In a mortgage transaction, who has a 3-business-day right to cancel and under what conditions?

• A. The borrower has a 3-business-day right to cancel certain refinances of the borrower's primary residence; not available on purchase money loans
• B. The seller has a 3-business-day right to cancel
• C. The lender has a 3-business-day right to cancel
• D. All parties have a 3-business-day right to cancel any mortgage

Answer: (A)

The situation tests the right of rescission under Truth in Lending Act for refinances of a borrower’s primary residence. This protection gives the borrower (and any co-borrowers) a three-business-day window to cancel a new loan that replaces an existing loan and creates a new security interest on the borrower's home. The window starts after closing on the refinance, and the borrower must act within those three business days by notifying the creditor. If canceled in time, the lender must return any money or property exchanged, and the lien is void. This right does not apply to purchase-money loans (loans used to buy the home), and it is not a right held by the seller or the lender for all mortgage scenarios.