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#702596 - 03/16/07 08:39 PM I know its late, but...
Wyogirl Offline
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Wyogirl
Joined: Nov 2001
Posts: 713
Laramie, WY. USA
I'll buy each responder a drink next year in Vegas, if you think this one through with me. Here's the scenario:

Purchase money to buy a lot with additional proceeds to land development.

The collateral is the lot and a trailer.

The trailer is not located on the lot yet, part of the proceeds will be used to place it, including water and electrical work.

The trailer is currently, and will continue to be, the primary residence of one of the borrowers, but she is not on the title.

It will be the primary residence of both borrower's when it is moved and hooked up.

Neither of the borrowers own the trailer. A business does, (borrower's mom), and the title will not be signed over to the borrower for several years. (The business is still taking depreciation on it.) The business will pledge it as collateral. No money will change hands regarding the trailer, it is bought and paid for.

Could this in any way be construed as a HMDA loan? I'm thinking yes, because its improvement to the land on which the primary residence will be located. Its not temporary.

Do you think rescission applies? I say no, as the resident has no legal claims to title and for all practical purposes is renting the place, free of charge. I'm flip flopping on the rescission though.

So, does anyone still have their thinking cap on?

If not, I obviously can relate. Have a great weekend and thanks for any input.

Deb

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#702633 - 03/16/07 11:17 PM Re: I know its late, but... Wyogirl
Truffle Royale Offline

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Doubt I'll make it to Vegas (no funding) so I'll give someone my drink ticket for.......?

I was all ready to say HMDA HI on this one. Rereading this, the purchase jumped out at me. But the borrower is improving the trailer by purchasing and improving the lot. So, I'm gonna stay with HI since the home is already owned free and clear, but not by the borrowers which leads to.......

the ROR. I'm inclined to say the title holder would be the only one possibly entitled to an ROR. But that's a business and it's not their residence so I'm leaning with you to no on the ROR.


So, who wants my drink and what's it worth to ya?

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#702693 - 03/17/07 09:27 PM Re: I know its late, but... Truffle Royale
David Dickinson Offline
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David Dickinson
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Central City, NE
Good questions wyogirl, or should I say "strange" question. Assuming BOL asks me to come back, I'll be in Vegas, so you can buy me a drink (and I'll take Truffles') Here's my thoughts.

HMDA:
I don't think this is a HMDA "Purchase" loan as you are not purchasing a dwelling.

I've never seen a "home improvement" loan like this, but I do think it qualifies.

Rescission:
RofR does NOT apply. RofR only applies to those that are owners AND when the dwelling is their principal dwelling. Since both conditions do not apply to anyone, RofR does not apply to this loan.
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#702767 - 03/19/07 01:26 PM Re: I know its late, but... David Dickinson
Truffle Royale Offline

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What a way to start a Monday! I got it right!!!

btw, Happy Birthday, David! Hope your day AND your cake are great!

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#703039 - 03/19/07 06:02 PM Re: I know its late, but... Truffle Royale
Bullseye Offline
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I am just curious, when I was at our state bankers association compliance school, the presenters taught us to provide the right of rescission to the borrowers if it is their primary residence regardless of ownership due to Section 125(a) of the Truth in Lending Act:

Except as otherwise provided in this section, in the case of any consumer credit transaction (including opening or increasing the credit limit for an open end credit plan) in which a security interest, including any such interest arising by operation of law, is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this title, whichever is later.....

By your comments above stating you would NOT grant these borrowers the right to rescind because they are not owners, does that mean that the regulation overrides this or what am I missing? I have always been confused by this as I see many compliance officers say they have to be owners to have rescission rights.

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#703065 - 03/19/07 06:20 PM Re: I know its late, but... Bullseye
Dan Persfull Offline
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Bloomington, IN
Reg Z is the implementing regulation of the TILA.

You need to look at the definitions of a consumer in Reg. Z.

Consumer means a cardholder or a natural person to whom consumer credit is offered or extended. However, for purposes of rescission under §§226.15 and 226.23, the term also includes a natural person in whose principal dwelling a security interest is or will be retained or acquired, if that person's ownership interest in the dwelling is or will be subject to the security interest.

and from the Commentary:

Rescission rules. For purposes of rescission under §§226.15 and 226.23, a consumer includes any natural person whose ownership interest in his or her principal dwelling is subject to the risk of loss. Thus, if a security interest is taken in A's ownership interest in a house and that house is A's principal dwelling, A is a consumer for purposes of rescission, even if A is not liable, either primarily or secondarily, on the underlying consumer credit transaction. An ownership interest does not include, for example, leaseholds or inchoate rights, such as dower.



