[Annmichele]

Our bank does a lot of loans for spec house builders. We first loan them the money to purchase say 20 acres and they break it up into 20 building lots. Then we do the loan to build the spec house on one of the lots. We refer to the future advance clause of the mortgage with the 20 acres. The right to receive an appraisal notice states for credit that is to be secured by a first lien on a dwelling. Is this situation considered a 2 lien were we would not have to give an appraisal notice?

[jholzknecht]

There are two regulatory requirements for providing an appraisal notice.
• Regulation B requires an appraisal notice for an application for credit secured by a first lien on a dwelling whether the credit is for a business purpose or a consumer purpose.
• Section 1026.35(c)(2) (Higher Priced Mortgage Loans) requires an appraisal notice for a closed-end consumer credit transaction secured by the consumer’s principal dwelling with an APR that exceeds the average prime offer rate by the applicable threshold.

It appears the HPML rule does not apply to your transaction, since your transaction is a business purpose transaction.

It appears the Regulation B requirement does apply to your transaction. It appears your bank is in the first lien position; no other creditor has an interest in the property.

[jholzknecht]

While the Regulation B appraisal rule applies to your transaction, there is an exemption for a transaction to finance initial construction of a dwelling.

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