Posted By: #12
Rescission question - combined purpose - 03/01/11 05:41 PM
Commentary to Reg Z (226.23(f)) states:
3. Combined-purpose transaction. A loan to acquire a principal dwelling and make improvements to that dwelling is exempt if treated as one transaction. If, on the other hand, the loan for the acquisition of the principal dwelling and the subsequent advances for improvements are treated as more than one transaction, then only the transaction that finances the acquisition of that dwelling is exempt.
I have a lender that is doing a purchase money 2nd lien loan, which is exempt from rescision. Does the above from the OSC cover only home improvements, or is that just an example?
For example, if the customer wants the purchase money 2nd, but also wants to add extra money to pay off some credit cards, would the addition of the extra money make this a rescindable loan? I think it would not. It would still qualify as an RMT and be exempt from rescission.
Any thoughts?
3. Combined-purpose transaction. A loan to acquire a principal dwelling and make improvements to that dwelling is exempt if treated as one transaction. If, on the other hand, the loan for the acquisition of the principal dwelling and the subsequent advances for improvements are treated as more than one transaction, then only the transaction that finances the acquisition of that dwelling is exempt.
I have a lender that is doing a purchase money 2nd lien loan, which is exempt from rescision. Does the above from the OSC cover only home improvements, or is that just an example?
For example, if the customer wants the purchase money 2nd, but also wants to add extra money to pay off some credit cards, would the addition of the extra money make this a rescindable loan? I think it would not. It would still qualify as an RMT and be exempt from rescission.
Any thoughts?