Questions and Answers

The general rule is that the right of rescission applies whenever you take a security interest in the consumer's principal dwelling.  One exception to the rule is for "residential mortgage transactions."  A residential mortgage transaction is basically credit extended for the purpose of the acquisition or initial construction of the consumer’s principal dwelling. 

Assuming that you are not taking a security interest in some prior dwelling, it is likely that your loan falls within the definition of residential mortgage transaction, meaning that the consumer would not have the right of rescission. 

First, the Commentary to Regulation Z says that "a loan to finance the construction of a consumer's principal dwelling on a vacant lot previously acquired by the consumer" is a residential mortgage transaction.  If we are reading your question correctly, that appears to be what the construction lender did in your example. 

Second, the Commentary also says that where "... 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."

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