Mortgage Rescission and Fees

If I exercise my right to rescind a mortgage, will I still be required to pay all the various fees that were assessed at closing (Bank Commitment Fee, Attorney's fee, lien search fees, etc)?

1 Answer

The general answer to your question is no, you will not be required to pay the closing costs associated with the loan. The rescission period is federal law and protects consumers inside the truth in lending also known by its acronym TIL ( http://www.fdic.gov/regulations/laws/rules/6500-1650.html#6659). This link will lead to you the TIL, and about halfway down this page you will find the right of recsission for you to read... regardless I will make a couple of points here.

I say generallly no because there are transactions that do not have recsission periods, purchase loans, constructions loans, and refinancing investment properties. In addition if refinancing with your current lender you have no rescission period unless you are taking cash out at which time the rescission period is good for 3 days and only good for the cash out portion, it is not available for the rate and term portion of the new loan. If however you were taking cash out with a different lender the entire new loan balance would be considered rescindable not just the cash out portion.

Point in fact, most of these exceptions do not come into play... and more often than not you as a consumer will have the 3 day rescission period when refinancing. Counted days are Monday through Saturday... excluded days from rescission that do not count towards the three days are Sundays and national holidays. You have until midnight on the third day to rescind. This must be down in writing and cannot be called in. Fax and email work well because the delivery date is time stamped.

Now hopefully you are not a part of this... many lenders/brokers are having clients sign commitments that they are having borrowers sign that basically says, once we lock the loan and due our due diligence if you don't decide to go through with this, or you go with another lender, you still owe us our fee for service. To be honest... if you signed a contract like this when first speaking with your loan officer (if they are going to have you sign something like this it would be early in the game), you are in for a bumpy ride, and I do not know what will happen. My gut tells me federal law would trump this type of contract however, if that lender decides to come after you... it could get messy. Lawyers phone calls etc... but honestly who wants that type of headache... even with this type of contract in place the lender would probably tuck their tail and take the loss, but there are some that definitely live to fight. In all honestly I highly recommend anyone who sees this type of contract placed in front of them (a contract involving a due diligence clause protecting the broker's fee) to simply walk away and find another broker that does not require such a contract. Most do not. Regardless this is a tangent... and probably does not apply to you.

Now that we got the bullets in your six shooter, let's make sure they aren't wet and review the Truth in Lending... http://www.fdic.gov/regulations/laws/rules/10000-1.html this link will get you to an index where you can look up whatever you like.. the top link will take you directly to rescission rights half way down the page, this last link is more general and you could use it to look up the TIL in its entirity for review.

The bottom line, if you plan on rescinding get the paperwork in by midnight on the third business day, and use a means of delivery that includes a time stamp.

Hope this is helpful.