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The opinions expressed are mine and they are not to be taken as legal advice.

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#703076 - 03/19/07 06:24 PM Re: I know its late, but... Bullseye
Truffle Royale Offline

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As David stated, you have to be both the owner and the borrower to get the Right of Recission.

The section you quoted backs this up here:
Quote:
a security interest... is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended,


How can a borrower give you security interest in a property they don't own?

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#703106 - 03/19/07 06:41 PM Re: I know its late, but... Truffle Royale
Bullseye Offline
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Thanks for the clarification guys! This is one of those areas that kind of confused me & it always seemed like I was missing something.

I understand the reg implements the act, but the speaker we had said that the reg conflicted with the act, basically with the sentence I quoted... ...the obligor has the right to rescind... so we should cover ourselves by providing rescission rights to both. I actually still use their manual everyday & it's in there in writing. Your input has helped though - Thanks again!

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#703138 - 03/19/07 07:00 PM Re: I know its late, but... Bullseye
Dan Persfull Offline
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Bloomington, IN
I don't think they conflict, from the end of the section of your quote above:


The creditor shall clearly and conspicuously disclose, in accordance with regulations of the Board, to any obligor in a transaction subject to this section the rights of the obligor under this section. The creditor shall also provide, in accordance with regulations of the Board, appropriate forms for the obligor to exercise his right to rescind any transaction subject to this section.


Providing the ROR in accordance with the provisions and definitions in Reg. Z would IMO comply with the Act itself.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#703796 - 03/20/07 08:14 PM Re: I know its late, but... Dan Persfull
Wyogirl Offline
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Wyogirl
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Laramie, WY. USA
TY All, You're the Best!

HMDA HI
NO RECSCISSION-Very nice follow-up discussion by the way.

I just got done giving a conference report to my Board Compliance Committee and then we trained the whole board with a short PPT and a list of CMPs. I don't think there's any doubt I'll be back next year, LOL!!!! (They were also real glad its in Nebraska next year. :))

So, unless Truffle changes her mind, I only owe three drinks. Maybe I should stop this post why I can still cover my tab!!!!

Thanks Again,

Deb

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#703797 - 03/20/07 08:17 PM Re: I know its late, but... Wyogirl
Wyogirl Offline
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Wyogirl
Joined: Nov 2001
Posts: 713
Laramie, WY. USA
DOE! I missed that it was your birthday David. Happy Birthday!!!

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#703853 - 03/20/07 09:45 PM Re: I know its late, but... Wyogirl
David Dickinson Offline
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Joined: Nov 2000
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Central City, NE
I'm looking forward to that drink wyogirl. Plus, I would think you'd want to add a Birthday drink. On top of that, I was hoping to get Truffle's drink and then . . . .

Thanks for the Birthday wishes. Hope to see you next year!
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#705518 - 03/23/07 01:54 PM Re: I know its late, but... David Dickinson
kitten Offline
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Not prison
On this same topic - (it seems a popular and confusing one!!) - I need to make sure I am interpreting footnote 47 correctly from 226.23. It says:

47 For purposes of this section, the addition to an existing obligation of a security interest in a consumer's principal dwelling is a transaction. The right of rescission applies only to the addition of the security interest and not the existing obligation. The creditor shall deliver the notice required by paragraph (b) of this section but need not deliver new material disclosures. Delivery of the required notice shall begin the rescission period.

I am reading this that when there is new money involved, and the loan being refinanced is still with my institution, EVERYONE who has the right to rescind gets the rescission notice, but NO ONE, necessarily, needs to get the material disclosures (although it is likely that we would still produce a TIL, so they would). Is this right?

Thanks in advance!
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#705533 - 03/23/07 02:07 PM Re: I know its late, but... kitten
Dan Persfull Offline
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Bloomington, IN
Footnote 47 does not exempt the material disclosure in a refinancing transaction.

If I have an exiting unsecured loan of $20,000 and I take a security interest in the borrower's primary residence in order to give him tax benefits then I have added a security interest to the existing obligation. I have to give the ROR but not the material disclosures.

If I refinance the transaction to advance new money then both the ROR and the material disclosures are required.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#705645 - 03/23/07 03:12 PM Re: I know its late, but... Dan Persfull
kitten Offline
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kitten
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Not prison
Thank you Dan!

WOW! I was way off! I'm so glad I asked and that there is this resource!!!
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