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Right of Rescission: Loan Modification Agreement For A Home Equity Fixed Rate Loan
Answer by John Burnett, BOL Guru
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Question: Can we offer a loan modification agreement for a Home Equity Fixed Rate Loan whereby the current loan balance remains the same but the rate and term (months) of the loan decrease (which causes the monthly payment to increase because of the shorter term)? If so, can this transaction be rescinded (does the three-day right to cancel apply) because we have modified the terms by reducing the term of the loan and increasing the monthly payment?
Answer: Assuming that state law will allow such a modification, and that the customer agrees in writing, you can do so.
The transaction would not be rescindable, because there is no new obligation created, and no increase in the borrower's liability.
First published on BankersOnline.com 04/07/03
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