ALEXANDRIA, Va. (12/13/11)--A federal credit union may invest in a credit union service organization (CUSO) established solely to act as a corporate trustee on deeds of trust for real estate loans made by another CUSO of the credit union. It also is permissible for a CUSO to form a subsidiary to function as the corporate trustee for its own real estate loans.
So said a Nov. 17 legal opinion letter from National Credit Union Administration (NCUA) Associate General Counsel Hattie Ulan to Samuel T. Wyrick, III., general counsel of Wyrick, Robbins, Yates & Ponton, LLP, of Raleigh, N.C.
The NCUA letter notes that deeds of trust are three-party documents, used in some states instead of mortgages, and which pledge real property to secure a loan: Typically, the borrower-trustor conveys legal title to real property to an impartial trustee to hold for the benefit of the lender-beneficiary in order to secure the loan obligation.
Ulan goes on to point out that the NCUA CUSO rule provides illustrations of permissible CUSO activities (12 C.F.R. §712.5) and trust and trust-related services, such as acting as trustee, are allowed.
To read the complete opinion, use the resouce link below.