Situation I haven't seen prior.

Applicants bought a house in December of 2020. They have never lived in the house and had never planned on living in the house. They bought the property with the intention of building a 2nd home on the property and living in the 2nd home. Zoning codes would not allow this so they will be demolishing the existing home to build a new home.

Our legal counsel is asking if we should be providing a Right of Rescission. My first thought was no. It is not currently their primary residence, they have never lived in the home that will be demolished but they bought it with the intentions of the property eventually becoming their primary property after building a new home I am doubting myself and could use some of your expertise.

I have reviewed 1026.23 and have read the commentary. 1026.23(a)(1)-3 and -4. I do understand that normally a construction loan would be a Residential Mortgage Transaction and not rescindable but with legal questioning this makes me think I am not understanding something

If it is not their current principal dwelling, I am not sure why there is any discussion regarding a right of rescission, unless there is some State law consideration entering into the picture.

I told the closer that it was not required but that if legal pushed the issue and wanted us to provide it to ask them why.

After another conversation with the closer she indicated she wasn't sure if she told legal they never lived there so it may just be a misunderstanding on all of the facts.

No state law that I am familiar with. Washington state.

Our legal counsel is requiring the rescission to be added after the Closer and him discussed it more. His response was He might be being overly cautious, and to keep in mind, you can never get in trouble for offering the notice and waiver.

While I always agree it is prudent to error on the side of caution when their is ambiguity in a situation I don't think this situation requires the rescission period. It was never their primary residence prior to this.

I agree that there does not seem to be any ambiguity here at all.

I would never offer a waiver of rescission rights under any circumstances. That's something the borrower (if the transaction is subject to rescission) has to ask for and has to provide a convincing bona fide personal financial emergency to justify it. And the creditor has to determine whether the emergency is bona fide -- certainly more urgent than the borrower wants to move in on Friday to enjoy the weekend gazing at the autumn foliage colors.

I join the chorus here that there's no ambiguity in the instant situation. No rescission.