By what time must a borrower notify the creditor of any intent to rescind on a loan?

By what time must a borrower notify the creditor of any intent to rescind on a loan?

• A. Midnight of the second business day
• B. Midnight of the third business day
• C. Midnight of the fourth business day
• D. By the close of business on the third day

Answer: (B)

The correct answer is that a borrower must notify the creditor of any intent to rescind on a loan by midnight of the third business day. This timeframe is established under the Truth in Lending Act (TILA), which provides borrowers the right to rescind certain types of loans, specifically those that are secured by their primary residence. The three-day period allows borrowers adequate time to reconsider their decisions concerning the loan agreement after the loan documents have been signed. The rescission period begins after the borrower receives the required disclosures and the loan documents. This protective measure is designed to ensure that borrowers are fully informed about the terms and implications of their loans, minimizing the risk of making hasty financial decisions. Understanding the specific timeline is crucial for mortgage loan officers, as it impacts how they instruct borrowers on their rights and the necessary steps if they choose to exercise their right to rescind. Knowing that the notification must occur by midnight on the third business day reinforces the importance of attention to detail in lending practices.

The correct answer is that a borrower must notify the creditor of any intent to rescind on a loan by midnight of the third business day. This timeframe is established under the Truth in Lending Act (TILA), which provides borrowers the right to rescind certain types of loans, specifically those that are secured by their primary residence.

The three-day period allows borrowers adequate time to reconsider their decisions concerning the loan agreement after the loan documents have been signed. The rescission period begins after the borrower receives the required disclosures and the loan documents. This protective measure is designed to ensure that borrowers are fully informed about the terms and implications of their loans, minimizing the risk of making hasty financial decisions.

Understanding the specific timeline is crucial for mortgage loan officers, as it impacts how they instruct borrowers on their rights and the necessary steps if they choose to exercise their right to rescind. Knowing that the notification must occur by midnight on the third business day reinforces the importance of attention to detail in lending practices.