Right of Rescission Apply to Existing HELOC?

Answered by:

Question:

Does the Right of Rescission apply to a refinance of an existing HELOC with a new HELOC for a larger amount? The lender is the same institution, and there is new money.

Answer:

by John Burnett:

Yes. The increase in the HELOC line is rescindable, so there can be no disbursement from the new line except for the payoff of the old HELOC and the costs of refinancing until the rescission period has elapsed.

Answer:

by Dan Persfull:

Just a side note. There is no "no new money" exemption in 1026.15 as there is in 1026.23. Even if the LOC was not increased and it was refinanced the new transaction would have rescission.

1026.15(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.