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Right of Rescission 03/16/2020

The Truth in Lending Act (TILA) is a federal law in the United, created in 1968. According to Investopedia, TILA's purpose is "to help protect consumers in their dealings with lenders and creditors." The Right of Rescission is specifically meant to allow consumers to back out of certain transactions with lenders within a three-day window with no questions asked. Once the rescission has been made, "the lender must give up its claim to the property." The lender then has 20 days to refund all fees. 

Now, the ability to rescind does not apply to all mortgages. For instance, if you are applying for a first-time mortgage, the right of rescission does not exist. However, refinances on that same home will have a rescission option. The right of rescission also applies to home-equity lines. SFGATE states "you'll have three business days in which to change your mind and rescind it." It should be noted that the Right of Rescission does not apply to business loans or nonprimary residence loans. 

It is possible to waive your Right of Rescission. On rare occasions when there is a cash-out refinance, a borrower can waive rescission in order to receive their money faster. In order to do this, there must be a demonstrated emergency that requires immediate access to the cash. Lenders are not all too quick to allow borrowers to this. Whatever the "emergency" is, the task of determining that falls squarely on the shoulders of the lender. 

The Right of Rescission was created specifically to help protect borrowers from less-than forthright lenders. Ideally, you will never have a need to use the Right of Rescission. Hopefully, it is enough to know that such a thing exists so you can rest easy. And remember, you can always potentially waive it in case of a genuine emergency.