The Truth in Lending Act allows you to cancel a home loan up to three days after obtaining it from a Massachusetts lender. This is referred to as the right of rescission, and it is designed to ensure that borrowers aren’t bound by mortgage terms that they may have agreed to while under duress.
What types of loans grant you a right of rescission?
You have the right to cancel a loan that is used to refinance the current mortgage on your principal residence. However, this right is waived if you are refinancing your existing mortgage with your current lender. A business and commercial litigation attorney may provide more insight into what your rights may be after agreeing to borrow funds from a mortgage lender.
You can’t cancel loans used to acquire principal residences
Once a purchase closes, the seller is entitled to receive the proceeds from the sale. If you decided to rescind after the lender had already paid the seller, it would be unclear who is actually entitled to the money. Furthermore, it would be unclear who the legal owner of the home would be.
How do you rescind an eligible loan?
Typically, you must let your lender know in writing that you are exercising your ability to cancel the loan. You must send notice before the 72-hour window to do so closes, and it may be necessary to prove that the financial institution that granted the loan received your request to cancel in a timely manner.
If a lender violates any portion of the Truth in Lending Act, you may be entitled to compensation. In some cases, you may be allowed to get out of a contract even if more than three days have passed since it was finalized.