How Does The Right of Rescission Work in Escrow for the State of California?
- When you sign loan documents prepared by your lender on the refinance of your principle residence, there is a "three-day notice of cancellation" form included in the documents. This form explains the cancellation process and will also provide a space where you enter your signing date. The escrow company or loan document signing service will then enter the date on which the three-day rescission period expires. For example, if you sign the form on Monday, you will have until midnight, Thursday, to cancel the loan. You sign a copy of the form acknowledging its receipt and you leave the actual cancellation signature un-signed.
- The three-day rescission only applies to a refinance transaction on your principal residence. This is the home that you live in the majority of the time. The three-day rescission does not apply on rental or investment property or on purchase money loans. A purchase money loan is a loan you take out with a lender when you buy a home.
- If you decide to cancel the loan, you must sign on the cancellation line of the three-day rescission form and fax it to the lender before the rescission period expires. You should keep a copy of the completed fax transmission for your records. You should also call your lender and let it know that you intend to cancel the loan. If you cancel the loan, you are not liable for any loan or escrow fees other than third party fees such as an appraiser or credit report.
- There are several ways to notify your lender of your intention to cancel. You can send the cancellation form directly to the loan agent or broker who is working for the lender. If possible, you can also send the form next-day air with certified delivery confirmation receipt. Since a loan transaction can involve large sums of money, you should contact the lender after sending the cancellation form to confirm that the lender received it.