FINDING AN “OUT” ON REVERSE MORTGAGE LOAN
If you feel that you cannot continue with the reverse mortgage contract after you have signed, the law gives you three business days to cancel the contract without penalty. Called right of rescission, this borrower’s right is essentially a cool-off period for people who believe they have made a bad decision. In reverse mortgage loans, the borrower has three business days, including Saturdays, to fully commit to the contract. Once you exercise your right of rescission, the lender must give up its claim to your property after 20 business days and must refund any fees you paid.
This is a provision in the Truth in Lending Act which protects borrowers from abusive lenders. At the same time, this gives an “out” for borrowers who feel that they have a better deal in place with another reverse mortgage lender. This is a legal process to secure the rights of borrowers. However, the three business day rule is a strict guideline and it is important to submit a written letter with your intent to cancel the contract. A phone call to your reverse mortgage lender won’t be enough to cancel the contract.
