TIL Rescission/TRID

Posted By: LostinRegLand

TIL Rescission/TRID - 01/07/22 11:59 PM

Question on TRID purpose and rescission. The staff has me doubting myself smile

Construction company built a spec home in the name of the company.

The owner of the company (NOT a DBA or sole prop) has decided to transfer the ownership of this spec home and take out a loan to themselves and live in it.

My thoughts on TRID purpose would be purchase as the title will be moving from the name of the company to the person. The person will be acquiring title. Lending staff believes it will be Refinance as the person owns the company and the spec loan will be paid off. Based on my understanding of 1037(a)(9)-1ii this is not a refinance under TRID as we are not refinancing the consumers existing obligation. We are refinancing a companies obligation into a consumers name with a change of title.

Rescission I do not believe it is required as they do not currently live in it. It was not built for them as it was built as a spec. Lending staff keeps asking me if I am wrong. I have reread 1026.23 and believe I am right as it is not currently their principal dwelling and will only become so after this transaction. (1026.23(a)(1)-3

Am I offer my rocker with my interpretations?
Posted By: rlcarey

Re: TIL Rescission/TRID - 01/08/22 01:52 PM

So, I assume this is being handled like any other borrower buying a spec house from a builder? Whether the borrower owns the construction entity is irrelevant to the analysis as to what this transaction might represent. The construction entity is a separate legal entity from the borrower, regardless of who owns it. Whether or not the sales price is the same as the existing loan does not really matter either. I assume this is closing through a title company like any other purchase transaction.

If that is not what is happening, then I think we need some more information.
Posted By: LostinRegLand

Re: TIL Rescission/TRID - 01/10/22 07:15 PM

Closing through a title company like any other loan.

This is what I tried explaining to the staff that the owner was buying the house from his own business but that it was still a "purchase" of a spec home. They are really pushing back against me that I am wrong so I started thinking what am I missing.

Thought I would throw it out here in case there was a bit of the regulation that I had missed that would change this scenario from my way of thinking.
Posted By: John Burnett

Re: TIL Rescission/TRID - 01/11/22 08:45 PM

Stick to your guns, "Lost." Randy's analysis is spot-on. The borrower doesn't own the property now, but will after closing. It's a purchase for TRID and for HMDA. Perhaps your staff could benefit from a little training on the separation (legal and otherwise) between owners of an entity company (LLC or corporate form) and the company itself.

And, by the way, even if the borrower moved into the house as their principal dwelling while the company still owned it, because the loan will finance their acquisition of the property, it's a residential mortgage transaction as that phrase is defined in Regulation Z, and exempt from the rescission requirement. See 1026.2(a)(24) and 1026.23(f)(1)