I have several lenders that often want to correct a rescission document when an error has been made. The most common error is that the wrong rescission form has been used. The other issue is when rescission is not given at all but is applicable. I have had different compliance people provide varying answers.

How do many of you handle these situations?

There was a recent court ruling that more or less said using the wrong form (ROR -for opening LOC vs. Refinancing, for example) did not automatically in and of itself open up the rescission period. With that said, I would re-train on the topic and be sure your lenders understand which form to use in which situation or, if possible, set up your software to generate the correct form.

If rescission was required and it was not provided, there is nothing you can do to correct it. Just hold your breath and hope the consumer does not realize the error. I also, report it the board as a possible loss and re-train the lender.

Hope that helps!

Do you by chance remember the name of the court case?

Santos/Rojas vs. Doral Mortgage Corporation,
(United States Court of Appeals for the First Circuit

It is the CourtWatch section of this website. I don't know how to do a link or I would have linked it. Sorry!

Also- I don't have access to Shepardize the case - so I can't say this is still good law. Just an FYI.

http://www.bankersonline.com/infovault/courtwatch.html#santosrojasdoral

Several rescission cases are in there.

I have been looking back through old posts looking for a ROR issue that we are having. I am sure there is one out there, but I can't locate it.

We did a loan and the doc system did not print a ROR form. The loan closed and was funded. It was later participated out. The participating bank found that we did not have a ROR form. This is where the problem starts. I feel the ROR is not a curable issue. It was done incorrectly and we need to take the blame for it. My lender is telling me there is another school of thought out there that if we give a valid ROR disclosure now and wait our three days we will only be exposed for the three days and not the next three years. I can't find anything out there to support giving the ROR now. Can anyone help?

There is that chain of thought out there by some, I'm not one of them though.

The purpose of the ROR is to allow the consumer to "back" out of the transaction without being obligated on the transaction or incurring any costs.

If you wait until the loan is funded to provide the ROR then the consumer most likely has already spent the money for the intended purpose and since they have to return the money if they rescind now they really don't have an option unless they have the reserves to repay the loan. Whereas if they were afforded the ROR before funding they could rescind if there were an issue they felt was not right with the transaction without the burden of having to return the money. So by funding the loan without providing the ROR you have effectively and inappropriately waived their right to rescind.

Just my thoughts.

That is how I feel, it is what it is, and not correctable. Compliance is always a learning experience and someone out there may have thoughts that could lead me to chance my opinion of this situtation. Thank you.

I totally agree with Dan on this issue. There is no going back on the ROR. It cannot be redone or regiven.

If you have a loan go bad, the first thing the attorneys look at is the ROR. If there's an error on it they're like sharks going after it as a basis for a faulty loan and a means to get the borrower out from under the debt.

Given the number of cases out there like this, I'd be interested in knowing what this school of thought is using as the basis for their notion.

FWIW - I agree with Dan and Truff. I 'googled' 'rescission lawsuits' last week and a lot of stuff popped up. You might try that and show it to your lender.

The basis for this argument is from when the ROR begins, the later of when the consumer receives the material disclosures, consummates the loan or receives the notice of the right to cancel.

However, once you fund the loan without providing the ROR you have violated 226.23 and you cannot correct that violation. How can you, you can't take the funding back.

And as I said earlier, whether intentionally or unintentionally, the FI "traps" the consumer into the loan if they fail to provide the ROR at consummation and then provide it several days or weeks after funding because 99.9% of the time the consumer cannot rescind because they won't have the means to repay the funds. Therefore the FI circumvented the ROR by taking it on themselves to inappropriately waive the consumer's ROR by funding the loan.

Again just my thoughts.

The following is an email exchange from a couple of years ago, when you read it please note that it states "bank attorneys" disagreed with the 5th Circuit.


You have identified a gray area. I've come across only a single case on this issue (I think it was in the 1980s) in the 5th Circuit. The judge said something like once the rescission requirements were violated, there was no going back. The barn door is open, the horses left and the rescission period would run the full three years.

Bank attorneys I've talked to have said that the 5th Circuit's decision was a wrong one. They read Regulation Z to say that the rescission period ends three full business days after the latest of three events (consummation, delivery of rescission notices and delivery of material disclosures). Under that approach, the lender need only "cure" the violation by delivering correct disclosures and waiting three full business days for the rescission period to end.

Essentially, there are two rescission provisions in Regulation Z that appear to be contradictory. One states the rescission runs only three days if certain conditions are met and the other states the period must run for three years, with no mention of what happens if all conditions are finally met. We have no legal guidance on this issue, as far as I know, except for the 5th Circuit case.

If a creditor identifies a problem with rescission notices, there is another issue involved, concerning whether or not redisclosure is voluntary or mandatory. When disclosures are not made when required (e.g., the initial TILA disclosure required to be delivered before consummation), most or all of the banking agencies do not require the lender to redisclose. Consummation has already occurred, so the only purpose of redisclosure would be to tell the consumer that the original disclosure was in error, thereby tipping the consumer off and possibly resulting in a law suit. The TILA and Reg Z do not require redisclosure (unless the creditor takes steps to avoid civil liability), so it's generally a management decision whether to redisclose. With rescission, however, Regulation Z says that the creditor "shall" provide rescission notices. It doesn't say when those notices must be delivered so if the error is identified 5 years after consummation, presumably the lender still has a legal obligation to deliver those disclosures to the consumer. As I recall, in the early 90s the FDIC required its banks to send out corrected rescission notices and the other agencies did not. The other agencies left it up to bank management.


The best offense (defense) is do the darn thing right to begin with. Contrary to popular belief it's not rocket science.

What if the customer dated the discloure wrong...with a date of closing or earlier? Should this be re-disclosed?

No. Once it's given it's done. There's no going back to correct any part of it. The best you can do is document the file and pray the loan doesn't go sour.

That said, are you talking about the confirmation of receipt of the RoR signature or the confirmation of non-cancellation signature?
The only signature that's required is the confirmation of receipt.
We got rid of the dual signature forms a few years back just because of instances like this.
I'd suggest you contact your forms provider and do the same so you don't get stuck this way again.

If the form was executely properly with the exception that the Unit# was left off the address (the rest of the paperwork for the loan is correct and includes the Unit#) is this something that is correctable/needs correction, is it a violation or can we just proceed with the form as is? Thanks!

I would not correct that.