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#504549 - 02/24/06 08:52 PM Waving Rescission
Piano Man Offline
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If an appliaction was taken on 2/9 and on 2/17 the customer waived his right to rescend due to a court order on the 17th, would that be considered a financial emergency?
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#504550 - 02/24/06 09:07 PM Re: Waving Rescission
Piano Man Offline
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Just to make this better, he wasn't even given the form to sign. He just waived it at closing to get his money.
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#504551 - 02/24/06 09:15 PM Re: Waving Rescission
Dan Persfull Offline
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My first response is no, but what was the court order?
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#504552 - 02/24/06 09:21 PM Re: Waving Rescission
Piano Man Offline
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It was to pay his ex-wife her half of the house in a divorce settlement.
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#504553 - 02/24/06 09:41 PM Re: Waving Rescission
David Dickinson Offline
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I doubt that this was something that just popped up. Poor planning does not equal a "financial emergency".

Quote:

Just to make this better, he wasn't even given the form to sign. He just waived it at closing to get his money.



To document the modification or waiver, the consumer must give a dated, written statement specifically modifying or waiving the right and also include a brief description of the emergency. Remember also that each consumer who is entitled to rescind must sign the waiver statement. Preprinted forms may not be used to waive the right to rescind. Refer to Section 226.23(e) (if this is a closed-end loan).
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#504554 - 02/24/06 09:50 PM Re: Waving Rescission
Rocky P Offline
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Florida
Quote:

It was to pay his ex-wife her half of the house in a divorce settlement.



If there was a change of ownership (he gets the house in his name only from joint ownership) then rescission would not apply.

Ooooops - David corrected this mis-statement. See below
Last edited by Southern Banker; 02/25/06 02:53 AM.
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#504555 - 02/24/06 09:53 PM Re: Waving Rescission
Dan Persfull Offline
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I agree this is not a financial emergency, poor planning yes. If the court order was issued on the 17th, the court order would not have required the buy out of the ex-spouse as of the date of the court order. These type court orders will give the person a reasonable amount of time to make the financial arrangements. IMO you have a rescission violation.
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#504556 - 02/24/06 09:54 PM Re: Waving Rescission
David Dickinson Offline
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Quote:

If there was a change of ownership (he gets the house in his name only from joint ownership) then rescission would not apply.



Southern Banker: This is not accurate. Read the Commentary to 226.2(a)(24) - comment #5. It clearly states that rescission DOES apply to transactions to buy out a joint owner. The "logic" is your borrower can lose their already earned half interest in his home.
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#504557 - 02/25/06 02:50 AM Re: Waving Rescission
Rocky P Offline
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David, thank you.
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#504558 - 02/25/06 02:54 AM Re: Waving Rescission
David Dickinson Offline
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You're welcome. That's what's great about BOL - we're all here to help each other out. I've been pointed in the right direction a number of times.

BTW, I always recommend that people thoroughly read and then tab the page that defines "Residential Mortgage Transactions" [Commentary to 226.2(a)(24)]. This is my most well worn page. It provides clarification on many issues.
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#504559 - 02/25/06 09:23 PM Re: Waving Rescission
A D Virr Offline
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Derry, NH
David, I agree with you but I would like to point out to the other participants in this thread that Regulation Z provides the borrower(s)the right to waive or modify the right to rescission and it is they who must determine whether or not it is a financial emergency.
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#504560 - 02/26/06 01:35 AM Re: Waving Rescission
Truffle Royale Offline

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Can anyone verify, chapter and verse, if A D's post is correct? I'm not at the point that I have the regs here at home to check.

IMHO, if borrowers could determine financial emergencies the floodgates on immediate recissions would be flung wide.

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#504561 - 02/26/06 02:05 AM Re: Waving Rescission
Kathleen O. Blanchard Offline

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Problem is that it is not that clear cut as stated here. The staff interpretations (Fed) state:

15(e) Consumer's waiver of right to rescind.

"1. Need for waiver. To waive the right to rescind, the consumer
must have a bona fide personal financial emergency that must be
met before the end of the rescission period. The existence of the
consumer's waiver will not, of itself, automatically insulate the
creditor from liability for failing to provide the right of
rescission."

