California Real Estate SalespersonFinancingMedium
A borrower refinances the mortgage on their owner-occupied primary residence with a new lender. Under the Truth in Lending Act, the borrower generally has which right regarding this transaction?
- ANo right of rescission because a lien already existed on the property
- BA 7-day right to rescind that applies to all mortgage transactions including purchases
- CA 3-business-day right to rescind the refinance transaction
- DA 10-day right to rescind if the interest rate exceeds 8%
Show answer & explanationAnswer & explanation
Correct answer: C. A 3-business-day right to rescind the refinance transaction
TILA grants a 3-business-day right of rescission for non-purchase-money loans secured by the borrower's principal residence, such as refinances and home equity loans, but this right does not apply to purchase-money mortgages.
Why the other options are wrong
- A. The rescission right applies specifically because it is a refinance, regardless of the existing lien.
- B. Purchase-money mortgages are exempt from the TILA right of rescission.
- D. There is no interest-rate threshold triggering a special rescission period under TILA.
TILA Right of Rescission
TILA gives borrowers a 3-business-day period to cancel certain non-purchase-money loans secured by their primary residence, such as refinances.
- Applies to refinances and home equity loans on primary residence
- Does NOT apply to purchase-money mortgages
- 3-business-day period begins after signing and receiving disclosures
Memory trick: Refinance? Right to rescind in 3 days.