By law, borrowers refinancing their Conventional mortgage loan receive a mandatory three day period after signing their final loan documents. During this recession period, the borrower can rescind or cancel the loan and walk away for any reason whatsoever.
This is called the Right of Rescission, and it gives homeowners the absolute right to cancel a refinance until midnight of the third day after they finish signing their closing loan documents. The Right of Rescission applies to refinances of a primary residence. The Right of Rescission does not apply to any purchase mortgage loans or the refinancing of second homes/investment properties.
The rescission period starts three business days after the loan documents are signed. Business days include all days of the week, besides Sunday and recognized federal holidays.
The Right of Rescission attached to various mortgage loan products is provided on a no-questions-asked basis. However, not every financing situation will qualify for a right of rescission, such as second homes and investment properties.
How To Exercise The Right Of Rescission
For example, if you’re refinancing your mortgage and decide to cancel or rescind the loan, your three-day Right of Rescission period will begin once the following events occur:
1. You have signed the final loan documents, such as the Promissory Note
2. You have received a Closing Disclosure form (or a Truth in Lending Disclosure)
3. You have received two copies of a notice which explains your right of rescission, known as the notice of right to rescind
When a Right of Rescission is not available to a Borrower
1. Mortgage used to purchase a home
2. Refinancing of a second home
3. Refinancing of an investment property
The notice of right to rescind will include information on how to exercise the right of rescission. It will also include the form needed to complete in order to cancel the loan as well as the designated address of the creditor where you will send it.
If you have any questions about the right of rescission, please don’t hesitate to contact us at (760) 930-0569 and one of our loan officers will be happy to answer any questions.