Thanks very much for the response. I'd like to elaborate a bit and hope that you'll provide some more guidance...
The loan is not for the initial construction of the dwelling. No loan funds have been given to the consumer for this purpose. Its a refi of a land only loan that is now complicated because there is a dwelling in the course of construction that the consumer intends to use as a primary residence when complete. There is no cash out, only the remaining $25,000 of the land loan is being refinanced.
The "tiny home" that is also on the property is not affixed to the property and is considered personal property. It will not be collateral on this loan (just found this out).
I was concerned that under 1026.2(a)(24)-3 we would have to consider it a principal dwelling since in addition to the statement that "a consumer can have only one principal dwelling at a time", it also says "if a consumer...builds a new dwelling that will become the consumer's principal dwelling within a year or upon the completion of construction, the new dwelling is considered the principal dwelling for purposes of applying this definition to a particular transaction."
Are you saying that since the consumer cannot live in the dwelling that is in the course of construction, that where they currently live can or should be considered their principal residence?
If that is the case, my rescission and HMPL questions go away...
If it must be considered the principal dwelling based on that information above, then it seems like maybe rescission would apply based on the following:
1026.23(a): In a credit transaction in which a security interest is or will be retained or acquired in a consumer's principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction,…
1026.23(a)-3: ...When a consumer builds a new dwelling that will become the consumer's principal dwelling within one year or upon completion of construction, the new dwelling is considered the principal dwelling if it secures the acquisition or construction loan. In that case, the transaction secured by the new dwelling is a residential mortgage transaction and is not rescindable.
Since we are not funding the construction, this loan is not a residential mortgage transaction. It is also not a bridge loan. So wouldn't we then rely on the basic rule in (a)...that it is secured by a principal dwelling".
Then for HPML - if we have to consider it a principal dwelling, then that rule applies. But 1026.35(b) says - ...a creditor may not extend a higher-priced mortgage loan secured by a first lien on a consumer's principal dwelling unless an escrow account is established before consummation for payment of property taxes and premiums for mortgage-related insurance required by the creditor,...
But if we as the lender waive the need for property insurance, then we would only have to escrow for property taxes, right?
All of this hinges on if we must consider the dwelling in the course of construction as a principal dwelling even if the loan transaction is not for the construction. From what I understand, the application is already marked refi primary residence. But if we have the option to not consider this dwelling as the principal dwelling then would would like to do that.
Honestly, we don't mind so much if we over comply. It really is only that the consumer doesn't want to get property insurance yet and we want to waive it because the land value is much higher than the loan outstanding, so there really isn't any risk for us. We are hoping if HPML rules would apply, that we don't lose our right to waive the insurance.
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