residence.
• If there is more than one (1) trustee, the number of trustee signatures are required to exercise powers under the trust.

Eligible Borrowers

• All borrowers and occupancy types are eligible.

Eligible Occupancy Types

• For principal residences, at least one individual establishing the trust (underwritten Settlor) must occupy the property to be mortgaged.
• Note: Freddie Mac does not currently permit financing for investment properties held by inter vivos revocable trusts.

Eligible Borrowers

• Full title must be vested in the one (1) trust. There can be no other owners.

Eligible Occupancy Types

• The Borrower must occupy the property as his/her principal residence.

Trusts are not permitted.

• American Financial Resources does not permit deed transfers into or out of any type of trust once the loan application has been taken. The owner of record on the date of the application must remain the titled owner throughout the entire loan process, including closing.
• Title vesting must exactly match the name of the trust and the trustee(s) identified within the trust documents.
• Title to the subject property must be vested in the trustee(s) of the trust and list the date upon which the trust was established and not just in the Trust itself.