12 C.F.R. § 226.23

Right of rescission

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(a) Consumer's right to rescind. (1) In a credit transaction in which a security interest is or will be retained or acquired in a consumer's principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction, except for transactions described in paragraph (f) of this section. 47

47 For purposes of this section, the addition to an existing obligation of a security interest in a consumer's principal dwelling is a transaction. The right of rescission applies only to the addition of the security interest and not the existing obligation. The creditor shall deliver the notice required by paragraph (b) of this section but need not deliver new material disclosures. Delivery of the required notice shall begin the rescission period.

(2) To exercise the right to rescind, the consumer shall notify the creditor of the rescission by mail, telegram or other means of written communication. Notice is considered given when mailed, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor's designated place of business.

(3) The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, 48 whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first. In the case of certain administrative proceedings, the rescission period shall be extended in accordance with section 125(f) of the Act.

48 The term ‘material disclosures’ means the required disclosures of the annual percentage rate, the finance charge, the amount financed, the total of payments, the payment schedule, and the disclosures and limitations referred to in §§ 226.32(c) and (d) and 226.35(b)(2).

(4) When more than one consumer in a transaction has the right to rescind, the exercise of the right by one consumer shall be effective as to all consumers.

(b)(1) Notice of right to rescind. In a transaction subject to rescission, a creditor shall deliver two copies of the notice of the right to rescind to each consumer entitled to rescind (one copy to each if the notice is delivered in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act). The notice shall be on a separate document that identifies the transaction and shall clearly and conspicuously disclose the following:

(i) The retention or acquisition of a security interest in the consumer's principal dwelling.

(ii) The consumer's right to rescind the transaction.

(iii) How to exercise the right to rescind, with a form for that purpose, designating the address of the creditor's place of business.

(iv) The effects of rescission, as described in paragraph (d) of this section.

(v) The date the rescission period expires.

(2) Proper form of notice. To satisfy the disclosure requirements of paragraph (b)(1) of this section, the creditor shall provide the appropriate model form in appendix H of this part or a substantially similar notice.

(c) Delay of creditor's performance. Unless a consumer waives the right of rescission under paragraph (e) of this section, no money shall be disbursed other than in escrow, no services shall be performed and no materials delivered until the rescission period has expired and the creditor is reasonably satisfied that the consumer has not rescinded.

(d) Effects of rescission. (1) When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer shall not be liable for any amount, including any finance charge.

(2) Within 20 calendar days after receipt of a notice of rescission, the creditor shall return any money or property that has been given to anyone in connection with the transaction and shall take any action necessary to reflect the termination of the security interest.

(3) If the creditor has delivered any money or property, the consumer may retain possession until the creditor has met its obligation under paragraph (d)(2) of this section. When the creditor has complied with that paragraph, the consumer shall tender the money or property to the creditor or, where the latter would be impracticable or inequitable, tender its reasonable value. At the consumer's option, tender of property may be made at the location of the property or at the consumer's residence. Tender of money must be made at the creditor's designated place of business. If the creditor does not take possession of the money or property within 20 calendar days after the consumer's tender, the consumer may keep it without further obligation.

(4) The procedures outlined in paragraphs (d) (2) and (3) of this section may be modified by court order.

(e) Consumer's waiver of right to rescind. (1) The consumer may modify or waive the right to rescind if the consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency. To modify or waive the right, the consumer shall give the creditor a dated written statement that describes the emergency, specifically modifies or waives the right to rescind, and bears the signature of all the consumers entitled to rescind. Printed forms for this purpose are prohibited, except as provided in paragraph (e)(2) of this section.

(2) The need of the consumer to obtain funds immediately shall be regarded as a bona fide personal financial emergency provided that the dwelling securing the extension of credit is located in an area declared during June through September 1993, pursuant to 42 U.S.C. 5170, to be a major disaster area because of severe storms and flooding in the Midwest. 48a In this instance, creditors may use printed forms for the consumer to waive the right to rescind. This exemption to paragraph (e)(1) of this section shall expire one year from the date an area was declared a major disaster.

48a A list of the affected areas will be maintained by the Board.

(3) The consumer's need to obtain funds immediately shall be regarded as a bona fide personal financial emergency provided that the dwelling securing the extension of credit is located in an area declared during June through September 1994 to be a major disaster area, pursuant to 42 U.S.C. 5170, because of severe storms and flooding in the South. 48b In this instance, creditors may use printed forms for the consumer to waive the right to rescind. This exemption to paragraph (e)(1) of this section shall expire one year from the date an area was declared a major disaster.

48b A list of the affected areas will be maintained and published by the Board. Such areas now include parts of Alabama, Florida, and Georgia.

