Guarantors' Right to Rescind

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Question:

I have a consumer-purpose, residential purchase of primary RE transaction to an individual. The borrower has no down payment; therefore, the parents have offered to guarantee the debt and further secure their guarantee with a lien on their primary residence. I know RESPA and early TIL will not apply as to the guarantors, since guarantors are not applicants, but should the parents be given the right to rescind?

Answer:

Yes, the parents are pledging their primary residence and must have the opportunity to change their minds via a right to rescind. Also, although as guarantors they don't have to receive a copy of the early TIL disclosures, they must receive the "material disclosures" defined in Section 1026.23(a)(3)(ii) of Regulation Z, along with the required two copies of the Notice of Right to Rescind (one copy if delivered electronically after conforming to E-SIGN Act requirements).

First published on BankersOnline.com 8/27/12