Georgia Attorneys Title Guaranty Fund

Underwriting Bulletin No. 101

October 15, 2004

SUBJECT: Reverse Mortgage (Trust Mortgagor)
First American has been approached by Financial Freedom Senior Funding Corp., who makes Reverse Mortgage loans on property that is held in trust. This lender has expressed concern when they are lending to the surviving spouse who is sole remaining trustee under a family trust. Usually, family trusts are set up to split the trust upon the death of one of the trustees into a survivor’s trust which generally remain revocable, and an irrevocable trust that can be invaded by the survivor when necessary for the survivor’s health or well-being. This is done to minimize the liability for estate taxes.

To properly underwrite these situations, you must obtain and review the trust agreement for authority of the trustee to enter into a transaction like a Reverse Mortgage. This would include checking to make sure that the surviving trustee retains all their powers upon the death of the other trustee, reviewing the trust agreement for barriers to encumbering some or all of the property that has gone to the irrevocable trust, and where necessary getting consents of other parties who may have the right to object.

If these procedures are followed and you are convinced that the surviving trustee has the power to enter into and complete your transaction, you may issue the endorsement attached (see ub101.pdf) to this bulletin. If you have any questions, please feel free to contact the State Underwriting Department at (800) 328-2642 or 404-250-1609.

Printable version: ub101.pdf*

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