Secured Real Estate Loan to Estate

Answered by:

Question:

We are making a secured real estate loan to an estate to pay property taxes. The trust owns the property that will secure the loan and the son of the deceased lives in the property and pays rent albeit below market. The house is for sale and the proceeds will pay the note off. There is plenty of equity. The term is for one year and they would like to have the interest and principal due upon sale or 12 months. Is this covered by compliance regulations? Would you disclose?

Answer:

Unless defined as such under state law a trust would not be a natural person under Reg Z therefore Reg Z would not apply. Neither would RESPA since the purpose is to pay taxes owed by the trust. It would not be a consumer purpose loan.

First published on BankersOnline.com 2/21/11