Rescission

Rescission is the legal right to cancel a contract and restore the parties to their original positions as if the contract never existed.

• Voids the contract
• Returns money and property to original owners
• Must be exercised within a specific time period
• Often applies to consumer protection laws

• Applies to refinances of a principal residence
• Borrower has 3 business days to rescind
• Does not apply to:
  • Purchase loans
  • Investment properties
  • Second homes

• Clock starts after the last of:
  • Loan closing
  • Receipt of TILA disclosures
  • Receipt of notice of right to rescind
• Includes Saturdays, excludes Sundays and federal holidays

• Loan is canceled
• Lender must return fees
• Borrower returns loan proceeds (if received)

• Rescission
  • Based on statute or law
  • Automatic right within timeframe

• Cancellation
  • Based on contract terms

• Remember 3 business days
• Applies only to owner-occupied refinances