WORD: Right of Rescission

And the WORD for Today Is...

Right of Rescission – a borrower has the right to decide they do not wish to proceed with the utilization of services from a particular entity which is known as the right to rescind or “change my mind.” They may change their mind about using a particular service provider altogether or decide to decline specific services being offered. There are rules associated with this right which usually include:

A. How much time is allowed to rescind;

B. What documentation is required to rescind;

C. To whom must you provide such documentation;

D. What address must be used in order to consider the rescission delivered;

E. Other pertinent information.

All of these specifics should be included in the disclosure which requires the borrower(s) signature acknowledging the information was provided and understood.

A provision in the federal Truth in Lending Act that allows borrowers to cancel certain kinds of loans within three (3) days of signing:

TILA establishes a right of rescission for any loan transaction in which the borrower’s principal dwelling is used as security. See 15 U.S.C. § 1635(a). The rescission period extends until “midnight of the third business day following consummation [of the loan], delivery of the notice [of the right to rescind], or delivery of all material disclosures, whichever occurs last.” 12 C.F.R. § 226.23(a)(3). Under TILA regulations, a creditor is required to “deliver two copies of the notice of the right to rescind to each consumer entitled to rescind.” 12 C.F.R. § 226.23(b)(1). This notice “shall be on a separate document that identifies the transaction” and shall “clearly and conspicuously” disclose the consumer’s right to rescind the transaction. Id. If the required notice or material disclosures are not delivered, the right to rescind shall expire three years after consummation. See 12 C.F.R. § 226.23(a)(3).

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You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

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