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Everything you ever wanted to know about RTCs
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Everything you ever wanted to know about RTCs
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Posted by GOLDGIRL/CA on 10/8/12 1:01am
Msg #437620

Everything you ever wanted to know about RTCs

There was a brief discussion in an earlier thread about when a RTC can be waived or excepted. I started to heavily edit this to get to the main points but decided to post the whole thing because it was recently republished as part of the new CFPB, which we're all starting to deal with now. So, for RTC junkies who want to wade through this, it's kinda interesting because it answers questions we hear all the time from borrowers: "I don't want to cancel, why can't I just skip this part?" or "If I want to cancel, how do I do it?" I also found it interesting that if the RTC is delivered electronically, only 1 copy is required ...(uh duh)


Regulation Z

Sec. 226.23 Right of rescission.


The Federal Reserve Board's Regulation Z (12 CFR Part 226) has been republished effective December 30, 2011, at 12 CFR Part 1026 as one of the regulations transferred to the Consumer Financial Protection Bureau under the Dodd-Frank Act. This section of the FRB regulation was republished as §1026.23 of the Bureau's regulation.

(a) Consumer's right to rescind. (1) In a credit transaction 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 the transaction, except for transactions described in paragraph (f) of this section.47
47 For purposes of this section, the addition to an existing obligation of a security interest in a consumer's principal dwelling is a transaction. The right of rescission applies only to the addition of the security interest and not the existing obligation. The creditor shall deliver the notice required by paragraph (b) of this section but need not deliver new material disclosures. Delivery of the required notice shall begin the rescission period.

(2) To exercise the right to rescind, the consumer shall notify the creditor of the rescission by mail, telegram or other means of written communication. Notice is considered given when mailed, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor's designated place of business.
(3) The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures,48 whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first. In the case of certain administrative proceedings, the rescission period shall be extended in accordance with section 125(f) of the Act.

48 The term "material disclosures" means the required disclosures of the annual percentage rate, the finance charge, the amount financed, the total of payments, the payment schedule, and the disclosures and limitations referred to in Sec. Sec. 226.32(c) and (d) and 226.35(b)(2).



(4) When more than one consumer in a transaction has the right to rescind, the exercise of the right by one consumer shall be effective as to all consumers.

(b)(1) Notice of right to rescind. In a transaction subject to rescission, a creditor shall deliver two copies of the notice of the right to rescind to each consumer entitled to rescind (one copy to each if the notice is delivered in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act). The notice shall be on a separate document that identifies the transaction and shall clearly and conspicuously disclose the following:
(i) The retention or acquisition of a security interest in the consumer's principal dwelling.
(ii) The consumer's right to rescind the transaction.
(iii) How to exercise the right to rescind, with a form for that purpose, designating the address of the creditor's place of business.
(iv) The effects of rescission, as described in paragraph (d) of this section.
(v) The date the rescission period expires.
(2) Proper form of notice. To satisfy the disclosure requirements of paragraph (b)(1) of this section, the creditor shall provide the appropriate model form in Appendix H of this part or a substantially similar notice.

(c) Delay of creditor's performance. Unless a consumer waives the right of rescission under paragraph (e) of this section, no money shall be disbursed other than in escrow, no services shall be performed and no materials delivered until the rescission period has expired and the creditor is reasonably satisfied that the consumer has not rescinded.

(d) Effects of rescission. (1) When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer shall not be liable for any amount, including any finance charge.
(2) Within 20 calendar days after receipt of a notice of rescission, the creditor shall return any money or property that has been given to anyone in connection with the transaction and shall take any action necessary to reflect the termination of the security interest.
(3) If the creditor has delivered any money or property, the consumer may retain possession until the creditor has met its obligation under paragraph (d)(2) of this section. When the creditor has complied with that paragraph, the consumer shall tender the money or property to the creditor or, where the latter would be impracticable or inequitable, tender its reasonable value. At the consumer's option, tender of property may be made at the location of the property or at the consumer's residence. Tender of money must be made at the creditor's designated place of business. If the creditor does not take possession of the money or property within 20 calendar days after the consumer's tender, the consumer may keep it without further obligation.
(4) The procedures outlined in paragraphs (d) (2) and (3) of this section may be modified by court order.

(e) Consumer's waiver of right to rescind. (1) The consumer may modify or waive the right to rescind if the consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency. To modify or waive the right, the consumer shall give the creditor a dated written statement that describes the emergency, specifically modifies or waives the right to rescind, and bears the signature of all the consumers entitled to rescind. Printed forms for this purpose are prohibited, except as provided in paragraph (e)(2) of this section.
(2) The need of the consumer to obtain funds immediately shall be regarded as a bona fide personal financial emergency provided that the dwelling securing the extension of credit is located in an area declared during June through September 1993, pursuant to 42 U.S.C. 5170, to be a major disaster area because of severe storms and flooding in the Midwest. In this instance, creditors may use printed forms for the consumer to waive the right to rescind. This exemption to paragraph (e)(1) of this section shall expire one year from the date an area was declared a major disaster.
(3) The consumer's need to obtain funds immediately shall be regarded as a bona fide personal financial emergency provided that the dwelling securing the extension of credit is located in an area declared during June through September 1994 to be a major disaster area, pursuant to 42 U.S.C. 5170, because of severe storms and flooding in the South. In this instance, creditors may use printed forms for the consumer to waive the right to rescind. This exemption to paragraph (e)(1) of this section shall expire one year from the date an area was declared a major disaster.
(4) The consumer's need to obtain funds immediately shall be regarded as a bona fide personal financial emergency provided that the dwelling securing the extension of credit is located in an area declared during October 1994 to be a major disaster area, pursuant to 42 U.S.C. 5170, because of severe storms and flooding in Texas. In this instance, creditors may use printed forms for the consumer to waive the right to rescind. This exemption to paragraph (e)(1) of this section shall expire one year from the date an area was declared a major disaster.

