Is Another ROR Necessary?

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Question:

A customer has a revolving line of credit with a mortgage on their home as collateral and a right to rescind was given at closing. The full amount of the loan has been used and partially paid back. If the customer wants another draw will another right to rescind be necessary at that time?

Answer:

Not if this is still in accordance with the same agreement. Verify your state laws don't vary.

Section 226.15 Right of rescission.
(a) Consumer's Right to Rescind. (1)(i) Except as provided in paragraph (a)(1)(ii) of this section, in a credit plan in which a security interest is or will be retained or acquired in a consumer's principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind: each credit extension made under the plan; the plan when the plan is opened; a security interest when added or increased to secure an existing plan; and the increase when a credit limit on the plan is increased.

(ii) As provided in Section 125(e) of the act, the consumer does not have the right to rescind each credit extension made under the plan if such extension is made in accordance with a previously established credit limit for the plan.

First published on BankersOnline.com 2/2/04