I've been on vacation for 2 weeks and my brain has oxidized. We have a customer who's father and 2 uncles own property with a home on it. Our customer's father passed away and left his interest in the property to our customer, via a will. Our customer's interest in the property was never perfected by adding him to the deed or otherwise. The 2 uncles have agreed to sell their interest in the property to our customer. We are making a loan to pay the 2 uncles plus fund some improvements in the home, which he will occupy as his principal dwelling. We are not taking a downpayment or interest in his current home as we are making a 70% LTV loan. I believe this is a RMT by definition, but the part that bothers me is that he has an interest in the property already, by his fathers will.

Supplement I, 226.2: Definitions and Rules of Construction (01/01/01)

2(a)(24) Residential mortgage transaction.

5. Acquisition. i. A residential mortgage transaction finances the acquisition of a consumer’s principal dwelling. The term does not include a transaction involving a consumer’s principal dwelling if the consumer had previously purchased and acquired some interest to the dwelling, even though the consumer had not acquired full legal title.

ii. Examples of new transactions involving a previously acquired dwelling include the financing of a balloon payment due under a land sale contract and an extension of credit made to a joint owner of property to buy out the other joint owner’s interest. In these instances, disclosures are not required under §226.18(q) or §226.19(a) (assumability policies and early disclosures for residential mortgage transactions). However, the rescission rules of §§226.15 and 226.23 do apply to these new transactions.

Is the home your customer's current principal residence?

If not then I would say ROR does not apply.

If it is then I would say ROR does apply.

Dan is correct - it depends on whether your borrower is living there as a principal dwelling. Mark the page that Dan provided to you. This is one of those diamond sections - you'll use it a lot.

These guys are right on. There are really two questions to ask when thinking about RMTs and rescission. 1. Is it a purchase? 2. Does the borrower live in it? These are the two triggering issues. And it is possible to have a loan where the answers to both questions are no.