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#975104 - 06/13/08 07:41 PM Rescission
Sage Offline
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Joined: Aug 2005
Posts: 914
We made a loan to a customer to buy a home. Now he wants to replace the mortgage securing that loan with a mortgage on a new home he is buying. We are not financing the new home. Would rescission apply if we allow the swap?

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#976378 - 06/17/08 02:48 PM Re: Rescission Sage
Sage Offline
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Joined: Aug 2005
Posts: 914
Bump- is this so obvious no one is answering?

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#976668 - 06/17/08 07:10 PM Re: Rescission Sage
Many Hats Offline
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Joined: May 2008
Posts: 915
Orlando, FL
A little confusing......If you are not financing the new home, then I am assuming this will be a second mortgage. If it's a second mortgage, then there is a Right to Cancel.

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#976679 - 06/17/08 07:16 PM Re: Rescission Many Hats
Many Hats Offline
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Posts: 915
Orlando, FL
And I am also assuming this is his primary residence.

If it's not, i.e., if it's an investment property, there is no Right to Cancel.

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#976706 - 06/17/08 07:36 PM Re: Rescission Many Hats
Sage Offline
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Joined: Aug 2005
Posts: 914
Yes, it will be his primary residence once he buys it. We will release the collateral we originaly took. It is not a refinance.

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#976708 - 06/17/08 07:40 PM Re: Rescission Sage
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 77,209
Galveston, TX
5. 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 a 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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