ROR on Refinance of Non-Owner Occupied Home

Answered by:

Question:

We are refinancing a home that is not owner occupied, but is also not a rental property. The borrower’s sister lives in the home and it is her primary residence. Who has the right to rescind?

Answer:

Section 226.23: Right of Rescission (01/01/08)

(a) Consumer's right to rescind.

(1) In a credit transaction in which a security interest is or will be retained or acquired in a consumer's principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction, except for transactions described in paragraph (f) of this section.47[/i]

226.2 Definitions and Rules of Construction

(11) Consumer means a cardholder or a natural person to whom consumer credit is offered or extended. However, for purposes of rescission under Section Section 226.15 and 226.23, the term also includes a natural person in whose principal dwelling a security interest is or will be retained or acquired, if that person's ownership interest in the dwelling is or will be subject to the security interest.
Under Reg Z only consumers who have an ownership interest in the residence and reside in the residence as their principal residence has the right to rescind the transaction.

First published on BankersOnline.com 9/22/08