If the right of rescission is not handled properly, can a borrower receive a free home if funds were advanced?

The accurate understanding of the right of rescission under the Truth in Lending Act is crucial here. When a borrower exercises their right of rescission, they have the legal right to cancel certain types of loans secured by their primary residence. This right is typically applicable within three business days of closing. If the lender fails to provide the necessary disclosures or adequately inform the borrower about their right to rescind, the rescission period may be extended.

However, regardless of whether the borrower rescinds the loan or not, they are still responsible for repaying the principal amount borrowed. The right of rescission allows the borrower to cancel the loan and avoid the mortgage, but it does not grant them ownership of the home without any financial obligations. Therefore, the borrower would still owe the principal amount that was advanced at closing, even if procedural errors were made.

This principle underscores the importance of proper procedural handling by lenders and clarifies that a loan cancellation does not equate to receiving home ownership without repayment responsibilities.