![]() For example, a transaction secured by a mobile home, trailer, or houseboat used as the consumer's principal dwelling may be rescindable.Ĥ. Dwelling, as defined in § 1026.2, includes structures that are classified as personalty under state law. 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 B is a residential mortgage transaction. ![]() In that case, the transaction secured by the new dwelling is a residential mortgage transaction and is not rescindable. ![]() When a consumer buys or builds a new dwelling that will become the consumer's principal dwelling within one year or upon completion of construction, the new dwelling is considered the principal dwelling if it secures the acquisition or construction loan. A transaction secured by a second home (such as a vacation home) that is not currently being used as the consumer's principal dwelling is not rescindable, even if the consumer intends to reside there in the future. (But see comment 23(a)(1)-4.) A vacation or other second home would not be a principal dwelling. A consumer can only have one principal dwelling at a time. For example, if only one spouse signs a credit contract, the other spouse is a consumer if the ownership interest of that spouse is subject to the security interest.ģ. To be a consumer within the meaning of § 1026.2, that person must at least have an ownership interest in the dwelling that is encumbered by the creditor's security interest, although that person need not be a signatory to the credit agreement. Thus, even though an interest in the consumer's principal dwelling is not a required disclosure under § 1026.18(m), it may still give rise to the right of rescission.Ģ. Although liens arising by operation of law are not considered security interests for purposes of disclosure under § 1026.2, that section specifically includes them in the definition for purposes of the right of rescission. The creditor obtains a lien and completion bond that in effect satisfies all liens against the consumer's principal dwelling as a result of the credit transaction. All security interests that may arise in connection with the credit transaction are validly waived.Ĭ. A mechanic's or materialman's lien is obtained by a contractor who is not a party to the credit transaction but is merely paid with the proceeds of the consumer's unsecured bank loan.ī. The security interest is not part of the credit transaction and therefore the transaction is not subject to the right of rescission when, for example:Ī. A mechanic's or materialman's lien that is retained by a subcontractor or supplier of the contractor-creditor, even when the latter has waived its own security interest in the consumer's home. A security interest that is acquired by a contractor who is also extending the credit in the transaction.ī. In order for the right of rescission to apply, the security interest must be retained as part of the credit transaction. Security interest arising from transaction.
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