Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

April 23, 2013
Do I have to provide a copy of my entire trust when applying for refinancing?

I have a friend trying to refinance her home under the HARP program and her home, her only asset, is in a trust. She has been told by USAA and another lender that she would have to submit her entire trust to them for evaluation before she can refinance. More recently she was told that lenders cannot refinance a property held in a trust and that it is against the law for the lender to refinance without a full copy of the trust. She is not willing to give that information to a group of strangers. Are there new federal laws that are going to make having a revocable trust obsolete?


What is very common is that lenders will either (1) require a copy of the trust; or (2) refuse to lend to a "trustee." In the first circumstance, that really is not an unreasonable request because the lender has to verify that the trustee has the authority under the terms of the trust to borrow funds against trust property and to be sure that there is nothing in the trust which would have the potential of impairing the security interest. In the second instance, what happens is that the trustee will transfer the property out of the trust into his or her name as an individual, the lender then makes the loan to the individual owner - and not in his or her capacity as trustee - and then the individual owner will transfer the real property back into his or her name as trustee of the trust.

The Selling Guide of the Federal National Mortgage Association (Fannie Mae) provides that a lender can make a loan to a revocable trust, so long as the trust meets Fannie Mae's revocability and other eligibility requirements at the time the loan is delivered. The Selling Guide states that, where the borrower is the trustee of a revocable trust, the lender is responsible for "determining that both the trust and the mortgage satisfy Fannie Mae eligibility criteria and documentation requirements." Further, the lender is responsible for "completing a review of the mortgage documentation, applicable state law, and the trust documents to ensure that title insurers provide full title insurance coverage without exceptions for the trust or the trustees for inter vivos revocable trusts in that state. The Trust Requirements provision states that, "The inter vivos revocable trust must be established by one or more natural persons, solely or jointly. The primary beneficiary of the trust must be the individual(s) establishing the trust. If the trust is established jointly, there may be more than one primary beneficiary as long as the income or assets of at least one of the individuals establishing the trust will be used to qualify for the mortgage. The trustee(s) must include either 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. The trustee(s) must have the power to mortgage the security property for the purpose of securing a loan to the party (or parties) who are the borrower(s) under the mortgage or deed of trust note."

The Selling Guide is available online at and has a current date of January 17, 2013. The section applicable to loans made to revocable trusts is B2-2-05.

If the lender requires a full copy of the trust, and the borrower prefers to maintain the confidentiality of the document, then your friend might consider taking title out of the trust, borrowing as an individual, and then transferring title back to the trust.

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Meet Our Financial Experts

Claudia Buck

Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

Carlena Tapella

Carlena Tapella is a partner in the law firm of Webb & Tapella Law Corp. in Sacramento. The firm specializes in estate planning and probate, such as estates, trusts, conservatorships and litigation. She is a past president of the Sacramento County Bar Association's Estate Planning & Probate Section. Ask her a question.

Kimberly Foss

Kimberly Foss, certified financial planner, is the founder of Empyrion Wealth Management in Roseville. With nearly 30 years in the financial industry, her clients include women in transition, small business owners, retirees and "pre-retirees." Ask her a question.

Jesse Weller

Gregory Burke, a CPA and tax expert with John Waddell & Co. in Sacramento since 1984, worked as an IRS tax auditor for six years. He’s a past chairman of the California Society of CPAs. Ask him a question.

Daniel Tahara

Daniel Tahara takes your questions about California taxes. Tahara, a spokesman for the state Franchise Tax Board, has 10 years of experience as a tax auditor. Ask him a question.

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