(4) The consumer's need to obtain funds immediately shall be regarded as a bona fide personal financial emergency provided that the dwelling securing the extension of credit is located in an area declared during October 1994 to be a major disaster area, pursuant to 42 U.S.C. 5170, because of severe storms and flooding in Texas. 48c In this instance, creditors may use printed forms for the consumer to waive the right to rescind. This exemption to paragraph (e)(1) of this section shall expire one year from the date an area was declared a major disaster.

48c A list of the affected areas will be maintained and published by the Board. Such areas now include the following counties in Texas: Angelina, Austin, Bastrop, Brazos, Brazoria, Burleson, Chambers, Fayette, Fort Bend, Galveston, Grimes, Hardin, Harris, Houston, Jackson, Jasper, Jefferson, Lee, Liberty, Madison, Matagorda, Montgomery, Nacagdoches, Orange, Polk, San Augustine, San Jacinto, Shelby, Trinity, Victoria, Washington, Waller, Walker, and Wharton.

(f) Exempt transactions. The right to rescind does not apply to the following:

(1) A residential mortgage transaction.

(2) A refinancing or consolidation by the same creditor of an extension of credit already secured by the consumer's principal dwelling. The right of rescission shall apply, however, to the extent the new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the costs of the refinancing or consolidation.

(3) A transaction in which a state agency is a creditor.

(4) An advance, other than an initial advance, in a series of advances or in a series of single-payment obligations that is treated as a single transaction under § 226.17(c)(6), if the notice required by paragraph (b) of this section and all material disclosures have been given to the consumer.

(5) A renewal of optional insurance premiums that is not considered a refinancing under § 226.20(a)(5).

(g) Tolerances for accuracy—(1) One-half of 1 percent tolerance. Except as provided in paragraphs (g)(2) and (h)(2) of this section, the finance charge and other disclosures affected by the finance charge (such as the amount financed and the annual percentage rate) shall be considered accurate for purposes of this section if the disclosed finance charge:

(i) is understated by no more than 1/2 of 1 percent of the face amount of the note or $100, whichever is greater; or

(ii) is greater than the amount required to be disclosed.

(2) One percent tolerance. In a refinancing of a residential mortgage transaction with a new creditor (other than a transaction covered by § 226.32), if there is no new advance and no consolidation of existing loans, the finance charge and other disclosures affected by the finance charge (such as the amount financed and the annual percentage rate) shall be considered accurate for purposes of this section if the disclosed finance charge:

(i) is understated by no more than 1 percent of the face amount of the note or $100, whichever is greater; or

(ii) is greater than the amount required to be disclosed.

(h) Special rules for foreclosures—(1) Right to rescind. After the initiation of foreclosure on the consumer's principal dwelling that secures the credit obligation, the consumer shall have the right to rescind the transaction if:

(i) A mortgage broker fee that should have been included in the finance charge was not included; or

(ii) The creditor did not provide the properly completed appropriate model form in appendix H of this part, or a substantially similar notice of rescission.

(2) Tolerance for disclosures. After the initiation of foreclosure on the consumer's principal dwelling that secures the credit obligation, the finance charge and other disclosures affected by the finance charge (such as the amount financed and the annual percentage rate) shall be considered accurate for purposes of this section if the disclosed finance charge:

(i) is understated by no more than $35; or

(ii) is greater than the amount required to be disclosed.

[Reg. Z, 46 FR 20892, Apr. 7, 1981, as amended at 51 FR 45299, Dec. 18, 1986; 58 FR 40583, July 29, 1993; 59 FR 40204, Aug. 5, 1994; 59 FR 63715, Dec. 9, 1994; 60 FR 15471, Mar. 24, 1995; 61 FR 49247, Sept. 19, 1996; 66 FR 17338, Mar. 30, 2001; 72 FR 63474, Nov. 9, 2007; 73 FR 44601, July 24, 2008]

Notes of Decisions

Cited in 540 cases (40 in the last 5 years), 1982–2026 · leading case: Bonte v. U.S. Bank, N.A., 624 F.3d 461 (7th Cir. 2010).

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Bonte v. U.S. Bank, N.A., 624 F.3d 461 (7th Cir. 2010). · cites it 4× “§ 1635 (f) (extending right of rescission to earlier of three years or until the sale of the property); 12 C.F.R. § 226.23 (a)(3); see also R.G. Fin.”

Santos-Rodriguez v. Doral Mortg. Corp., 485 F.3d 12 (1st Cir. 2007). · cites it 10× “See 12 C.F.R. § 226.23 (app. H-8). Both sets of plaintiffs received identical disclosure forms, and they acknowledged receipt by signing the documents.”

Sanders v. Mountain Am. Fed. Credit Union, 689 F.3d 1138 (10th Cir. 2012). · cites it 7× “12 C.F.R. § 226.23 (a)(1). Creditors are required to give consumers two copies of a disclosure advising them about the right of rescission.”

