When does the Right of Rescission become effective after closing?

The Right of Rescission allows borrowers to cancel certain types of loans within a specified time frame after closing. In the context of the Truth in Lending Act, this right typically applies to loans secured by the borrower's primary residence, such as home equity loans and refinances.

The correct duration for the Right of Rescission to become effective is three business days after the closing date. This period provides borrowers with an opportunity to reconsider the terms of the loan after they have had a chance to review the final disclosures and any relevant details. The three-day window starts at midnight of the closing day and extends for the next three business days.

During this time, borrowers can withdraw from the transaction without penalty, which emphasizes consumer protection by offering a safeguard against impulsively agreeing to loan terms. If closing occurs on a Friday, for example, the rescission period would typically end the following Tuesday, assuming Monday is not a federal holiday.

Therefore, the correct choice reflects the legal requirement designed to protect consumers in real estate transactions.