5.1 The Notice of Right to Cancel

The Notice of Right to Cancel

The Notice of Right to Cancel (sometimes called the Right of Rescission notice) is a federal disclosure required under Regulation Z (12 CFR § 1026.23) and the Truth in Lending Act. It gives certain borrowers a cooling-off period during which they can cancel a credit transaction secured by their principal dwelling without penalty. The purpose is to protect consumers from high-pressure or hasty decisions about loans that put their home at risk. As a Notary Signing Agent, you will encounter this notice in refinances and home-equity transactions, and you must handle its date fields correctly — but you must never advise a borrower on whether to exercise the right.

Which Transactions Carry a Right of Rescission?

Rescission applies to non-purchase credit transactions secured by the borrower's principal dwelling. The most common examples are:

• Refinances of the borrower's primary residence (including cash-out refinances)
• Home-equity loans and home-equity lines of credit (HELOCs) secured by the principal dwelling
• Certain second mortgages on the primary residence

Rescission generally does NOT apply to:

A good way to remember it: if the borrower is buying the home they will live in, there is generally no rescission; if they are refinancing or borrowing against the home they already live in, rescission usually applies.

The Three-Part Trigger

The rescission clock does not start until three things have all occurred. The right expires at midnight of the third business day after the latest of:

1. Consummation — the borrower signs the Promissory Note (this is the signing event you attend).
2. Delivery of the required Truth in Lending disclosures — typically the Closing Disclosure (CD) containing the accurate material disclosures.
3. Delivery of two copies of the Notice of Right to Cancel to each borrower who has the right to rescind.

If any one of these three events happens later than the others, the clock starts from that later event. In a typical refinance closing, all three happen at the signing table on the same day, so the clock starts from the signing date. If the lender delivers a corrected CD a day later, the clock restarts from that later delivery.

The Two-Copy Requirement

For each borrower with the right to rescind, the lender must deliver two copies of the Notice of Right to Cancel. This is so each borrower retains a copy showing the rescission expiration date and the address to send a cancellation notice to, and so a co-borrower who is not present still receives proper notice. As the NSA, you typically:

• Print two copies of the Right to Cancel for each borrower to keep,
• Plus one signed copy that returns with the loan package to the lender.

If there are two borrowers on a rescindable transaction, that is four copies for the borrowers plus the return copy(ies). Verify the rescission expiration date printed on the notice is correct using a rescission calendar; if it is blank, fill it in; if it is wrong, line through the error, write the correct date, and have the borrower initial the correction. Do not white-out or obliterate the original entry.

Midnight of the Third Business Day

The rescission period ends at midnight of the third business day — not the end of the business day, and not 72 hours. The detailed counting rules — including which days count as business days and which holidays are excluded — are covered in Section 5.2. The key point here is that the deadline is a specific calendar date and time, not a rolling hour count.

Extended Rescission

If the lender fails to deliver the required disclosures or the Notice of Right to Cancel, or delivers incorrect material disclosures, the right to rescind is extended — up to three years after consummation. This is why accurate date handling on the Notice is critical: an error by the lender (or by the NSA filling in a wrong date) can extend the borrower's rescission right for years and create liability for the lender.

Your Role as NSA

You identify the Notice of Right to Cancel, verify the rescission date is correctly filled in, and point to where the borrower signs. You do not explain the borrower's legal rights, recommend whether to rescind, or interpret what rescission means for their situation — that is the lender's or an attorney's role.