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#25994 - 07/30/02 08:50 PM Reg Z - ROR
Anonymous
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A customer has a Home Equity Line of Credit with us and it was secured by their principal dwelling. They have since moved into a new principal dwelling and have an agreement of sale for the old one pending the removal of the lien for the Home Equity Line of Credit. Our lender did a change in terms, satisfied the old mortgage, and took the new principal dwelling as security for the same credit facility. Is right of rescission needed for the replaced security?

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Lending Compliance
#25995 - 07/30/02 10:34 PM Re: Reg Z - ROR
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 83,581
Galveston, TX
IMHO - Yes, since you took a lien on their now "principal" residence. Unless, you could tie this loan into the purchase money transaction, but since you already had the outstanding loan, I'm not sure how that could be the case.
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#25996 - 07/31/02 02:38 PM Re: Reg Z - ROR
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,765
Central City, NE
Yes, I think that RofR applies as this is "new to the house money."

The following comes from the Closed-end rules (I know that HELOC's fall under 226.15 for RofR) but I couldn't find a similar rule in 226.15.
The Commentary to §226.23(a)(1)#5 states:
Addition of a security interest. Under footnote 47, the addition of a security interest in a consumer’s principal dwelling to an existing obligation is rescindable even if the existing obligation is not satisfied and replaced by a new obligation, and even if the existing obligation was previously exempt (because it was credit over $25,000 not secured by real property or consumer’s principal dwelling). The right of rescission applies only to the added security interest, however, and not to the original obligation. In those situations, only the §226.23(b) notice need be delivered, not new material disclosures; the rescission period will begin to run from the delivery of the notice.
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David Dickinson
http://www.bankerscompliance.com

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