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Will the rescission rules apply to the following loan scenario?
Borrower currently has two loans with Bank A. Loan #1 is secured by a collateral mortgage -1st lien, primary residence AND a collateral mortgage – 1st lien, investment property. Loan #2 is a HELOC secured with a HEM, 2nd mortgage, primary residence. Borrower wants to refinance both loans and combined into one. The new loan with Bank A will be secured with the same collateral that is securing loans 1 and 2.
If this is a loan covered by Reg Z as a consumer purpose loan, then rescission would apply since you are securing the loan with the consumer’s principal residence.
Rules for refi/consilitation in 1026.23(f)(2):
(2) A refinancing or consolidation by the same creditor of an extension of credit already secured by the consumer’s principal dwelling. The right of rescission shall apply, however, to the extent the new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the costs of the refinancing or consolidation.
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