Spouse's Name on the Right of Rescission?

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Question:

A spouse's name is not on any real estate loan documents except for the mortgage for homestead rights. Should the spouse's name be on the right of rescission?

Answer:

If the transaction is subject to a right of rescission and if the security interest is in the non-obligated spouse's principal dwelling, he or she has rescission rights if he/she signs the security agreement (mortgage), even if he or she will have no obligation under the promissory note. Comment 23(a)(1)-2 explains that "To be a consumer within the meaning of Section 226.2, that person must at least have an ownership interest in the dwelling that is encumbered by the creditor's security interest, although that person need not be a signatory to the credit agreement. For example, if only one spouse signs a credit contract, the other spouse is a consumer if the ownership interest of that spouse is subject to the security interest."

First published on BankersOnline.com 5/16/11