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We received an application for a mortgage loan refinancing. The applicant is the only person listed on the title to the property that will secure the loan, but her boyfriend also lives there. Does the boyfriend have a homestead right in the property? Also, should he be included on the Closing Disclosure and provided a notice of the right of rescission? – IBA Compliance Connection

IBA Compliance Connection

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We received an application for a mortgage loan refinancing. The applicant is the only person listed on the title to the property that will secure the loan, but her boyfriend also lives there. Does the boyfriend have a homestead right in the property? Also, should he be included on the Closing Disclosure and provided a notice of the right of rescission?

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No, the applicant’s boyfriend does not have a homestead right in the property, because he does not have an ownership interest in the property. The Illinois homestead exemption generally applies only to individuals with an ownership interest in their personal residence.

Also, the applicant may waive her homestead rights without the boyfriend’s signature, since they are unmarried — Illinois law requires only that a property owner “and his or her spouse, if he or she [has] one” sign a waiver of a homestead exemption.

The applicant’s boyfriend should not be included on the Closing Disclosure or provided a notice of the right of rescission. Regulation Z requires that a Closing Disclosure be provided to a “consumer,” which is defined as a person to whom credit is offered or extended. Since credit is not being extended to the boyfriend, he should not be included on the Closing Disclosure.  Also, since the boyfriend is not an owner of the property, he is not entitled to the right of rescission, which applies only to persons with an ownership interest in the mortgaged property.

For resources related to our guidance, please see:

  • Illinois Code of Civil Procedure, 735 ILCS 5/12-901 (“Every individual is entitled to an estate of homestead to the extent in value of $15,000 of his or her interest in a farm or lot of land and buildings thereon, a condominium, or personal property, owned or rightly possessed by lease or otherwise and occupied by him or her as a residence, or in a cooperative that owns property that the individual uses as a residence. . . .”)
  • Illinois Code of Civil Procedure, 735 ILCS 5/12-904 (“No release, waiver or conveyance of the estate so exempted shall be valid, unless the same is in writing, signed by the individual and his or her spouse, if he or she have one . . . .”)
  • Regulation Z, Official Interpretations, Paragraph 38(a)(4), Comment 4 (“Section 1026.38(a)(4)(i) requires disclosure of the consumer’s name and mailing address, labeled ‘Borrower.’ For purposes of § 1026.38(a)(4)(i), the term ‘consumer’ is limited to persons to whom the credit is offered or extended.”)
  • Regulation Z, 12 CFR 1026.23(a) (“In a credit transaction in which a security interest is or will be retained or acquired in a consumer’s principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction, except for transactions described in paragraph (f) of this section. . . .”)