Rescission

Posted By: Sage

Rescission - 06/13/08 07:41 PM

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?
Posted By: Sage

Re: Rescission - 06/17/08 02:48 PM

Bump- is this so obvious no one is answering?
Posted By: Many Hats

Re: Rescission - 06/17/08 07:10 PM

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.
Posted By: Many Hats

Re: Rescission - 06/17/08 07:16 PM

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.
Posted By: Sage

Re: Rescission - 06/17/08 07:36 PM

Yes, it will be his primary residence once he buys it. We will release the collateral we originaly took. It is not a refinance.
Posted By: rlcarey

Re: Rescission - 06/17/08 07:40 PM

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.