Which statement accurately describes transactions with rescission rights?

Which statement accurately describes transactions with rescission rights?

• A. Refinances
• B. Piggyback loans on current property
• C. Both refinances and piggyback loans on current property
• D. Neither

Answer: (C)

Rescission rights come from the Truth in Lending Act and apply to any credit transaction that is secured by the consumer’s principal dwelling. Because both refinancing an existing mortgage and taking a second loan (a piggyback loan) on the same property involve a lien on the home, both types of transactions typically carry rescission rights. The borrower generally has a brief window—three business days after closing and after receiving the required disclosures—to cancel the loan without penalty. If rescission is exercised, the creditor must return any fees or charges and void the security interest, restoring the property to its previous state. The core idea is that when the dwelling is used as collateral for a new loan, rescission rights apply, which is why both refinances and piggyback loans on the current property are described as having rescission rights.

Rescission rights come from the Truth in Lending Act and apply to any credit transaction that is secured by the consumer’s principal dwelling. Because both refinancing an existing mortgage and taking a second loan (a piggyback loan) on the same property involve a lien on the home, both types of transactions typically carry rescission rights. The borrower generally has a brief window—three business days after closing and after receiving the required disclosures—to cancel the loan without penalty. If rescission is exercised, the creditor must return any fees or charges and void the security interest, restoring the property to its previous state. The core idea is that when the dwelling is used as collateral for a new loan, rescission rights apply, which is why both refinances and piggyback loans on the current property are described as having rescission rights.