Have you ever heard of the three day right of rescission? If you refinanced, chances are you signed a document titled 3 Day Right To Rescind. If you do what the document says, you can get out of your refinance mortgage within three days of signing your mortgage paperwork.
Did you know that this 3 day rescission period is actually extendable to 3 years under certain circumstances? Yes, that’s right – 3 years. Okay, so do the math – if you have refinanced in the past 3 years you might qualify for this extra rescission period. This might be very important to you if you are in foreclosure or have an Adjustable Rate Mortgage – ARM – that is getting ready to adjust.
Let’s look further at what I’m saying. I am not an attorney, nor am I a person who can write with legalese but I am going to try my best to spell this out so you understand it.
How Long Is My Rescission Period
The only mortgage in the U.S. that has a rescission period is a refinance loan on a primary residence. You do not get a rescission period when you purchase a home, or refinance an investment property. If everything on your loan documents for your primary residence refinance are perfect without errors or mistakes or missing information or pages then the rescission period is 3 days.
However, if there are mistakes in your loan paperwork, then you might qualify for a 3 year rescission period. That’s right 3 years. I can hear you thinking – well when did I do my refinance? I did it 2 years ago. If so, then you might fall into this situation. This may be extremely important for you if you are facing a delinquent mortgage and foreclosure proceeding.
The other important feature of the rescission period is that it says that if you can get out of the loan you will have to pay the money back that you borrowed, however you will be able to subtract from that amount all closing costs for the refinance and all of the interest paid on the loan since it started. Yes, you read that correctly, you will get credit for all of the interest payments you have made so your payback amount will be lower than the original loan amount.
Well this is exciting, but remember you still have some work to do. What has happened to your credit? Are you going to be able to get a new mortgage? The other thing to consider is that in today’s real estate and mortgage crunch (as of April 2008), property values have declined considerably so refinancing might not be an easy option.
Now that you know what it possible, let’s look at how you might qualify for the extra rescission period. You must meet the first bullet and either of the following two bullets to have a shot at having your rescission period extended.
- The mortgage you are concerned about is on your primary residence and that it is was for a refinance.
- You must be provided an accurate Truth In Lending at settlement, or when you sign your loan paperwork that contains: annual percentage rate, the amount financed, the payment schedule or amortization schedule, the total finance charges, to total amount to pay back the loan over the life of the loan./li>
- The Notice of Right to Cancel which clearly spells out that the lender has taken a security interest in your property (gave you a mortgage), that you have the right to rescind or cancel the loan, how do you execute the notice to cancel form, what happens if you rescind, and the date when your rescission period is over. If any of these things are inaccurate there could be reason to rescind your mortgage./li>
Why Do I Have A Rescission Period?
You have a rescission period primarily to protect you. Congress wanted to make sure that you have ample time to review the signed loan documents that you got at settlement or closing. With this in mind, Congress enacted a law that gave homeowners who refinance a three day “cooling” off period. This period of time allows the homeowner a chance to really review what they signed at closing, and if they didn’t want it, they would have some time to stop it.
If you feel like you fit into this category then you are strongly urged to contact a real estate attorney, foreclosure attorney etc. to get a professional opinion. This is a highly sensitive topic and very important to your financial future so you do want to get professional guidance.
Article by Dale Stouffer, Mortgage Broker. Dale has a been a mortgage broker since 1996. This Article is designed to be of general interest and should not be considered legal advice. The specific information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal adviser.
