During a post closing review, it was discovered that borrower and co-borrower each acknowledged the ROR by signing the "I wish to cancel" signature line. We contacted the borrower to confirm whether it was their intent to cancel. No, their intent was never to cancel the transaction. They want their mortgage loan. Question is, what to do now? Do we obtain written statement from borrower explaining they simply signed the document on the wrong form? Do we ask borrowers to re-execute documents, does this mean the RTC period is now extended three years?

Live with it for the three years. You cannot unwind it and you can't have them re-execute it because the funding already occurred. If you put a statement in file, it may be possible to introduce it into evidence if they elect to rescind during the timeframe.

Use this as a training example. Many of the prior posts would say if they signed the wrong line, they rescinded and start again with the loan (using the same documents - get another closing). Fire the attorney who gave them the form and had them rescind.

^^^???? Rocky, could you possibly find any of the prior posts that say signing on the incorrect line is rescinding? I don't believe I've ever read that on BOL or heard it either. But, it's Friday (almost) so maybe my brain has already started it's weekend.

Notwithstanding which line they signed or whether the funding occurred or not, you can't re-execute or correct the RoR...ever. Period.
The best you could do in this instance is document what happened and why.
No matter what, your borrowers now have three years to rescind.
Which is why I would have started by contacting the closing officer rather than the borrowers.
No need to point out your error on this non-correctable document to them.

TR - Mine may be the same weekend excuse - I thought there was at least one where a ROR was incorrectly signed on the line indicating they wished to rescind, and the response was to start over as the borrower could subsequently claim that it was signed as intended and the lender cohered them to take the loan.

Tried searching and either it's too early, not using correct search words or a figment. Happy weekend

I did come across a previous post that recommended 'starting over'. In that situation, one borrower signed on the correct line and one borrower signed on the 'wrong' line. I'm not saying I disagree with the opinion of "living with it", that is what I expected the answer to be.
"If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first." In the interest of exploring interpretation, the regulation states that we have to provide a RTC, we did; we have to provide material disclosures, we did. The borrower was provided all that was necessary. How does that translate into the borrower now having 3 yrs to rescind?

Maybe I'm confused here, but I don't understand why they have 3 years to rescind in this case? They DID rescind, and are entitled to a full refund of any fees or interest they paid to anyone.

The 3 years window, in my understanding, is what happens when you don't give them their disclosures, appropriately notify them of their right to rescind or allow them the proper amount of time in which to cancel. Not when they indicate that they wanted to cancel the transaction within the rescission period (erroneously or otherwise).

Then again, I'm assuming they signed and dated this section on business day #4, in which case their right to rescind had already expired, right?

If they signed there before the end of the rescission period, however, I would think if they came back at you in 3, 5, 10, or 15 years and said "But we rescinded the transaction within the allotted timeframe," you could have an issue.

If you're worried about it, could you offer them a refinance with a lower rate, all fees paid by the bank, to get this one off the books?

Or am I thinking about this all wrong?

The only legal thing to do is start over. Everything else puts your bank in jeopardy. I worked at a bank where the FDIC found several of these before I came aboard and told the bank to refund everything including all the interest paid for five years the loan did not exist.

I'm not an attorney so I can't speak to what is the only legal thing to do.
The borrowers acknowledged that this was a mistake and they did not want to rescind the loan.
Any error on the RoR extends the rescission period to three years.
That might only become an issue if this loan were to go into bankruptcy or foreclosure.
If this happened here, I would advise contacting our attorney and suggesting they draft something for the borrowers to sign stating they know they signed on the wrong line.

Accidental Rescission

Let me change my wording from legal to prudent thing to do.

Charlie

Thanks Dan - that was the post I was thinking of, but did not realize it was 10 years ago.

How nice to see an attorney go through all the steps we did here and have them come out at the same points. Validation is a great way to start a Monday and a week!

This is actually something that you may want to watch.

http://www.bankersonline.com/forum/ubbth...073#Post1918073

Depending on how SCOTUS were to rule on this case and how a judge might view the rescission, it's possible that the borrower would have a right to a claim until the loan is paid off.

Pure speculation on my part.