Can a Nominee Realty Trust Get a Mortgage or Line of Credit?
Would a bank grant a refinancing or line of credit to the mortgage of a house held in a nominee realty trust? There are two people named on the schedule of beneficiaries.
Possibly. They would just require the individuals listed on the schedule of beneficiaries to sign the mortgage along with the trustees. But they may also require that the property be put in the names of the beneficiaries before granting the loan. Subsequently, they beneficiaries could transfer the property back to the nominee trust. This often happens with properties in revocable trusts.
Nominee realty trusts are hybrid arrangements, halfway between an agency agreement and a trust. For any major activity, such as borrowing on the property in the trust, the trustees may only act as directed by the beneficiaries. This is different from a standard trust, under which the trustees must act in the best interest of the beneficiaries, but do not need the beneficiaries’ approval for the specific actions they take,
Ultimately, the answer will depend on the lending institution. They are likely to require that the property be in the beneficiaries’ names because many mortgages are sold on the secondary market and nominee trusts are rare in states other than Massachusetts. In order to resell the mortgage, it must be in a form that is acceptable nationwide.