Under the Truth in Lending Act, a consumer who uses his or her home or "principle dwelling" as collateral for a non-purchase-money loan may cancel or "rescind" the loan within three business days. This right to rescind is available only to a consumer who uses his or her home as collateral for a new loan or to refinance a loan with a new creditor. The right to rescind is not available to a consumer who:

(1) obtained the loan to buy or build the home;

(2) has consolidated or refinanced a loan already secured by the home with the same creditor, without borrowing additional funds; or

(3) obtained the loan from a state agency.

A creditor is required to deliver two copies of a notice of the right to rescind to any consumer who has a right to rescind under the Act.

Exercising the Right to Rescind

A consumer must exercise the right to rescind by delivering a written notice of rescission to the creditor's place of business by midnight of the third business day following the later of:

(1) the date on which the loan contract was signed;

(2) the date on which the consumer received the notices of the right to rescind; or

(3) the date on which the consumer received all material disclosures required by the Act.

Saturdays are business days for the purpose of the Act; Sundays and legal holidays are not business days. A notice of rescission is delivered when it is mailed or telegraphically transmitted.

The right to rescind may be exercised for up to three years if the creditor has failed to deliver to the consumer the notices of the right to rescind or the material disclosures required by the Act.

Upon rescission, the security interest in the home is void. The creditor must return the consumer's money or property and take steps to terminate the security interest within 20 calendar days of receipt of a valid notice of rescission.

Waiver

A consumer may waive his or her right to rescind if the consumer obtained the loan in connection with a bona fide personal financial emergency and the consumer waived the right to rescind in writing. If a consumer waives the right to rescind, the consumer is bound by the terms of the loan contract.

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