In a credit transaction (other than a residential mortgage transaction) in which a security interest is or will be retained or acquired in a consumer’s principal dwelling, each consumer whose ownership interest is or will be subject to the security interest has the right to rescind the transaction until midnight of the third business day following consummation, delivery of the notice of the right to rescind or delivery of the Truth-in-Lending Disclosure Statement, whichever occurs last. See the Notice of Right to Rescission forms located at the end of Chapter 15.
To exercise the right to rescind, the consumer must notify the creditor of the rescission by mail, telegram or other means of written communication. Notice is considered given when mailed, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor’s designated place of business.
A residential mortgage transaction is exempt from the right of rescission under Reg Z. However, refinancings of residential mortgage transactions or a consolidation by the same creditor also is excluded, but the right of recission still attaches to the extent the refinancing or consolidation exceeds the unpaid principal balance, unpaid finance charge and costs of refinancing or consolidation [12 C.F.R. §226.23(f)(2)] Home improvement loans are subject to the right of rescission. See Chapter 15, “Home Construction and Improvement Lending”.