How Quontic Bank is leading mortgage lending solutions for trusts

March 1, 2021
by Chris Teague
Sept. 20, 2020
Last updated: November 10, 2022

The information on this page is provided for the benefit of mortgage professionals and not intended for consumers or the general public.

Every week, a borrower or their attorney calls the corporate offices of “that orange bank with the Q,” and asks for the “guys who lends to trusts.” Well, those guys are Michael Bocelli and me, Frank Melia. Our job as Vice Presidents – Lending/Reverse Manager is a truly unique one.

We provide lending solutions to families that have transferred their home into a trust or life estate. We work closely with attorneys, financial advisors, and accountants regarding these lending solutions.

But let’s back up. What are trusts? They fit into three categories: testamentary, revocable (aka a living trust) or irrevocable.

A testamentary trust is one that is formed after someone passes away. We cannot lend to testamentary trusts—no one does, because they are formed after the grantor (or the occupant) has already passed.

A revocable trust is usually referred to as a living trust, and it’s something that most banks
can lend to (It’s considered a Fannie Mae/Freddie Mac loan through their guidelines), but I still get calls every week from people who get turned down because other banks are just not familiar with revocable trusts. Banks just don’t want to think outside the box.

An irrevocable trust is a different type of trust. We haven’t found any banks in the country that will lend to an irrevocable trust. To my knowledge, Quontic is the only one that will review an irrevocable trust, approve the trust, and offer the reverse mortgage program (which is a line of credit) or our Community Development Loan program. That’s why Quontic stands out here.

The truth is, most banks do not want to underwrite trusts in general. It’s out of the norm. The landscape of lending changed significantly with the mortgage crisis in 2008, meaning underwriters are now held to a higher standard. Based on the conversations I’ve had with underwriters throughout my career, I know that the last thing that underwriters want to do is tiptoe around a topic they’re not familiar with. For many of them, that means trusts.

Incredibly, Michael and I stumbled into this market because of our referral sources—referring professional partners, financial advisors, accountants, and elder law attorneys.

About 6 years ago when we officially joined Quontic, we came with that referral-based business. With the foundation of our network, we were able to work with  George Lazaridus, the Chief Lending Officer, and figure out how to lend to irrevocable trusts. Law firms would come to us through our division here in Melville, NY, then I would speak to George. We figured out how to offer trust borrowing options to irrevocable trusts.

Which means we’re in a blue ocean with very little competition. I’m not complaining, but it keeps us busy.

So why would a client need a loan program for trusts? Nine times out of ten, we’re helping families secure the financial resources to keep aging parents in their homes to age safely; and the parents’ home is a great source for this. This issue has taken center stage during the pandemic—nobody wants to send a parent to a care facility right now. They either need help financing 24/7 home health care, or they need to make home improvements for an aging parent—or both. Medicaid or government benefits will pick up some of the expense, but usually, the financial burden is on the adult children, or sometimes even the grandchildren. That’s when we get the phone call.

That’s why I think banks actually should enter this space. More lenders in this space would be better for the consumer. But it’s not easy to get into this space; we built this division up gradually over a 6 year period. Now, we talk to attorneys around the entire country. We offer webinars for attorneys, financial advisors, and CPA’s. I hope banks will enter the space, but I just haven’t seen any that will approve trust lending.

If you do need help in this process, please reach out. Give us a call with this toll-free number (888-954-7463), or email me at [email protected].

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