Refinancing Loan Secured by Stock Shares

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Question:

Is the refinance of a loan to be secured by shares of stock in a cooperative corporation subject to the right to rescission under Reg Z? The borrower does not own the property, he/she owns shares of stock in the cooperative which allow him/her the right to possess the unit. The cooperative corporation owns the property.

Answer:

If the coop apartment is the debtor's principle residence and his ownership interest in it is security for the refinancing of the loan, the transaction would be subject to the right of rescission to the same extent it would be if the borrower's residence were a single-family detached dwelling.

First published on BankersOnline.com 11/08/10