We have a customer that has purchased a farm that has tenant house (he is temporarily living in the house) and he wants to build a new home on the same property…will he need to sign Right of Rescission if he secures his construction loan with the farm?
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.
My opinion is that rescission would apply since that tenant house is his current principal dwelling and it will be securing the loan.