I know that a loan to convert a construction loan to permanent financing still qualifies as an RMT and is therefore exempt from the ROR. However, if the loan is also going to include new money (i'm assuming based on the equity in the land that was owned free and clear prior to the construction loan), wouldn't a ROR be needed? It would be further encumbering the primary dwelling of the borrower. Thanks for any help.

Commentary 226.2(a)(24)(6).

Thanks Dan.

Dan....i'm now having a hard time finding the citation that i was looking at Friday that a loan to convert an initial construction loan to permanent financing IS an RMT......to be sure.....ROR is NOT needed in the scenario i describe, correct?

Correct. .2(a)(24)(4) in the Commentary. Also the Commentary to .23(f)(1), (2) & (3).

Thanks again.

Sec. 226.23(f)(3) says a loan to "acquire" a principal dwelling and make improvements is exempt if treated as one transaction. What if the loan isn't to "acquire" but to "convert from construction to permanent" and add extra money? Is it still exempt because it is a RMT and done as one transaction?

Look at my initial post Comp. I think you have the same scenario as me.

It is the same scenario and i've looked at all of the sections of the reg and commentary posted in the thread but they either refer to "acquiring" a principal dwelling or the "initial construction". I didn't see anything that referred to a refinance of construction to perm with additional money for improvements. The closest I saw was 226.23(f)(3) but it just says "acquire" which to me means a purchase of a home. I am probably making it too hard and maybe "acquire" can mean the const to perm also.

That's the conclusion, with Dan's help, i've come to.

Okay, I'm doing a ROR audit and we do these often enough that if I take an opinion one way or the other on if they are subject to ROR or they are not it is going to become a training issue and so I want to be correct.

You ARE making it too COMPlicated for yourself.
The house was being constructed and now it's being acquired by paying off the draw loan with permanent financing. If there's extra $ in the deal to finish improving the house, that's ok. (It's now 'improving' the house because you can only construct it once.)

Which all boils down to, it is all a residential mortgage transaction (with the end result a home), not subject to rescission.

Okay so a RMT trumps anything else that goes on in that same loan...correct?

I just discussed this with our trainer and she asked about loans where we've already done the initial construction loan and then that matures and the customer needs to refinance it for longer and they need more funds to finish construction. This isn't a const to perm yet. Is that subject to ROR?

You are acquiring the materials to construct a home with a construction loan so wouldn't constructing a home be acquiring a home?

No

So if construction is still going on and the purpose is that then it is a RMT regardless of how many times it has been refinanced?