New HPML Rules - Third Party Collateral

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Question:

Do the new HPML rules extend to a primary residence offered as collateral by a third party?

Answer:

It will depend if the third party is also obligated on the loan. You should review the definition of a consumer in 226.2(11) and its Commentary.

If the third party is not obligated on the loan, then they are not a consumer for the purposes of the regulation therefore the loan would not be secured by a consumer's dwelling. The third party, by definition, would however be a consumer for the purposes of the right of rescission and would be entitled to the Right to Cancel disclosure and a copy of the material disclosures related to the loan transaction.

First published on BankersOnline.com 3/22/10