I do not have all info with me but I recall Fed interpreptations that give examples of what is acceptable. Bank's aren't going to take the chance of being overruled and therefore subject to a 3 year rescission. If it were that easy, no one would take the rescission period. Customers and lenders constantly try to waive rescission.
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#504562 - 02/26/06 02:08 PM Re: Waving Rescission
A D Virr Offline
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Derry, NH
For the record, I do not advocate banks allowing this on a regular basis but the consumer's position for waiving or modifying should carefully weighed by the bank. The cite is directly from 226.23(e) where it states..."(e) Consumer's waiver of right to rescind. (1) The consumer may modify or waive the right to rescind if the consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency. To modify or waive the right, the consumer shall give the creditor a dated written statement that describes the emergency, specifically modifies or waives the right to rescind, and bears the signature of all the consumers entitled to rescind. Printed forms for this purpose are prohibited, except as provided in paragraph (e)(2) of this section.

I believe that there must indeed be the risk of financial loss as established by the consumers statement of reasons.
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#504563 - 02/27/06 02:39 AM Re: Waving Rescission
Dan Persfull Offline
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Unfortunately if the borrower deems it a financial emergency the Reg is written to put the burden on the bank to decide if it is a bona-fide emergency, as evidenced by the following from KB's cite:

The existence of the consumer's waiver will not, of itself, automatically insulate the creditor from liability for failing to provide the right of rescission.

If a person is going to lose $100,000 because they don't close a loan by a certain date is not a bona-fide personal financial emergency, it's just a bona-fide failure to adequately plan.

IMO, the bona-fide personal financial emergency must be an emergency that will affect the physical well being of the borrower or their family where they do not have the immediate cash to pay for the emergency.
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#504564 - 02/27/06 02:55 PM Re: Waving Rescission
A D Virr Offline
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Derry, NH
Dan; I absolutely agree that the reason for waiving or modifying the ROR must be a bona fide reason and not just the failure to plan a closing in time. I have and will remain very opposed to suggestions to waive or modify the ROR; but I also think that the lender needs to give serious consideration to such requests to determine that it is a bona fide reason. I also think that in such cases where it can be determined to be so, that the Right to Rescind should still be offered and acknowledged.
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#504565 - 02/27/06 04:23 PM Re: Waving Rescission
bgehres Offline
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What if there was no new money, even if you had a change in title? Would rescission still apply?

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#504566 - 02/27/06 04:45 PM Re: Waving Rescission
Dan Persfull Offline
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Bloomington, IN
Quote:

I have and will remain very opposed to suggestions to waive or modify the ROR; but I also think that the lender needs to give serious consideration to such requests to determine that it is a bona fide reason.




Alan, I agree 100%. I was only trying to point out that the burden lies with the financial institution. If they agree to waive the ROR and it was not a true bona-fide financial emergency then they face the consequences of not providing the ROR.

I may claim losing $100,000 today a bona-fide emergency - but when you waive my ROR and my deal goes south and I can't pay - my story will change when you try to foreclose and I will claim that I was improperly allowed to waive my ROR.
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#504567 - 02/27/06 06:25 PM Re: Waving Rescission
HRH Okie Banker Offline
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Oklahoma
I've had customer's want to waive based on the rate of the old loans vs the interest rate on the new loan (NOT)

I've had a customer waive based on the fact that upon receipt of the money they were flying the wife to a special hospital for cancer treatment and the file was documented with evidence from a doctor. (YES)

I was always taught that the emergency should be life or death or the loan is for a new heater and it is -10 degrees outside.
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#504568 - 02/28/06 03:07 AM Re: Waving Rescission
David Dickinson Offline
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Quote:

What if there was no new money, even if you had a change in title? Would rescission still apply?



Please read my post again:
Quote:

Read the Commentary to 226.2(a)(24) - comment #5. It clearly states that rescission DOES apply to transactions to buy out a joint owner. The "logic" is your borrower can lose their already earned half interest in his home.



It doesn't matter if the previous loan was with the bank (no new money). Reg Z requires a RofR for this new transaction.
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