Hello!

I am looking for some feedback from my fellow Compliance Officers in regards to whether your Bank has a borrower sign a Statement of Non-Cancellation after their rescission period expires (of course for a loan to refinance the borrower's primary residence) that evidences that the borrower did not wish to rescind the transaction?

If you do not, when do you disburse the loan proceeds to the borrower? Do you do that the day immediately following the expiration of the rescission period or what is the reasonable amount of time that you wait before doing so?

Our procedure has been that we ask the borrower to sign a Statement of Non-Cancellation after the rescission period expires to confirm they did not wish to rescind the transaction; however, we have multiple business units claiming that we are the only bank that requires this. They want to remove this requirement and fund the loan immediately the next day after the rescission period expires; however, I do not feel that meets the commentary to the rule in 1026.15(c) that states:

15(c) Delay of Creditor's Performance
1. General rule.
i. Until the rescission period has expired and the creditor is reasonably satisfied that the consumer has not rescinded, the creditor must not, either directly or through a third party:
A. Disburse advances to the consumer.
B. Begin performing services for the consumer.
C. Deliver materials to the consumer.

5. Delay beyond rescission period.
i. The creditor must wait until it is reasonably satisfied that the consumer has not rescinded. For example, the creditor may satisfy itself by doing one of the following:
A. Waiting a reasonable time after expiration of the rescission period to allow for delivery of a mailed notice.
B. Obtaining a written statement from the consumer that the right has not been exercised.

Any feedback you could provide would be extremely helpful!

Welcome to the Forum!

What you describe sounds like closed-end credit, so the applicable rules are found in Section 1026.23, not 1026.15. The standard should be the same, however. "no money shall be disbursed...until the rescission period has expired and the creditor is reasonably satisfied that the consumer has not rescinded. What is reasonable to one creditor may not be reasonable to the next, so you have to be ready to state your case during a compliance examination or during litigation. And...as we have seen on a daily basis during the past year, reasonable expectations may change from time to time as a result of temporary conditions (such as COVID.)

I would be very careful with this approach. I can tell you from past experience (years ago) that a closing attorney may have the borrowers sign this at the closing table so they 'don't have to come back in'. I had this happen to me, and they knew that I was the compliance officer for the financial institution.

Actually had this once where one of the borrowers passed away during the rescission period and lo and behold they had signed the statement saying the three days had passed ....

I agree that I have always found this to be a very dangerous practice and I have never encouraged it in any bank that I worked. You will find it pretty standard though for secondary market transactions.

We sell all on secondary and used to use the ROR form that had two signature blanks, one for receipt and one for confirmation of non-cancellation. Not getting the second one signed caused issues with secondary which wants every signature line signed.
Switched to an ROR that only has blanks for receipt signatures and disburse on the first business day after the three days expire.
No pushbacks or issues from secondary or examiners.

Thank you all!