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My bank is making a construction to permanent loan to a customer who owns the land free and clear so the customer can build a modular home that will be his primary residence. He currently lives in a rental property. Does the right to rescind apply?

My bank is making a construction to permanent loan to a customer who owns the land free and clear. The purpose of the loan is construction of a modular home that will be his primary residence. The customer is currently living in a rental property. Does the right to rescind apply?

No. Loans to finance the acquisition or initial construction of the customer’s principal dwelling are exempt from the right of rescission. (See §§1026. 2(a)(24) and 1026.23(a) of Regulation Z.) In addition, Comment 7 to §1026.2(a)(24) specifically provides: “Construction on previously acquired vacant land. A residential mortgage transaction includes a loan to finance the construction of a consumer's principal dwelling on a vacant lot previously acquired by the consumer.” (January 2018)

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