From 1026.15
6. Special rule for principal dwelling. Notwithstanding the general rule that consumers may have only one principal dwelling, when the consumer is acquiring or constructing a new principal dwelling, a credit plan or extension that is subject to Regulation Z and is secured by the equity in the consumer's current principal dwelling is subject to the right of rescission regardless of the purpose of that loan (for example, an advance to be used as a bridge loan). For example, if a consumer whose principal dwelling is currently A builds B, to be occupied by the consumer upon completion of construction, a loan to finance B and secured by A is subject to the right of rescission. Moreover, a loan secured by both A and B is, likewise, rescindable.
I'm curious. If the consumer qualified for the HELOC on the new property being purchased then what was the purpose of the AOC on the existing primary residence? Did it give more favorable terms? Did it give the consumer some tax advantage? What was the advantage to the consumer to pledge the AOC collateral? I generally find the AOC property was a "condition" of the loan which negates any and all AOC exemptions.
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The opinions expressed are mine and they are not to be taken as legal advice.