I have a customer who owns a rental property free and clear. He and his wife are in title. At closing they are deeding the property from he and his wife to he, his wife, and his son. The son currently lives in the property. The loan we are doing is an open ended HELOC. Does the son get a rescission since this property is his primary residence and he will be in title to the property?

Thanks!

No - it would be a purchase for the son.

I am going to respectfully disagree with, or rather expand upon, Randy's answer. Because this is a HELOC and it's also unknown as to whether or not any money is actually being advanced for "purchase" purposes, any future advances, other than original purchase, is rescindable..therefore, to protect yourself and prevent needing RofR for every future advance, I would give RofR at closing. Any funds not attributed to purchase would need to wait 3 days.

The son does not currently own the property and it is not the primary residence of the current owners (father and mother). Where is the trigger for the right of rescission? THe loan being a HELOC really has nothing to do with the transaction as the property transfer is taking place at the time of the loan. The son is gaining a 1/3 interest in the property at the time of the trnasaction, unless I am misunderstanding the scenerio.

As you said earlier Randy this would be a "RMT HELOC" for the son, therefore the initial advance would not be subject to ROR by the son, however subsequent advances would be since it is his primary residence and he now has ownership in it.

As discussed in many previous threads the ROR should be given on RMT HELOCs to keep from needing to provide it for each subsequent advance.

Used to, you never saw HELOC's used for purchase-type transactions....these days you see them more often. It all has to do with those good ole future advances not related to the purchase transaction portion.

Well dah... Thanks Dan for lifting the fog.

I'd like to re-open this topic up with a similar scenario.

Mom, dad, and son are all on deed to home. Son lives in home. Dad wants to obtain a HELOC for debt consolidation purposes.

Who gets ROR?

Is a HELOC appropriate credit facility since this is not dad's primary residence? Does it matter?

Son gets the ROR.

That depends on your lending policy. Due to the regulatory restrictions placed on HELOCs for limiting advances, discontinuing credit, etc. we would not allow this unless the son also was going to sign the HELOC agreement. We would do a closed end equity loan but not an open-end one.

FWIW, I agree.

Thank you.