HELOC - Right to Cancel Not Provided

Posted By: Anonymous

HELOC - Right to Cancel Not Provided - 11/03/21 05:37 PM

NO FEE HELOC

Right to Cancel NOT provided to a spouse with "martial interest" in the personal dwelling.

My understanding there is no way to correct this - A draw has already been made on the HELOC -

Is this correct?
Posted By: Dan Persfull

Re: HELOC - Right to Cancel Not Provided - 11/03/21 07:17 PM

Define "marital interest".

If the spouse is not on title they do not have rescission rights under Reg. Z. State law may be different however.

From 1026.2

2. Rescission rules. For purposes of rescission under ยงยง1026.15 and 1026.23, a consumer includes any natural person whose ownership interest in his or her principal dwelling is subject to the risk of loss. Thus, if a security interest is taken in A's ownership interest in a house and that house is A's principal dwelling, A is a consumer for purposes of rescission, even if A is not liable, either primarily or secondarily, on the underlying consumer credit transaction. An ownership interest does not include, for example, leaseholds or inchoate rights, such as dower.
Posted By: Anonymous

Re: HELOC - Right to Cancel Not Provided - 11/03/21 08:09 PM

The spouse with "marital interest" signed the Deed of Trust.
Posted By: Skittles

Re: HELOC - Right to Cancel Not Provided - 11/03/21 08:55 PM

It appears that she has an ownership interest in the property. If that is the case and she didn't receive the rescission notice timely she now has three years to rescind the transaction. You can't unring the bell.
Posted By: Dan Persfull

Re: HELOC - Right to Cancel Not Provided - 11/04/21 07:24 PM

The spouse with "marital interest" signed the Deed of Trust.

That statement does not define if "marital interest" is referring to state dower rights or if they are shown as a property owner on the deed. Signing the DOT/Mortgage does not necessarily show ownership.

If they do have an ownership in the property with rescission rights then as Skittles said that spouse has 3 years to rescind any advances (from the date of the advance) made against the HELOC.

Going forward you could provide a Right to Cancel Notice to that spouse each time an advance is requested which would delay the advance for 3 business days. Not doing so gives that spouse 3 years from the date of the advance to rescind it. How you make that delivery and/or track it is going to be a nightmare.

You may want to talk to the bank's legal counsel that is versed in Reg. Z to see if they could possibly draw up a rescission notice that can be given to the affected spouse that will cover future advances from that date.