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#2270533 - 05/17/22 05:01 PM Right of Rescission on Construction Loan Refinance
K. Bloom Offline
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Joined: Mar 2007
Posts: 22
Applicant is building a new home. There is an existing construction LOC; however, a new construction LOC is being originated due to a change in the plans and increase in financing needs (existing construction loan will be paid off). The new loan amount will increase and the borrowers currently occupy an outbuilding that is situated on the subject property address. Does ROR apply?

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Lending Compliance
#2270543 - 05/17/22 06:13 PM Re: Right of Rescission on Construction Loan Refinance K. Bloom
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,763
Bloomington, IN
The new loan amount will increase and the borrowers currently occupy an outbuilding that is situated on the subject property address. Does ROR apply?

If that outbuilding is also securing the new loan then rescission will apply.

4. Special rule for principal dwelling. Notwithstanding the general rule that consumers may have only one principal dwelling, when the consumer is acquiring or constructing a new principal dwelling, 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. For example, if a consumer whose principal dwelling is currently A builds B, to be occupied by the consumer upon completion of construction, a construction loan to finance B and secured by A is subject to the right of rescission. A loan secured by both A and B is, likewise, rescindable.
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The opinions expressed are mine and they are not to be taken as legal advice.

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