A borrower asks whether a refinance secured by the principal dwelling gives a rescission right. Which TILA response is compliant?

Correct Answer

B) Recognize rescission applies to covered principal-dwelling security interests

Why this is correct: TILA's right of rescission generally applies to most refinances of a principal dwelling that are not used to acquire the dwelling, provided the transaction creates a security interest in the home. This right allows the borrower to cancel the transaction within three business days after closing. Recognizing that rescission applies to covered transactions secured by the principal dwelling is the compliant, accurate response to the borrower's question. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because the right of rescission is a federal consumer right that cannot be negated by internal policy. "Use the appraisal review standard to decide the TILA Right of Rescission issue before confirming the trigger facts" is wrong because rescission eligibility is determined by specific TILA triggers (e.g., principal dwelling, non-purchase money), not by appraisal standards. "Rely on oral agreement when the rule requires documented compliance" is wrong because TILA requires specific written disclosures about the right to rescind; oral statements are insufficient. Exam tip: Rescission rights are a hallmark of TILA for most refinances on a primary home. Remember the key trigger: a security interest in the consumer's principal dwelling.