Inter Vivos Revocable Trust

Overview

PennyMac will purchase loans where the property is held in a revocable trust provided the trust meets investor and PennyMac guidelines.

Acceptable Forms of Revocable Trusts

  • Inter Vivos Revocable Trust
  • Family Trust
  • Living Trust
  • Revocable Living Trust


Unacceptable Forms of Trusts

  • Irrevocable Trust
  • Qualified Personal Residential Trust
  • Institutional Trust
  • Corporate Trust
  • Trust established under the laws of any entity other then one of our 50 states (or D.C.)
  • Survivor Trust where the Trust is no longer Revocable
  • Testamentary Trust
  • Blind Trust
  • Land Trust (including IL)


Eligible Property and Occupancy Types

All property and occupancy types purchasable by PennyMac are eligible. For properties that are the borrower's principal residence, at least one trustor/settlor (individual who established the trust) must occupy the security property and sign the loan documents.

Underwriting Considerations

The mortgage must be underwritten as if the individual establishing the trust (or at least one of the individuals, if there are two or more) were the borrower (or a co-borrower, if there are additional individuals whose income or assets will be used to qualify for the mortgage).

Title Requirements

Prior to delivery to PennyMac the lender must ensure the title company has reviewed and approved the Trust Agreement or Trust Certification. Upon delivery to PennyMac title must not contain any title exceptions and offer full title protection without exception to the trust.

Acceptable Title Vesting

The property must be vested in the trusts name or in the trustee’s names on behalf of the trust.

PennyMac accepts loans closed in:

  • One trust
  • One trust and an individual(s)
  • Multiple trusts
  • Multiple trusts and an individual(s)


Documentation Requirements

The following documentation must be provided in the closed loan file delivered to PennyMac.

Trust Agreement

The loan must include a complete copy of the trust agreement or Trust Certification as outlined below. In the case where amendments have been made to the trust that designate new parties or other changes those must be documented and copies must be provided in the loan file.

Note: If the trust includes significantly more assets than the subject property some borrowers may be hesitant to provide a full copy of a trust. In these cases, the borrower must supply all portions of the trust, as required by the title company, that clearly identify:

  • The identities of the grantor/trustor/settlor, beneficiaries (if there is a beneficiary, or if applicable state law requires a beneficiary), and trustee
  • The powers of the trustee (sell, convey, exchange, borrow, encumber)
  • The property is held as part of the trust
  • Revocability of the trust
  • The trust was created and became effective during the lifetime of the original grantor/trustor/settlor
  • The primary beneficiary of the trust is the settlor (if there is a beneficiary, or if applicable state law requires a beneficiary). Multiple primary beneficiaries are permitted if the settlor’s income and assets are being used to qualify for the loan.
  • The trust document names one or more trustees to hold legal title to and manage the property.


Trust Certification

Trust Certifications are acceptable provided it contains sufficient information to determine the trust meets all PennyMac requirements. A Trust Certification can be used in lieu of the complete Trust Agreement in the following states:

Arizona California Delaware District of Columbia
Idaho Illinois Iowa Kansas
Maine Mississippi Minnesota New Hampshire
New Mexico Nevada Oregon South Carolina
South Dakota Tennessee Utah  Wyoming


Trust Rider to Security Instrument

The Security Instrument may include an Inter Vivos Revocable Trust Rider. If provided, it must be completed in its entirety.

Clients are not required to execute an Inter Vivos Revocable Trust Rider. However, by not providing an executed rider the lender agrees to hold PennyMac harmless in the event we suffer a loss due to the lack of amendment of other ambiguity. Should foreclosure proceedings later have to be initiated to acquire the property and PennyMac suffers a loss that relates either to the lender’s amendment or to any ambiguity in the application of the covenants in the security instrument the lender must either repurchase the mortgage or the acquired property or make PennyMac whole.

Borrowers Acknowledgement

The loan file must include a Borrowers Acknowledgement. This can be provided on a standalone document or incorporated into the Security Instrument or in any Security Instrument Rider.

Trust Addendum to Note

The Note may include a Trust Addendum. If provided, it must be completed in its entirety.  

Execution Requirements

Use the execution chart to determine if the loan documentation has been executed correctly.

At least one borrower on the loan must be all of the following:

  • Credit Qualifying Borrower
  • Trustee
  • Settlor/Grantor/Trustor
  • Beneficiary (if there is a beneficiary, or where applicable state law requires a trust to have a beneficiary).

 

Document

Document Execution Requirement

Note

  • All borrowers as individuals

  • All Trustees of the Trust

Note Addendum

  • All borrowers as individuals

  • All trustees of the Trust

Security Instrument

  • All trustees of the Trust

  • All vested individuals

Security Instrument Inter Vivos Revocable Trust Rider

  • All trustees of the Trust

  • All vested individuals

Security Instrument Riders (all others)

  • All trustees of the Trust

  • All vested individuals

Borrowers Acknowledgement

  • All grantor(s)/trustor(s)/settlor(s)

Truth in Lending Disclosure

  • All borrowers as individuals

  • All Trustees of the Trust

Notice of Right to Cancel

  • All borrowers as individuals

  • All Trustees of the Trust

Signature Block Examples

Use the acceptable signature format examples below to determine if the loan documentation has been executed correctly.

Acceptable Signature Format for Individual and Trustee Executions

Jane Mac

Jane Mac, Individually and as Trustee of the __[Complete Legal Name of Trust]__ Trust under trust instrument dated_____,_____.

 

Acceptable Signature Format for Trustee Executions

Jane Mac

Jane Mac as Trustee of the __[Complete Legal Name of Trust]__ Trust under trust instrument dated_____,_____.

 

Acceptable Signature Format for Borrower's Acknowledgement

BY SIGNING BELOW, the undersigned, Settlor(s) of the__ [Complete Legal Name of Trust]____ Trust under trust instrument dated _________, ______________, acknowledges all of the terms and covenants contained in this Security Instrument and any rider(s) thereto and agrees to be bound thereby. _____ Jane Mac___(Seal) Trust Settlor.

Power of Attorney Executions

Power of Attorney powers cannot be utilized in connection with trust executions.