There are several laws protecting the rights of the consumers. One such provision is the mortgage rescission rights. This has been put forth in the Truth in Lending Act (TILA). During this rescission period, the home buyer gets the chance to think over the mortgage transaction that he/she has initiated. Mortgage transaction is not complete, until the rescission period is over. Borrowers are given 3 business days to mull over a mortgage contract. Within these 3 days, borrowers have the legal rights to rescind a line of credit or a home equity loan with a new lender. Borrowers have also the right to cancel refinance contract made with another lender other than the current mortgage lender. In case a borrower cancels a deal within that time period, the lender has no right to ask any question to the borrower.
Rescission time period
The aim of creating the rights of rescission is to safeguard the borrowers from the unethical lenders. It also aims at giving the borrowers some time to think over the deal and to change their minds in case they think so. The rescission period starts the day after you sign and ends once the 3 business days are over. In case the mortgage documents are signed on Monday, then the rescission period starts on Tuesday and ends on Thursday. Here it is to be noted that Saturday is considered as a business day but Sundays and all legal holidays are not considered as business days.
What the borrowers should do in the rescission period?
The borrowers should properly utilize the rescission period. They must look for other lenders who are offering comparable loan with better terms and conditions. During this time, the borrower should thoroughly check the terms and conditions contained in the loan documents. The borrower needs to ensure that the this is the best deal available before him/her. The borrower needs to keep in mind that once the rescission period is over, he/she can noway cancel the deal and the lender has all the rights to complete the transaction.
Which mortgages have the rescission rights?
The rights of rescission can not be exercised for all types of mortgages. The rescission rights can be exercised for home equity loans and home equity line of credit. Again, if the borrower refinance a mortgage from a lender other than lender who originated the current mortgage, rescission rights can be exercised.
You can't exercise rescission rights in case you take out a new loan for the purchase of a house. If you take out a refinance loan from the same lender or if you take out a mortgage loan on an investment property, then also, you don't have the rights to rescind.