Watkins v. Suntrust Mortg., Inc., 663 F.3d 232 (4th Cir. 2011). · cites it 14× “12 C.F.R. § 226.23 (b)(1); see also 15 U.”

Williams v. BankOne, Nat'l Ass'n (In Re Williams), 291 B.R. 636 (Bankr. E.D. Pa. 2003). · cites it 13× “§ 1635 (a) and 12 C.F.R. § 226.23 (b); (ii) she was not provided with a copy of the HOEPA notice three days before the Loan closing as required by 15 U.”

GMAC Mortg. v. Heather McKeever, 651 F. App'x 332 (6th Cir. 2016). · cites it 3× “The complaint further stated that “[o]n or about October 15, 2008, [McKeever] sent correspondence to” GMACM purporting to rescind the Loan under the TILA and a regulation promulgated thereunder, 12 C.F.R. § 226.23 (“Regulation Z”). (No.”

Pac. Shore Funding v. Lozo, 2006 Cal. Daily Op. Serv. 3502 (Cal. Ct. App. 2006). · cites it 9× “§ 1635 (a); 12 C.F.R. § 226.23 (b) (2006)) 1 ; and (2) Pacific Shore failed to provide, at least three business days before the execution of the first loan’s documents, two copies of the consumer disclosures of the (a) interest rate, (b) monthly payments, (c) borrowers’ right…”

Alan Keiran v. Home Capital, Inc., 720 F.3d 721 (8th Cir. 2013). · cites it 12× “Required disclosures must be made to "each consumer whose ownership interest is or will be subject to the security interest," 12 C.F.R. § 226.23 (a), and must include two copies of a notice of the right to rescind (also referred to as the Notice of Right to Cancel), id.”

Reynolds v. D & N BANK, 792 F. Supp. 1035 (E.D. Mich. 1992). · cites it 19× “Plaintiffs claim that pursuant to 12 C.F.R. § 226.23 (a)(3), because defendant did not provide plaintiffs with a proper Notice of *1037 Right to Rescind at the time of the sale or at any time thereafter, as required by 15 U.”

Marr v. Bank of Am., NA, 662 F.3d 963 (7th Cir. 2011). · cites it 5× “§ 1635 (a); 12 C.F.R. § 226.23 (b)(1). Regulation Z, issued by the Federal Reserve Board to implement *965 TILA, elaborates on this rule by requiring the lender to give the consumer two copies of the notice of his three-day right to cancel at closing.”

Johnson v. Thomas, 794 N.E.2d 919 (Ill. App. Ct. 2003). · cites it 7× “§ 1635 (f) (1994); see also 12 C.F.R. § 226.23 (a)(3) (1995). “Any consumer who has the right to rescind a transaction under section 1635 of this title may rescind the transaction as against any assignee of the obligation.”

Bell v. Parkway Mortg., Inc. (In Re Bell), 309 B.R. 139 (Bankr. E.D. Pa. 2004). · cites it 8× “12 C.F.R. § 226.23 (b)(1). This requirement is not a “mere technicality,” because “[effective exercise of the right to rescind obviously depends upon the delivery of one copy of the rescission form to the creditor and the retention by the obligor of the other copy.”

Show all 540 citing cases →

— 12 C.F.R. § 226.23(a) — 2 cases

Joyce v. Clover-Brook Homes, Inc., 344 S.E.2d 58 (N.C. Ct. App. 1986).

Kocsis v. Pierce, 480 N.W.2d 598 (Mich. Ct. App. 1991).

— 12 C.F.R. § 226.23(a)(1) — 1 case

Kuechler v. Peoples Bank, 602 F. Supp. 2d 625 (D. Maryland 2009).

— 12 C.F.R. § 226.23(a)(2) — 1 case

Abbott v. Shaffer, 564 F. Supp. 1200 (D. Utah 1983).

— 12 C.F.R. § 226.23(a)(2)(1999) — 1 case

Williams v. Empire Funding Corp., 109 F. Supp. 2d 352 (E.D. Pa. 2000).

— 12 C.F.R. § 226.23(a)(3) — 14 cases

Barberan v. Nationpoint, 706 F. Supp. 2d 408 (S.D.N.Y. 2010).

Chiles v. Ameriquest Mortg. Co., 551 F. Supp. 2d 393 (E.D. Pa. 2008).

Citibank, N.A. v. Dalessio, 756 F. Supp. 2d 1361 (M.D. Fla. 2010).

Conder v. Home Sav. of Am., 680 F. Supp. 2d 1168 (C.D. Cal. 2010).

Laudani v. Tribeca Lending Corp. (In Re Laudani), 401 B.R. 9 (Bankr. D. Mass. 2009).

