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A construction loan for a primary residence was extended to a customer by another bank. My bank is providing permanent financing. Does the right to rescind apply to the permanent financing loan?

This is a question about the right of rescission. A construction loan for a primary residence was extended to a customer by another bank. My bank is providing permanent financing. Does the right to rescind apply to the permanent financing loan?

No. This is considered a residential mortgage transaction, which is exempt from the right of rescission requirement.

Comment 4-ii to §1026.2(a)(24) of Regulation Z explains that if one creditor finances the initial construction of the consumer's principal dwelling and another creditor makes a loan to satisfy the construction loan and provide permanent financing, both transactions are residential mortgage transactions. Under §1026.23(f), residential mortgage transactions are exempt from the right of rescission requirement. (December 2019)

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