Bridge Loans & Waiving Right Of Rescission

Answered by:

Question:

Is the 3 day right of rescission necessary in a situation where a bridge loan is being written for a couple to buy a new home and the security on the loan is a D.O.T. on the home they have listed to sell? If so, can the customers elect to waive their right of rescission?

Answer:

12 CFR Section 226.23 Right of rescission.

When the consumer is acquiring or constructing a new principal dwelling, any loan secured by the equity in the consumer’s current principal dwelling (for example, a bridge loan) is still subject to the right of rescission regardless of the purpose of that loan.As to the waiver, it must be for a bona fide financial emergency. This isn't a defined term, but you should apply any exceptions cautiously.

First published on BankersOnline.com 11/04/02