TILA Construction Loans

Hello Paul,

Do construction loans require the bank to give the borrower’s two copies of the “notice of right to cancel” each like a refinance loan? They owned the land free and clear before they got the construction loan.

Thanks

Gil

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Hello Gil,

In Perkins v. Central Mortgage Corp., 422 F.Supp.2d 487, 489 (E.D. Pa. 2006) we read:

The right to rescind does not apply to residential mortgage transactions. 15 U.S.C. § 1635(e)(1); 12 C.F.R. § 226.23(f)(1). Hence, there is no obligation to deliver a notice of right of rescission in connection with such transactions…

A “residential mortgage transaction” is defined in TILA as:

a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained against the consumer’s dwelling to finance the acquisition or initial construction of such dwelling. 15 U.S.C. § 1602(w).

Thanks for the questions and construction loans do not require a notice of right to cancel.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.