Apply Right Of Rescission - Nationwide Multistate Licensing System NMLS

1. What is the consumer's obligation after the creditor performs following rescission?

   Tender the loan proceeds or return the property received. This step completes the rescission process, aiming to return both parties to their pre-transaction status.

2. What is the HOEPA APR trigger for a first-lien high-cost mortgage?

   APR exceeds APOR by $6.5$ percentage points. HOEPA sets this threshold to flag first-lien loans with APRs significantly above average prime rates.

3. What is the required timing for the HOEPA high-cost mortgage disclosure before consummation?

   At least 3 business days before consummation. This advance timing under HOEPA ensures consumers are warned of high-cost risks before committing.

4. Which option correctly states the "business day" definition used for rescission timing?

   All calendar days except Sundays and federal legal public holidays. This definition under Regulation Z ensures the period aligns with typical business operations, excluding non-working days.

5. What event starts the 3-business-day rescission clock for a covered transaction?

   The latest of consummation, notice delivery, or material disclosures delivery. The period begins only after all key events ensure the consumer is fully informed and the transaction is complete.

6. What is the definition of a "residential mortgage transaction" for rescission purposes?

   Financing to acquire or initially construct the consumer's principal dwelling. This excludes acquisition and construction loans from rescission, focusing protection on transactions leveraging existing equity.

7. What is the HOEPA APR trigger for a subordinate-lien high-cost mortgage?

   APR exceeds APOR by $8.5$ percentage points. HOEPA applies a higher spread for junior liens to account for their subordinate risk position.

8. What is the limited exception that allows a consumer to waive the rescission waiting period?

   Bona fide personal financial emergency with a dated written statement. Regulation Z allows waiver only for urgent needs to balance consumer protection with exceptional circumstances.

9. What is the creditor's deadline to return money and terminate the security interest after rescission?

   Within 20 calendar days after receiving the notice of rescission. This deadline ensures prompt creditor action to unwind the transaction and restore the consumer's position.

10. What is the HOEPA points-and-fees trigger for a high-cost mortgage at or above the threshold loan amount?

    Points and fees exceed $5\%$ of the total loan amount. HOEPA uses this percentage for larger loans to detect excessive upfront costs indicative of high-cost lending.

11. What is the maximum time to rescind if notice or material disclosures are not provided?

    Up to 3 years after consummation (or upon sale/transfer, whichever occurs first). Extended timeframe protects consumers when creditors fail to deliver required information, capped to prevent indefinite rights.

12. What is the standard rescission period for a covered refinance under Regulation Z?

    3 business days after consummation, delivery, and required disclosures. Regulation Z provides this cooling-off period to allow consumers to reconsider credit transactions secured by their principal dwelling.

13. Which transactions are exempt from the right of rescission under Regulation Z?

    Residential purchase, refi with same creditor/no new money, most state agency loans. These transactions are exempt as they do not typically increase risk to existing home equity or involve certain protected loans.

14. What is the rescission rule for a refinancing with the same creditor that includes new money to the consumer?

    Rescission applies only to the new money portion (and related fees). Regulation Z limits rescission to new advances to avoid unnecessary disruption of unchanged loan portions.

15. What is the HOEPA "high-cost mortgage" coverage test based on APR called?

    The APR (rate spread) trigger compared to the Average Prime Offer Rate (APOR). HOEPA uses this metric to identify loans with potentially predatory rates compared to market benchmarks.

16. What is the HOEPA points-and-fees trigger for a high-cost mortgage below the threshold loan amount?

    Points and fees exceed $8\%$ of the total loan amount or a dollar cap (whichever is less). HOEPA scales the trigger for smaller loans to appropriately identify high-cost features relative to loan size.

17. Which delivery method makes a rescission notice effective: mailing, email, or receipt by creditor?

    Mailing (or otherwise sending) within the rescission period. Regulation Z deems the notice effective upon dispatch to facilitate timely consumer action without delivery delays.

18. What are the "material disclosures" for rescission purposes under Regulation Z?

    APR, finance charge, amount financed, total of payments, payment schedule. These TILA-required items are deemed essential for informed consent, delaying the rescission start if not provided.

19. Identify the rescission rule for a non-owner spouse who has an ownership interest in the principal dwelling.

    That spouse has independent rescission rights and must receive notices. Regulation Z grants rights based on ownership interest to safeguard all parties with stakes in the dwelling.

20. What is the general rule on disbursing funds in a rescindable transaction before the rescission period ends?

    No disbursement (other than escrow) until the rescission period expires. Regulation Z prohibits early disbursement to preserve the consumer's ability to rescind without complications.

21. Which property type triggers the right of rescission when used as collateral?

    The consumer's principal dwelling. Rescission rights apply specifically to protect the consumer's primary home from being collateralized in covered transactions.

22. How many copies of the notice of right to cancel must each consumer with rescission rights receive?

    Two copies per consumer. Regulation Z requires duplicates so one can be retained and the other used to exercise rescission if desired.

23. Which feature is prohibited in a HOEPA high-cost mortgage: balloon, negative amortization, or both?

    Both balloon payments (with limited exceptions) and negative amortization. HOEPA bans these features to avoid payment shocks and equity erosion in vulnerable high-cost loans.

24. If two spouses have rescission rights, what is the effect of only one spouse rescinding?

    The rescission is effective for the entire transaction. Joint ownership under Regulation Z means one party's rescission voids the whole loan to protect shared interests.

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