We have an application to construct a primary residence. The lot that the borrower will construct the residence on is owned free and clear. It currently has their primary residence on it. After construction is complete the residence will be removed. I know that construction loans are exempt from rescission, however I have never had one were the land already included the current primary residence. Also, as this is a construction loan and will be for less than 12 months, ATR is not required, right?

4. Special rule for principal dwelling. Notwithstanding the general rule that consumers may have only one principal dwelling, when the consumer is acquiring or constructing a new principal dwelling, any loan subject to Regulation Z and secured by the equity in the consumer's current principal dwelling (for example, a bridge loan) is subject to the right of rescission regardless of the purpose of that loan. For example, if a consumer whose principal dwelling is currently A builds B, to be occupied by the consumer upon completion of construction, a construction loan to finance B and secured by A is subject to the right of rescission. A loan secured by both A and B is, likewise, rescindable.

You're correct about being exempt from ATR.

Question. You say it is to be removed. Is it a titled manufactured home by chance? And if so, are you or are you NOT taking the title. If the latter, it will not have ROR. If you are taking title, or if it's a site built home that is to be lifted and moved/destroyed...then you do.

Good point Joker...i didn't read "removed" that way (i read "demolished"), but i can see it now.

It is a manufactured home, however it is not titled. It is attached to the foundation and the title has been surrendered.

I would treat it like a bride loan and follow the guidance raitchjay gave. IOW, give the RofR.

Thank you... That was what I was leaning towards, but wanted to make sure that other more knowledgeable compliance professionals interpreted it the same way I did.

Follow up question - Borrower obtaining construction loan to build home - borrower currently lives in a 5th wheel on the property. Would ROR apply?

Not unless you are taking the 5th wheel as collateral.

Thanks Randy! That is what I thought I was reading in the regulation, but then started second guessing myself.