I am totally stuck. Our customer applied for a new residential mortgage loan to be secured by a 1st on a home he recently built but is not yet living in. He plans to move into the new home on April 1 - at that point it will be his principal dwelling. He needs to close before March 10 to keep his rate.

The new home is free and clear. He paid off the initial construction loan by withdrawing funds from his IRA and cashing in some investments. He will use proceeds from our new loan to pay back his IRA "loan."

I have combed the Reg. Z and the Commentary - I swear this one just doesn't fit anywhere. The lender wants it to be exempt from rescission, but it doesn't smell like a residential mortgage transaction to me, or is it? It will be his principal residence shortly after closing, but it's not a refinance of the initial acquistion or construction money.

If I treat it like a home equity loan is it considered his principal dwelling even though he's not yet living in it? The special rule for a "principal dwelling" (Z Commentary, 226.23 doesn't fit. I am totally stumped on this one! Can anyone help?

This is not a RMT. He owns the home and is taking out his equity in the home to repay his personal accounts.

This is not his current, nor has been his primary residence, therefore I think you can forgo the ROR (however, this does go against my conservtative side ).

Just what I wanted to hear! I am going to recommend rescission - as far as I an tell Reg. Z is silent on this type of scenerio so playing it conservative never hurts. I'll simply tell the lender we are treating this as a home equity loan subject to rescission. Thanks so much for your help!