Need some input from ROR gurus on the following:
Customer purchasing a vacant lot to build, (at a later date)his principal dwelling. The bank is making a 6-month loan to purchase of the lot only. Our attorney says ROR applies since he plans to build his principal dwelling in the near future. I say no, because it is short-term and there is neither any constructing of the home on it yet, nor are we financing any type of construction...Lot purchase only. What is your take on this? Thanks

Since he can't live there (unless he pitches a tent), ROR does not apply. Also the regulation states that you may only have one primary residence at a time and I'm guessing he's living in it. Plus it's a purchase loan . . . correct?

ROR would not apply. You are taking no lien in his primary residence and even if you were this would be a purchase transaction and ROR does not apply to purchases.

Have your atty. site the section of the reg. that leads him to believe ROR applies.

Geez - I hope you don't have to pay for the time to educate your attorney! Have him/her read the Commentary to Reg Z Section 226.23, paragraph 3 - specifically:

3. Principal dwelling. A consumer can only have one principal dwelling at a time. (But see comment 23(a)(1)--4.) A vacation or other second home would not be a principal dwelling. A transaction secured by a second home (such as a vacation home) that is not currently being used as the consumer's principal dwelling is not rescindable, even if the consumer intends to reside there in the future. When a consumer buys or builds a new dwelling that will become the consumer's principal dwelling within one year or upon completion of construction, the new dwelling is considered the principal dwelling if it secures the acquisition or construction loan. In that case, the transaction secured by the new dwelling is a residential mortgage transaction and is not rescindable.

Again, I am with Bonnie. My first thought was to subtract your tutor session from the attorney's billable hours. On gray areas I am for siding with caution, but this isn't gray.

I feel dumb asking this question, but Is he using his present principal dwelling as security for the lot loan? (he may not have one but just thought I'd ask)

ahou, good point - if the customer is using his CURRENT principal dwelling as collateral, or even additional collateral for the lot loan, then ROR applies. The question originally posed says the attorney stated the REASON for ROR is that the customer intends to build his primary residence at a later date.

You may want to seek different counsel. He is wrong.

Thanks to all of you for your replies. No, customer is not using his current dwelling as collateral on the loan. Right now the attorney is so angry with me ("that compliance lady")for daring to dispute his interpretation however, he has finaly admitted I am right and he is wrong and in his words, "bowed to our superior wisdom". Sometimes things like this it just simply make my day. Thanks again
Gloria

I have disagreed with attorneys on many occasions. I even had one say once 'well TECHNICALLY you are correct but the chance the FDIC would see it is small'.

Don't you just love it! Savor the moment.

Just out of curiousity, how did the attorney get involved on what appears to be a simple transaction?