Some mortgage transactions are subject to a three day "cooling off" period allowing the borrower to essentially back out of the loan before the money is actually received. I found an article that clearly explains what types of loans are subject to this cooling period, and what types are not - and why.
Originally set up to protect borrowers from unethical business tactics by lenders and mortgage professionals, the laws also provide for borrowers who may wake up and decide they have made a bad financial decision. But more often than not - it's being used to undo a bad financial decision. I have not seen this right excercised very often, but when I have - it was usually not due to fraudulent activity on the part of the lenders. But it is comforting to know - especially with my week long report on foreclosure scams (which often involve equity loans, in which these laws and rights apply) - that you can consult an attorney with the paperwork that you signed, and you would have three days to "cancel" the loan. Read the article by Holden Lewis, of Bankrate.com
It's actually a reality check. I can understand the young kids making quick descisions, such as a drunken choice of what to pierce . . . And even marriage has a "cooling off" period of it's own - during which the marriage can be annulled. But an escrow takes a while - if you can see the train wreck coming for 30-60 days, geez, get out of the way! Don't wait for it to hit you
1. The right of recission is used in New York in connection with refinances that are done in a certain manner. The problem here as in all loans is that the consumers are encouraged not to have an attorney and most know little more after they have gone through the transaction than they did before.
There is a lot going on at a closing. How many people actually stop to read what they are signing? How many people actually stop to varify the calculations?
If you actually step back from the closing table and watch what is going on you will see that for the most part, people sign what they asked to sign with few if any questions and pay what they are asked to pay. A three-day right of recission rarely changes this.
In almost thirty (30) years of doing loan closings, I have had one (1) person rescind.
Posted at 7:11AM on Jun 17th 2006 by Karen B. Schleimer