Who does the Right of Rescission Apply to?

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Question:

Who does the right of rescission apply to? If a husband and wife own a home and the husband's mother lives with them but is not on the deed, would the mother have ROR if the house was being used as collateral on a car loan the mother was applying for?

Answer:

Answer from Dan: Sec. 226.23 Right of rescission.

(a) Consumer's right to rescind. (1) In a credit transaction in which a security interest is or will be retained or acquired in a consumer's principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction, except for transactions described in paragraph (f) of this section.

If the mother has no ownership interest in the property then she does not have rescission rights under Reg. Z.

Answer:

Answer from Andy: There is a distinct difference between Reg Z and TiLA. You may be thinking about the difference when you thought of the question.

You should follow the Reg Z rules as the FRB had the authority to interpret TiLA when they wrote Dan's quote above. But FYI TiLA says, "In the case of any consumer credit transaction in which a security interest is or will be retained or acquired in any property which is used as a principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction."

First published on BankersOnline.com 10/24/11