Here's a loan scenario. When would the right of rescission begin?

Answered by:

Question:

When would the Right of Rescission begin in the following scenario? This involves closing of a home improvement loan. The situation is out of the norm, where documents were taken out of the attorney's office for additional signatures. Customer comes in November 15th to sign papers. However, in this case, a second signature is required on the deed of trust only, not the note, which also must be notarized and the right of rescission notice must also be disclosed to this individual. All documents in question were taken for signature. If upon return of documents, the Rescission notice was dated showing receipt as of the 15th but the D/T was signed and notarized 2 days later, for example on Saturday Nov. 17th, would your rescission period begin the Friday Nov. 16th or Monday Nov. 18th. I believe ROR should begin the latter to occur of consummation of loan documents (signing the loan documents), delivery of ROR notice or delivery of material disclosures. In this case, applicant's signing)

Answer:

The 3-day right to rescind begins with consummation and runs for three days following consummation. Regulation Z defers to state law to define consummation. In most states, consummation occurs when the consumer becomes obligated on the note. The note is the real trigger for purposes of Reg Z.

However, there are a few states that make the note unenforceable unless and until the security instrument is executed. You should check with your state's Attorney General for the best interpretation of your state's law on this.

First published on BankersOnline.com 3/11/02