Answer:
Answer by David Dickinson:
The definition of "Residential Mortgage Transaction" in Section 226.2(a)(24)#4 (second bullet) doesn't distinquish new advances from the original construction money. It indicates that Right of Rescission does NOT apply when a loan is converted from construction to permanent. No exceptions are given.
Answer:
Answer by Lucy Griffin:
I agree with David. Even though the funds on the permanent loan exceed the amount used for construction, it is still a purchase money loan and thus exempt from rescission.
Answer:
Answer by Jay Bruce:
I agree with David and Lucy on this question based on the Reg Z Commentary regarding the definition of "Residential Mortgage Transaction" see 226.2(a)(24), paragraph 6: "Multiple purpose transactions. A transaction meets the definition of this section if any part of the loan proceeds will be used to finance the acquisition or initial construction of the consumer's principal dwelling. For example, a transaction to finance the initial constructionof the consumer's principal dwelling is a residential mortgage transaction even if a portion of the funds will be disbursed directly to the consumer or used to satisfy a loan for the purchase of the land on which the dwelling will be built."
First published on BankersOnline.com 8/11/03
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