A customer closed construction/perm loan with us. After closing he has moved into the basement of the home being constructed, so it is now his primary residence. He has now come back to us needing additional money to complete construction. Does right of rescission now apply to the new money since he now lives in the basement or will the new money still be considered as part of the original construction and thus be exempt from right of rescission?

No. This is a "residential mortgage transaction." It doesn't matter if he's living in the house or not. Look up that term in Reg Z and then look at §1026.23(f)(1).

Thanks, David. I was letting the fact that he lived in the home confuse me.

Since the original loan was a construction/perm, how will you be lending the additional monies? I'm curious!