Can a borrower (who has been notified that they have a right to rescind - 12 months after closing) just stall until 2.99 years has passed and then decide to rescind?

(3) The consumer may exercise the right to rescind until midnight of the third business day following the occurrence described in paragraph (a)(1) of this section that gave rise to the right of rescission, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, 36 whichever occurs last. If the required notice and material disclosures are not delivered, the right to rescind shall expire 3 years after the occurrence giving rise to the right of rescission, or upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first. In the case of certain administrative proceedings, the rescission period shall be extended in accordance with section 125(f) of the Act.

So are you saying that the borrower can still hold us hostage for 24 more months on this and they wouldn't have some obligation to act/rescind when notified of the error?

You are going to get several opinions on this. Some, as I do, feel providing the ROR after the fact does not cure the problem, others will. So IMO they have the 3 years to rescind.

Just keep in mind the only opinion that will truly matter will be the judge's and/or jury's.

I have never dealt with a RoR issue where someone tried to rescind. But I was discussing this with one of my law professors this week and he cited several cases in which the borrower was able to rescind because of a failure to provide the RoR at close. I will paste a case.

Soccer Dad: Check out the Commentary to 226.23(a)(3)- Unexpired right of rescission. Then contact your bank's attorney.