The right to rescission is described in the Truth in Lending Act, which is a federal law. The right of rescission allows borrowers to rescind specific types of loans up to three days after signing. Borrowers can rescind for any reason, and lenders will not inquire as to why they chose to do so. When a borrower exercises his right of rescission, lenders are required to relinquish their claim to the property and return any fees paid to the borrower within a specified amount of time. The right of rescission only applies to certain loans including home equity loans, lines of credit and refinance loans obtained through new lenders. Consumers are protected from deceitful lenders since they have three days to fully process the transaction and can change their minds if they choose. If borrowers are unsure if their loan allows a right of rescission, they should inquire with the lender before signing.
