An important part of many loan document signings is the rescission period — the three business days during which the borrower has the right to cancel the agreement. But which days count toward a rescission period, and what are a Notary Signing Agent’s responsibilities regarding rescission disclosures? Here’s what you need to know.
What is a rescission period?
A rescission period is a consumer protection under the federal Truth in Lending Act (TILA) in which a borrower may cancel certain types of loans within 3 business days, typically starting the next business day after the loan documents are signed and ending at midnight on the third business day.
The right to cancel applies to a residential mortgage transaction in which a borrower purchases a principal residence, refinances a loan transaction, and certain other types of loans.
To inform borrowers of this protection, qualifying loan packages include a document commonly titled Right To Cancel that contains the rescission provision disclosure required under the TILA and requires the borrower’s signature acknowledging receipt of the disclosure.
Which dates count as business days for a rescission period?
A business day includes every day of the week except Sunday and the following federal holidays:
- New Year’s Day (January 1)
- Martin Luther King Jr. Day (third Monday of January)
- Presidents Day (third Monday of February)
- Memorial Day (last Monday of May)
- Juneteenth (June 19)
- Independence Day (July 4)
- Labor Day (first Monday of September)
- Columbus Day (second Monday of October)
- Veterans Day (November 11)
- Thanksgiving Day (fourth Thursday of November)
- Christmas Day (December 25)
So if a borrower signed loan documents on a Saturday, the next day (Sunday) would not count toward the 3-day rescission period because Sunday is not a business day. Instead, the rescission period would start on Monday and end at midnight on Wednesday.
What if a loan signing was completed on a Saturday, but the following Monday is Labor Day? In that case, neither Sunday or Monday would count toward the rescission period because they are not business days. In this situation, the rescission period would start on Tuesday and end at midnight on Thursday.
How do you calculate the rescission period if one of the date-specific holidays (New Year’s Day, Independence Day, Veterans Day, or Christmas Day) falls on a weekend? Is the following Monday — which often is the day of “observance” of the holiday by banks, the post office and government offices — considered a business day? According to an official interpretation of “business day” in the supplement to regulations to implement the TILA, the only day that counts when computing the rescission period is the date of the actual holiday itself. Many assume the day of observance (Monday, in this case) does not count as a business day since many offices are closed, but this is not so. If the loan is transacted on a Friday and the holiday in question is on Saturday, the rescission period’s first day would be Monday, Tuesday would be the second day, and Wednesday the third.
What are a Notary Signing Agent’s duties concerning the rescission disclosure?
When a Notary Signing Agent receives a loan document package, the Signing Agent should print two copies of the “Right To Cancel” disclosure for each borrower in addition to the copy for the borrower to sign and return with the rest of the document package.
In many, if not most cases, the dates of the rescission period in the Right To Cancel will be filled in. As the Notary Signing Agent, you must confirm that the dates are correct. You can use a rescission calendar to confirm that the start date and ending dates of the rescission period are accurate.
If the rescission start date has not been filled in, you will need to fill in the correct start date using the rescission calendar. If the rescission start date is filled in incorrectly, you will need to line through the error, write in the correct date and have the signer initial your correction. You must then ensure that all copies of the Right To Cancel document are signed by the borrower. Leave two copies with each borrower and return one signed copy with the entire signed loan package to the lender.
David Thun is the Editorial Manager at the National Notary Association.
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