Given the urgency, we have prioritized this Mortgage FAQ.
First, a few necessary points of order.
For any credit transaction in which a security interest is or will be retained or acquired in a consumer’s principal dwelling, the Truth-in-Lending Act (TILA) gives each consumer residing in the dwelling whose ownership interest is or will be subject to the security interest the right to rescind the transaction (otherwise known as the “Right to Cancel”). This right does not apply to transactions expressly exempted and for instances where the consumer has appropriately waived rescission.
One exemption to the Right to Cancel applies to “residential mortgage transactions.”
The applicable section of TILA defines the term “residential mortgage transaction” to mean
- “a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained in [against, in the statutory version] the consumer’s principal dwelling to finance the acquisition or initial construction of that dwelling.”
The term “residential mortgage transaction” is not limited to a first lien or equivalent security interest. The term includes junior security interest transactions when created or retained in the consumer’s principal dwelling to finance the acquisition or initial construction of that dwelling.
Let’s look at the specific Commentary.
