Skip to content
GeoDataVision
Thread Options
#1843724 - 08/19/13 07:27 PM Right of Rescission on Primary Residenc
Combustible Offline
Diamond Poster
Joined: Dec 2008
Posts: 1,268
A bank has a loan that was identified on the application as a construction loan. Turns out the property was picked up and moved to a different location, and the first lien was paid off with the "construction loan". Do you think in a case like this a right of rescission should have been provided since it was essentially a refinance of a first lien on their primary residence? To add to the confusion, the loan doubled in size and is set for a 12 month maturity

Return to Top
Lending Compliance
#1843732 - 08/19/13 07:34 PM Re: Right of Rescission on Primary Residenc Combustible
MyScamper Offline
Gold Star
Joined: May 2006
Posts: 452
Between here and there
They own the property (house)before it was moved? What was the additional $$ used for? My guess would be they needed it to prepare the site the house was moved to (foundation, utilities, etc.)Was this their primary residence before the house was moved? Did you have that loan? Did they already own the land it was moved to?

Return to Top
#1843964 - 08/20/13 01:58 PM Re: Right of Rescission on Primary Residenc Combustible
Combustible Offline
Diamond Poster
Joined: Dec 2008
Posts: 1,268
1. Yes
2. Prepare the site and build a safe room
3. Yes, it was their primary residence; they built it and then decided they wanted to move it closer to their parents home
4. We did not make the first loan
5. Yes
The interesting thing is, they coded this loan as a construction loan, so there is no GFE, but there is a settlement statement. I believe the first loan, the one we refinanced was a construction loan, and they doubled the loan amount when we refinanced--set it up as an interest only construction loan,and have the proceeds set up as draws. This is a complicated one, and I don't want to write it up if it's not considered a refinance~thanks for your interest

Return to Top
#1844104 - 08/20/13 04:34 PM Re: Right of Rescission on Primary Residenc Combustible
Truffle Royale Offline

10K Club
Joined: Jul 2003
Posts: 17,347
It's often been stated in these threads that you can only construct a home once. The home existed at the time you made the loan that gave them monies to dig a new foundation and build a safe room. imho, there should have been an RoR given. You didn't ask but I would have marked this as HI on my HMDA LAR too.

Return to Top
#1844124 - 08/20/13 04:57 PM Re: Right of Rescission on Primary Residenc Combustible
Kathleen O. Blanchard Offline

10K Club
Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
What is going to happen at the end of the 12 months when this loan matures? Is this a temporary loan that will be paid off with long term financing?
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

Return to Top
#1844133 - 08/20/13 05:12 PM Re: Right of Rescission on Primary Residenc Combustible
James M. Moore Offline
100 Club
James M. Moore
Joined: Jul 2013
Posts: 110
Georgia
We see this all the time in South Georgia. We call these "mobile" home loans! smile

ROR would apply!

It may or may not be HMDA reportable based on the intended repayment source.

Last edited by James M. Moore; 08/20/13 05:14 PM.
_________________________
James M. Moore, CRCM
My postings are not legal advice and may not be endorsed by my employer.

Return to Top
#1844141 - 08/20/13 05:25 PM Re: Right of Rescission on Primary Residenc James M. Moore
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
Quote:
Do you think in a case like this a right of rescission should have been provided


Most definitely.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#1844161 - 08/20/13 05:45 PM Re: Right of Rescission on Primary Residenc Combustible
Kathleen O. Blanchard Offline

10K Club
Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
I should add, yes the loan is rescindable. My question relates to whether the loan is HMDA reportable. It appears to be temporary financing, if it will be replaced with long term financing. For HMDA this is one of those times you don't want to confuse what is to the bank a construction loan, managed as a construction project, with what is reportable for HMDA as a construction loan.

But for rescission, yes it was their home, yes they borrowed new money, therefore yes, the new loan is rescindable.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

Return to Top
#1844417 - 08/21/13 02:28 PM Re: Right of Rescission on Primary Residenc Combustible
Combustible Offline
Diamond Poster
Joined: Dec 2008
Posts: 1,268
Thanks to all of you--I appreciate your input. My apologies, I should have told you to begin with the bank is a non-HMDA reportable affiliate--but I'm kind of glad I didn't mention it because your comments broadened the spectrum and gave me a greater understanding. I especially like the reminder: A home can only be constructed once! I've been studying for the CRCM test in November, and with all of the additional help from these threads, the Regs are falling into place. Thanks again!

Return to Top
#1844423 - 08/21/13 02:33 PM Re: Right of Rescission on Primary Residenc Combustible
Combustible Offline
Diamond Poster
Joined: Dec 2008
Posts: 1,268
Now, from a RESPA perspective, I'm wondering if GFE etc should have been provided? If the loan cannot be considered a construction loan, not a bridge loan, then my next step would be to consider if it is temporary financing? The fact that is matures in one year and interest only payments will be made, does this open up a can of worms regarding HPML also?

Return to Top
#1844434 - 08/21/13 02:58 PM Re: Right of Rescission on Primary Residenc Combustible
James M. Moore Offline
100 Club
James M. Moore
Joined: Jul 2013
Posts: 110
Georgia
RESPA's definition of temporary financing does reference a construction loan for new or rehabilitated 1-to-4 family dwellings as possible exceptions. As long as there is not a commitment for financing from you FI, I think it would be exempt for RESPA being that it is less than 24 months and moving a dwelling could be considered rehabilitation construction.

Definitions of temporary financing can get tricky when skipping between regulation.
_________________________
James M. Moore, CRCM
My postings are not legal advice and may not be endorsed by my employer.

Return to Top
#1844590 - 08/21/13 06:57 PM Re: Right of Rescission on Primary Residenc Combustible
Combustible Offline
Diamond Poster
Joined: Dec 2008
Posts: 1,268
Agree. I guess I won't open that can of worms.

Return to Top
#1844605 - 08/21/13 07:10 PM Re: Right of Rescission on Primary Residenc Combustible
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 46,832
Bloomington, IN
"Rehabilitation construction" would be home improvement. The construction loan referenced in RESPA implies the initial construction.

We don't know how this loan will be re-paid. Without that information we can't opine whether it's a short term loan which would be subject to RESPA or a temporary loan which would be exempt from RESPA.

If the loan is not to be repaid from longer term financing then I would have to opine it's a short term loan and would be subject to RESPA.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top

Moderator:  Andy_Z