Legal Question in Real Estate Law in Massachusetts

No that is not true. Many Banks will not loan to Nominee Trusts, but there is no law that prohibits a bank from making a loan to a Revocable Trust which is normally used in estate planning. I know of no law prohibiting a bank make a loan against property held by a trustee.

What your bank told you is not true. Many banks prefer not to lend on a property held in trust. Some banks will require that the property be taken out of the name of the trust before granting a loan. This is quite common. Still other banks will permit a loan to be granted on a property owned in trust. Get a second opinion or - better yet - get in touch with an experienced real estate attorney.