[kmeade]

Scenario: A consumer is payoff a lien on a mobile home (no land) they currently live in and paying off another loan that is secured by a single-family dwelling. Both loans are currently in the borrower’s name. About 60% of the new loan is paying off the mobile home the borrower lives in and 40% is paying of the single-family dwelling. The new loan will be secured by both the single family dwelling and the mobile home. There is a recorded land contract on the single-family dwelling which currently has a lien in the Sellers name of the lands contracts (the borrower in the scenario). In the new loan the borrower will be the Seller in the land contract. Per our attorney the Buyer in the land contract will need to sign a subordination agreement and the new mortgage. I know the borrower will sign a right of rescission because we are taking the mobile home they live in. But since the Buyer of the land contract is signing the mortgage (not the note) which will increase the lien on their primary residence do they have to sign a right of rescission form too?

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[jholzknecht]

A refinance is not subject to the right of rescission unless the transaction involves new money. New money includes paying an existing debt that is not secured by the principal dwelling, the single family in your case.

Regulation Z is not clear as to whether the party acquiring the property under the land contract has the right to rescind or not. Even though that party does not acquire full title until the land contract is satisfied, the safe course of action to provide them with the right to rescind since they have acquired some interest in the property as payments are made under the contract.

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