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#694 - 05/25/01 01:34 PM Right of Rescission
Angel Eyes Offline
Power Poster
Angel Eyes
Joined: May 2001
Posts: 4,599
We currently have a mortgage which we maintain the servicing for but sell the loan on the secondary market. We now are refinancing that loan with no new funds (due to lower rates) and have a new note which we are now selling to the same party on the secondary market. We file a new mortgage and release the prior mortgage. Is recission required?

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General Discussion
#695 - 05/25/01 05:50 PM Re: Right of Rescission
Lucy Griffin Offline

Diamond Poster
Lucy Griffin
Joined: Nov 2000
Posts: 1,544
Since the customer already owes that amount, there should be no rescission. The customer has no ability to dodge that debt. It would be a different matter if you were adding the borrower's home as security for the first time.

However, your fact situation is complicated by the fact that a different creditor now holds the loan. Regulation Z doesn't really speak to the situation where the loan has been sold and a different (second) creditor holds the note. However, Reg Z does define "creditor" as the party to whom the loan is initially payable. I think there is therefore a strong arguement that rescission does not arise. However, if you want to be conservative and ultra-safe, you might want to offer the right to rescind anyway. That would ensure that there were no issues to raise in the future.

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