(f) Exempt transactions. The right to rescind does not apply to the following:
(1) A residential mortgage transaction.
(2) A refinancing or consolidation by the same creditor of an extension of credit already secured by the consumer's principal dwelling. The right of rescission shall apply, however, to the extent the new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the costs of the refinancing or consolidation.
(3) A transaction in which a state agency is a creditor.
(4) An advance, other than an initial advance, in a series of advances or in a series of single-payment obligations that is treated as a single transaction under Sec. 226.17(c)(6), if the notice required by paragraph (b) of this section and all material disclosures have been given to the consumer.
(5) A renewal of optional insurance premiums that is not considered a refinancing under Sec. 226.20(a)(5).

(g) Tolerances for accuracy.--(1) One-half of 1 percent tolerance. Except as provided in paragraphs (g)(2) and (h)(2) of this section, the finance charge and other disclosures affected by the finance charge (such as the amount financed and the annual percentage rate) shall be considered accurate for purposes of this section if the disclosed finance charge:
(i) is understated by no more than \1/2\ of 1 percent of the face amount of the note or $100, whichever is greater; or
(ii) is greater than the amount required to be disclosed.
(2) One percent tolerance. In a refinancing of a residential mortgage transaction with a new creditor (other than a transaction covered by Sec. 226.32), if there is no new advance and no consolidation of existing loans, the finance charge and other disclosures affected by the finance charge (such as the amount financed and the annual percentage rate) shall be considered accurate for purposes of this section if the disclosed finance charge:
(i) is understated by no more than 1 percent of the face amount of the note or $100, whichever is greater; or
(ii) is greater than the amount required to be disclosed.

(h) Special rules for foreclosures--(1) Right to rescind. After the initiation of foreclosure on the consumer's principal dwelling that secures the credit obligation, the consumer shall have the right to rescind the transaction if:
(i) A mortgage broker fee that should have been included in the finance charge was not included; or
(ii) The creditor did not provide the properly completed appropriate model form in Appendix H of this part, or a substantially similar notice of rescission.
(2) Tolerance for disclosures. After the initiation of foreclosure on the consumer's principal dwelling that secures the credit obligation, the finance charge and other disclosures affected by the finance charge (such as the amount financed and the annual percentage rate) shall be considered accurate for purposes of this section if the disclosed finance charge:
(i) is understated by no more than $35; or
(ii) is greater than the amount required to be disclosed.



Reply by Pro Mobile Notary on 10/8/12 10:36am
Msg #437642

While the law may provide a way to waive the RTC I do not know of a single lender that will allow people to do that for fear of the potential future consequences if the borrower has a change of heart later on.

Reply by ReneeK_MI on 10/8/12 11:22am
Msg #437653

Agreed - never in my life have I seen it happen. n/m

Reply by ArtG/KS on 10/8/12 11:30am
Msg #437655

Re: Agreed - never in my life have I seen it happen.

I have seen it happen in a purchase money transaction where it is a cash purchase and the buyer agreed to it. Also on investment or rental purchases you do not get a RTC at least in my state.

Reply by Teresa/FL on 10/8/12 11:56am
Msg #437662

Re: Agreed - never in my life have I seen it happen.

"I have seen it happen in a purchase money transaction where it is a cash purchase and the buyer agreed to it."

I'm sure you know purchase transactions do not have a RTC. Did you mean a PR refinance with cash out where the purpose of the cash out was to buy another property?

Reply by Pro Mobile Notary on 10/8/12 6:08pm
Msg #437713

Re: Agreed - never in my life have I seen it happen.

Wrong!

There is no RTC on a purchase transaction. Only on refinancing.

Reply by Don Courtney on 10/8/12 11:31am
Msg #437657

Re: Saw it once

I was a mortgage Operations Mgr for about 27 years and agreed to let the customer waive their RTC once.

It was a dire situation, mid winter in Denver and very cold. The customers furnace was out and the purpose of the loan (a small Heloc) was to buy a new furnace. There were young children in the family.

Reply by Teresa/FL on 10/8/12 12:00pm
Msg #437663

Re: Saw it once-me too

it was a loan to pay overdue property taxes on a property in Texas.

Reply by sigtogo/OR on 10/8/12 1:17pm
Msg #437677

waiver allowed with no muss no fuss in the 70's at US Bank

If they wanted to waive and signed the waiver we, I mean the bank didn't really care, or so I hear.
I wouldn't know personally cuz I am certainly too young! hehe

Reply by Pro Mobile Notary on 10/8/12 6:11pm
Msg #437714

Re: waiver allowed with no muss no fuss in the 70's at US Bank

Lots of things were very different in the world of lending 40 years ago.

Reply by Linda_H/FL on 10/8/12 1:34pm
Msg #437679

I've seen it n/m

Reply by MW/VA on 10/8/12 6:57pm
Msg #437722

I've seen it a few times on refi's with the same lender,

same loan amt.

Reply by Clem/CA on 10/8/12 2:31pm
Msg #437686

I saw it once.

Reply by Hailswath on 10/8/12 3:56pm
Msg #437692

Where does it say the lender or title company has the right to cancel the transaction during the 3 days if a document wasn't completed. Seems to me that the title company uses it to their benefit more that the borrower.

Reply by Pro Mobile Notary on 10/8/12 6:13pm
Msg #437715

The title company is the last possible entity that would benefit from a cancelled transaction.

If the transaction does not close, they do not get paid.

BTW- the title company has no right to cancel any transaction, EVER. They could refuse to insure the transaction is certain circumstances, but never can they cancel a transaction.


 
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