What does the right of rescission allow a borrower to do?

The right of rescission is a provision established under the Truth in Lending Act that allows a borrower to cancel certain types of transactions, specifically refinances and home equity loans, within three business days of closing. This right is intended to protect consumers by providing them with the opportunity to reconsider their decision and is particularly relevant in situations where they may be entering into a new loan that puts their home at risk.

Selecting the option that states that the borrower can cancel a refinance transaction within three days of closing accurately reflects this consumer protection feature. It empowers borrowers to ensure they are fully comfortable with the terms of the new loan and provides a safety net if they have doubts or discover unexpected information after the closing process.

The other options, while they may address different aspects of mortgage transactions, do not pertain to the right of rescission. Changing a loan amount before signing relates to negotiation during the loan application process, while requesting a lower interest rate after closing does not fall under this provision, as it relates to post-closing loan modifications, which are separate issues. Similarly, refinancing with the same lender at any time is a different scenario that does not invoke the right of rescission.