— 12 C.F.R. § 226.23(a)(8) — 1 case

Utah First Fed. Credit Union v. Dudley, 2012 UT App 164 (Utah Ct. App. 2012).

— 12 C.F.R. § 226.23(b) — 4 cases

Jenkins v. Landmark Mortg. Corp. of Virginia, 696 F. Supp. 1089 (W.D. Va. 1988).

Elsner v. Albrecht, 460 N.W.2d 232 (Mich. Ct. App. 1990).

Kocsis v. Pierce, 480 N.W.2d 598 (Mich. Ct. App. 1991).

Cantu v. Stief, 598 F. Supp. 562 (W.D. Tex. 1984).

— 12 C.F.R. § 226.23(b)(1) — 1 case

Flagstar Bank, FSB v. Cintron, 2012 Ohio 5914 (Ohio Ct. App. 2012).

— 12 C.F.R. § 226.23(b)(5) — 3 cases

Hawaii Cmty. Fed. Credit Union v. Keka, 11 P.3d 1 (Haw. 2000).

Mayfield v. Vanguard Sav. & Loan Ass'n, 710 F. Supp. 143 (E.D. Pa. 1989).

Patten Custom Homes, LLC v. Robert Mahlin, Anne Mahlin & Samanum Ngernerd (Tex. App. 2017).

— 12 C.F.R. § 226.23(b)(l)(ii) — 1 case

Barrett v. Bank One, N.A., 511 F. Supp. 2d 836 (E.D. Ky. 2007).

— 12 C.F.R. § 226.23(b)(l)(v) — 1 case

Staley v. Americorp Credit Corp., 164 F. Supp. 2d 578 (D. Maryland 2001).

— 12 C.F.R. § 226.23(c) — 2 cases

Citron v. Wachovia Mortg. Corp., 922 F. Supp. 2d 1309 (M.D. Fla. 2013).

Laubach v. Fid. Consum. Disc. Co., 686 F. Supp. 504 (E.D. Pa. 1988).

— 12 C.F.R. § 226.23(d) — 1 case

Thompson v. Carmax (N.D. Cal. 2023).

— 12 C.F.R. § 226.23(d)(1) — 5 cases

Melfi v. WMC Mortg. Corp., 568 F.3d 309 (1st Cir. 2009).

Hodges v. Swafford, 863 N.E.2d 881 (Ind. Ct. App. 2007).

Anand v. O'Sullivan, 168 A.3d 1030 (Md. Ct. Spec. App. 2017).

Cromwell v. Countrywide Home Loans, Inc. (In Re Cromwell), 461 B.R. 99 (Bankr. D. Mass. 2011).

Hodges v. Swafford, 868 N.E.2d 1179 (Ind. Ct. App. 2007).

— 12 C.F.R. § 226.23(d)(2) — 1 case

Cole v. Lovett, 672 F. Supp. 947 (S.D. Miss. 1987).

— 12 C.F.R. § 226.23(d)(4) — 1 case

The Bank of New York Mellon, Etc. Vs. Dolores Marie Dicicco (f-000714-16, Burlington Cnty. & Statewide) (N.J. Super. Ct. App. Div. 2020).

— 12 C.F.R. § 226.23(d)(l) — 1 case

Cornerstone Mortg., Inc. v. Ponzar, 254 S.W.3d 221 (Mo. Ct. App. 2008).

— 12 C.F.R. § 226.23(e)(1) — 1 case

DiVittorio v. HSBC Bank, USA, N.A. Ex Rel. Ace Sec. Corp. Home Equity Loan Trust (In Re DiVittorio), 430 B.R. 26 (Bankr. D. Mass. 2010).

— 12 C.F.R. § 226.23(f) — 2 cases

Lowenstein v. U.S. Bank, N.A. (In Re Lowenstein), 459 B.R. 227 (Bankr. E.D. Pa. 2011).

Mcgee v. Gregory Funding, LLC, 692 F. Supp. 2d 1270 (D. Or. 2010).

— 12 C.F.R. § 226.23(f)(1) — 2 cases

Elsner v. Albrecht, 460 N.W.2d 232 (Mich. Ct. App. 1990).

Odigie v. Nationstar Mortg., LLC (M.D. Tenn. 2020).

— 12 C.F.R. § 226.23(f)(2) — 1 case

Mcgee v. Gregory Funding, LLC, 692 F. Supp. 2d 1270 (D. Or. 2010).

— 12 C.F.R. § 226.23(g)(1) — 1 case

Sobieniak v. Bac Home Loans Servicing, LP, 835 F. Supp. 2d 705 (D. Minnesota 2011).

— 12 C.F.R. § 226.23(h) — 1 case

Lowenstein v. U.S. Bank, N.A. (In Re Lowenstein), 459 B.R. 227 (Bankr. E.D. Pa. 2011).

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