Thread Options
|
#2197762 - 11/08/18 03:58 PM
ROR fix?
|
10K Club
Joined: Jul 2003
Posts: 17,400
|
This was in a compliance newletter I got yesterday. I always thought an ROR error was unfixable no matter what. Am I correct that the underlined portion below is just wrong and there's no way to close the three year window? How do you cure if you forget to give rescission on a transaction? There's not really a "cure." You will always have the violation for not giving the disclosure as required and disbursing funds too early. However, you have not triggered the rescission period until you have given all appropriate disclosures. So, you should give the rescission notice, and the material disclosures if you have not done so, as soon as you find the error and this will start the three day period. Remember that the material disclosures for closed-end are the Closing Disclosure, two copies of the rescission notice, and the HOEPA notice, if applicable, and, if you have a prepayment penalty, you must offer an alternative transaction. For open-end, you need only give the HELOC Account Opening Agreement and two copies of the rescission notice. Once the three business days have passed, if the borrower does not rescind, then the rescission window closes, and all is well. Again, it doesn't remove the violation, but it closes the three year rescission window that would have remained open had you not given the rights.
|
Return to Top
|
|
|
|
#2197764 - 11/08/18 04:03 PM
Re: ROR fix?
Truffle Royale
|
10K Club
Joined: Sep 2002
Posts: 13,965
TN
|
That has always been my impression, Truffle - although I have heard others that differ.
_________________________
My Opinions Only
|
Return to Top
|
|
|
|
#2197770 - 11/08/18 04:18 PM
Re: ROR fix?
Truffle Royale
|
10K Club
Joined: Sep 2002
Posts: 13,965
TN
|
I apologize - my impression is similar to yours - that it can't be fixed after the fact. I should have been more clear.
_________________________
My Opinions Only
|
Return to Top
|
|
|
|
#2197791 - 11/08/18 05:44 PM
Re: ROR fix?
Truffle Royale
|
100 Club
Joined: May 2016
Posts: 241
|
I agree that the violation for disbursing funds prior to expiration of the ROR cannot be fixed, but the 3-year rescission period can be closed. The regulation specifically states that a 3-day rescission period begins the later of three events. See the reference below. If providing the ROR disclosure is the last of those events to take place then the rescission period ends 3 days later even if the ROR disclosure was provided days or months after loan funding.
12 CFR 1026.23 (a)(3)(i) The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last. 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.
_________________________
Just my opinion, I could be wrong. - Dennis Miller
|
Return to Top
|
|
|
|
#2197848 - 11/08/18 08:42 PM
Re: ROR fix?
Truffle Royale
|
10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
|
FWIW, I agree with Docs. You can't undo the violation(s), but you can stop the bleeding by ending the rescission period as described.
But -- and this is a BIG BUT -- Sending the rescission notice can be risky if you have a disgruntled borrower who may decide to rescind just to make life difficult. The lender loses all the interest paid by the borrower since closing. There are circumstances where sending the rescission rights notice may be a bad idea, and it certainly needs to be carefully considered before going in that direction.
Last edited by John Burnett; 11/08/18 08:45 PM.
_________________________
John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
|
Return to Top
|
|
|
|
#2252087 - 04/09/21 01:23 PM
Re: ROR fix?
Truffle Royale
|
Platinum Poster
Joined: Dec 2008
Posts: 729
Tennessee
|
OK....this is throwing me for a loop!!!
We disbursed funds a day early for a HELOC
I just had one of our two different consulting companies tell me that we can reissue the rescission notice and it would stop the 3 years....
The initial poster is talking about HELOCs but Docs is referring to closed end rescission......
Can this really be done for both open and closed-end rescission.....
If we only did this on a case-by-case basis (when an error is caught very close to closing) could it in anyway be UDAAP??
This has just really thrown me....
|
Return to Top
|
|
|
|
#2252097 - 04/09/21 02:52 PM
Re: ROR fix?
Truffle Royale
|
10K Club
Joined: Sep 2002
Posts: 13,965
TN
|
I have never heard of being able to 'fix' a rescission issue once the funds have been disbursed.
_________________________
My Opinions Only
|
Return to Top
|
|
|
|
#2252102 - 04/09/21 03:24 PM
Re: ROR fix?
Compliance504
|
Power Poster
Joined: Nov 2004
Posts: 3,238
|
You could ask the consulting company to explain why they believe the rescission period is extended for 3 years in this circumstance, and then why they believe that providing a new rescission notice would change that.
_________________________
Nobody's perfect, not even a perfect stranger.
|
Return to Top
|
|
|
|
#2252121 - 04/09/21 05:26 PM
Re: ROR fix?
Compliance504
|
10K Club
Joined: Oct 2000
Posts: 10,180
Toano, VA
|
We disbursed funds a day early for a HELOC How much was disbursed and how long has it been outstanding? Read John's comment carefully: "the lender loses all the interest paid by the borrower since closing." In a closed-end credit (except for multiple advance loans like construction), the interest clock has been running on the full loan amount since closing. Unless the error is caught immediately, a sizeable amount of interest has accrued (whether or not paid.) If the customer rescinds, the lender eats it all...plus all the up-front fees. Whether or not to attempt a "cure" is a gamble. If there's a BIG pile of interest sitting there, your decision will very likely be to let sleeping dogs lie. HELOCs are open-end, so the interest clock may be running on just a small portion of the line. The lender would still eat all of the interest accrued since closing, but the "pile" could be small enough that you're willing to risk a late rescission in order to cut off the ongoing exposure.
_________________________
...gone fishing.
|
Return to Top
|
|
|
|
|
|