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#1770478 - 12/26/12 08:48 PM Closed end line of credit and ROR
joeball Offline
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joeball
Joined: May 2004
Posts: 170
Bluegrass State
I did a search and found a lot of posts regarding HELOC's and purchase money but this is a little different.

We have a customer who is requesting a closed end line to purchase a home which needs some work. The line will be secured by the new home and their current home (until it sells).

Will the initial draw for the purchase be rescindable? I know the subsequent draws for the improvements would be since it is secured by their current home.

They are purchasing the home from Freddie and they stated that a rescission period was unacceptable because they needed the money within 24 hrs.

We need the extra collateral because of LTV issues.

Thanks
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Lending Compliance
#1770552 - 12/27/12 01:31 PM Re: Closed end line of credit and ROR joeball
RR Joker Offline
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RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
You will have ROR on this one because of the current PR being taken as collateral. Think of a bridge loan, you still have ROR if you take the current home.
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#1770809 - 12/27/12 07:13 PM Re: Closed end line of credit and ROR joeball
Jerod Moyer Offline
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Jerod Moyer
Joined: Oct 2005
Posts: 667
Sioux Falls, SD
Here's the chapter and verse:

Notwithstanding the general rule that consumers may have only one principal dwelling, when the consumer is acquiring or constructing a new principal dwelling, any loan subject to Regulation Z and secured by the equity in the consumer’s current principal dwelling (for example, a bridge loan) is subject to the right of rescission regardless of the purpose of that loan. For example, if a consumer whose principal dwelling is currently A builds B and secured by A is subject to the right or rescission. A loan secured by both A and B is, likewise, rescindable [Commentary to §1026.23(a)(1) #4].
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Jerod Moyer
www.bankerscompliance.com

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