If the loan officer did a round about way of disbursing funds on a home equity line of credit (open end) prior to the right of rescission expiring did they just give the loan an "unexpired right of rescission"? If so would this mean that the borrower has 3 years from the date of notice to rescind? Is this a done deal or are there further actions the bank can take to resolve the issue?

The customer has not been given the full right of rescission and yes, that would extend their rescission period to 3 years. I don't think you can do anything to change this, just cross your fingers and hope the customer does not come back to rescind. Big, big oops

That was what I thought. The right of rescission is 3 years from the date of notice or from when the transaction is completed?

After the latest of the following three events:
a. Consummation of the transaction
b. Delivery of the material Truth in Lending disclsoures
c. Delivery of the notice of the right to rescind

I would guess that in this situation, the consummation of the transaction would be the "latest" of the three.

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a. Consummation of the transaction

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That is the date the agreements granting a security interest in the home was signed.

I thought this was determined by State law? Tom - is this true in all 50 States?

§ 226.2 Definitions and rules of construction.
(13) Consummation means the time that a consumer becomes contractually obligated on a credit transaction.

Randy, this is an interesting question, because technically the mortgagor is not contractually obligated to pay until there is debt owed. However, if you can’t fund until three days after all three requirements are met and if one of those requirements is consummation (as defined in TiL) and if consummation doesn’t happen until you fund????!!!!! Catch 22

Therefore consummation must mean when the mortgagor(s) have signed the agreements (note, and mortgage or trust deed) and not when there is a contractual obligation to pay.

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I’m sure that you think you understand what the Federal Reserve has written, but I’m not certain you realize that what you read is not what they meant.

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Tom,

But when you go to the OSC it states:

2(a)(13) Consummation.

1. State law governs. When a contractual obligation on the consumer's part is created is a matter to be determined under applicable law; Regulation Z does not make this determination. A contractual commitment agreement, for example, that under applicable law binds the consumer to the credit terms would be consummation.

Not that I disagree, but that is why I asked the question. I have never research whether consummation is specifcally defined in all States.

I've always looked at consummation to be the date the parties signed the agreement to become liable for monies owed or to be owed against the agreement.

As for as the rescission problem, not sure how the loan officer advanced funds in a round about way, but he knowingly circumvented the ROR and IMO there is no way to cure that now or in the future. This loan officer would be severely reprimanded here, and his actions would be reported to the board in my quarterly compliance report.

I don't have a link but several years ago there was a FTC action against Associates where they were getting around the ROR by giving what they called Homeowner Express Loans. If this loan officer made the borrower a short term loan to be paid when the ROR expired, he basically did the same thing.

If I sound harsh about the above board report I meant to. ROR violations are not tolerated in our shop. There's too high a risk to the bank.