In a personal trust, any equity or “cash-out” refi taken out would be legally classified as “recourse” paper, the same as for an individual or joint tenancy. The trustees are free at any time to use one trustee’s individual income to qualify for a loan, or their collective incomes. However, it would take ALL the trustees’ signatures on the trust deed and note to apply for a loan against the property, regardless of whose income/assets are used to qualify.[/quote]
Not sure what a “personal trust” is, though technically, yeah, that’s probably all accurate. But as a practical matter, lenders don’t lend to trusts, except in very rare situations. Almost invariably, (even moreso with run-of-the-mill living trusts) the lender will insist title is held by individuals, not trusts, and the borrower are individuals, not trusts. So title is transferred out of a trust, into the name of the grantor, the loan is recorded, and then the property is transferred back into the trust.
Something to do with the near impossibility of successfully bringing collection actions against trusts. I only mention it here because these particular borrowers could be the exception. You gotta know someone or have some special influence for lenders to allow it. (I’m pretty sure that it’s not allowed for conforming loans.)
