Multiple loans, consummation and rescission

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Question:

We have had recent discussions regarding the rescission rules when applied to a TRID real estate purchase transaction. As the bank, we are financing the purchase of a new home; however, the consumer is using the home being purchased, as well as an existing property as collateral on their loan transaction. The use of an existing property is triggering the 3-day rescission period. Per Kentucky law, a purchase transaction should be closed by an attorney. However, our lender is questioning whether or not consummation of the loan with the bank and the settlement by the attorney actually need to be dated the same day. He wants to close our loan 3 days prior to the closing with the attorney, so all funds will be available at said closing. Is there a regulation you can cite that requires the loan transaction to be closed on the same day as the real estate settlement? I believe there are stipulations in regard to these requirements but having difficulty citing the reg.

Answer:

The rescission period does not begin until the last of three events:

1. Delivery and receipt of all material disclosures
2. Delivery to the consumer of the required rescission notice
3. Consummation of the transaction

I don't believe you can consummate the transaction, which includes a mortgage lien on the property to be acquired, until your borrower has the deed to that property (he can't pledge what he doesn't yet own). That could throw a monkey wrench into your lender's plan.

However, consummation of the transaction is determined under state law. You will have to consult legal counsel on when such a transaction would be considered consummated under Kentucky law. What makes sense to me isn't necessarily how state law will view the question.