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#2252118 - 04/09/21 04:58 PM New construction on property with existing home
jmancha Offline
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Joined: Jun 2007
Posts: 25
Tx
Borrower lives in a home on property A. They have been approved to construct their new home ALSO on property A. We are NOT using the value/equity in the existing structure (excluded from the appraisal) but the land value is included.

Is this loan subject to a right of rescission?

My initial thought is that this may be a home improvement loan, however they are not improving their existing dwelling AND the loan is not secured by the dwelling. ***As a side note, the home is a manufactured house elected as personal property.

Any help is greatly appreciated!

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TRID - TILA/RESPA Integrated Disclosures Rule
#2252129 - 04/09/21 08:08 PM Re: New construction on property with existing home jmancha
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,249
Bloomington, IN
https://www.bankersonline.com/regulations/12-1026-023#23a

Paragraphs 3 & 4 under the Official Interpretations.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2252432 - 04/15/21 07:24 PM Re: New construction on property with existing home jmancha
jmancha Offline
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Joined: Jun 2007
Posts: 25
Tx
Thank you so much for the response. After reading over 3 & 4 it appears to me that the transaction would NOT be rescindable. A dwelling as defined by the section (below) is a unit (not just land):

(19) Dwelling means a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.

Under section four, it states if the equity of the dwelling is used that it is rescindable. We are NOT using the value in the structure for the new request therefore I think not rescindable!

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.

Thoughts?

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#2252433 - 04/15/21 07:42 PM Re: New construction on property with existing home jmancha
rlcarey Online
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rlcarey
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Posts: 76,149
Galveston, TX
If their current home is personal property and you are not taking it for collateral, then I agree - you currently have nothing but a bare lot. There would be no rescission.
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#2252436 - 04/15/21 08:00 PM Re: New construction on property with existing home jmancha
jmancha Offline
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Joined: Jun 2007
Posts: 25
Tx
Thank you Mr. Carey!!

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#2252440 - 04/15/21 08:40 PM Re: New construction on property with existing home jmancha
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,249
Bloomington, IN
We are NOT using the value in the structure for the new request therefore I think not rescindable!

Not using the value and not taking the structure as collateral are two entirely different things.

As Randy said if the dwelling is personal property (think mobile home) and you are not taking title then it's not rescindable however if the dwelling is part of the real property then your mortgage will include the improvement as collateral and if it is the borrower's current primary residence then it would be rescindable.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#2252831 - 04/22/21 10:04 PM Re: New construction on property with existing home Dan Persfull
jmancha Offline
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Joined: Jun 2007
Posts: 25
Tx
Thank you Dan!

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