Hi all,

I am a relatively new compliance officer and was hoping for some opinions on a right of rescission issue. We have a consumer that owns a mobile home and it is on a piece of land that she also owns (MH is not purged). Our bank actually has a loan against that real property and the current mobile home. The borrower has been approved for a new loan to purchase a new mobile home to put on the property. The new loan will completely payoff our current loan and will be secured by the real estate and the new mobile home (the old mobile home will not be collateral and is being removed from the land.) Does this qualify as an exemption as a residential mortgage transaction? A residential mortgage transaction is "a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained in the consumer's principal dwelling to finance the acquisition or initial construction of that dwelling." I believe that there is no right to rescind in this circumstance because the loan is being provided to acquire the new principal dwelling...but others disagree.

Thanks for any help!

You are correct. They are acquiring a new dwelling to be used as a principal residence. Just like buying a new house. Now, if you were also taking the old mobile home as collateral, then it would be treated as a bridge loan and would be subject to the right of rescission, but you said that was not the case. Since the mobile homes are still being treated as personal property, the land in this case is not a factor.

If we do a construction/perm loan and the borrowers currently live in a dwelling on the property as their current primary residence until construction is complete, then it is rescindable....is that correct?

Whether they live in another house on the property or a mobile home....is this correct?

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..

Thanks, Dan......may I ask one more question...

Does the mobile home need to be affixed to the property for this to apply with a mobile home?

Affixed no - but you would have to take it as security for rescission to apply.