United States
Hong KongThe three-day rules, told apart
Three separate rules run on three business days: the Loan Estimate after application, the Closing Disclosure before consummation, and the right of rescission after consummation on a refinance. They differ in what they attach to.
Three rules. Same number. Different anchors.
The exam knows candidates confuse them, and writes questions that reward telling them apart.
The three of them
| Rule | Three business days from what | Applies to |
|---|---|---|
| Loan Estimate | After a complete application | Most closed-end consumer mortgages |
| Closing Disclosure | Before consummation | Most closed-end consumer mortgages |
| Right of rescission | After consummation | Refinance on a principal dwelling |
One runs forward from application. One runs backward from closing. One runs forward from closing, and only on a refinance.
The rescission distinction
This is the one most often got wrong, and the error is always the same: applying it to a purchase.
The right of rescission exists on a refinance secured by the borrower's principal dwelling. Not on a purchase, because you cannot unwind a home you have just bought in the same way you can unwind a new lien on one you already owned.
If the required notice or the material disclosures were never delivered, the rescission period extends to three years. The creditor then has 20 calendar days to return money and release the security interest.
Business days are not the same in each rule
Regulation Z uses two definitions of business day, and which one applies depends on the rule.
For the rescission period and for the Closing Disclosure waiting period, the more precise definition applies, counting all calendar days except Sundays and specified public holidays. That is why a rescission window can include a Saturday.
How to hold all three
Anchor each one to its event rather than to the number.
Application, then Loan Estimate. Consummation, and three days before it the Closing Disclosure. Consummation, and three days after it the rescission window on a refinance. The number is the same throughout, so it carries no information - the anchor is where the answer is.
Common questions
What are the three-day rules in mortgage lending?
The Loan Estimate within three business days of application, the Closing Disclosure at least three before consummation, and the three-day right of rescission after consummation on a refinance.
Does the right of rescission apply to a purchase?
No. It applies to a refinance secured by the borrower's principal dwelling.
When does rescission extend to three years?
When the required notice or the material disclosures were never delivered.
How long does a creditor have to unwind a rescinded loan?
20 calendar days to return money and release the security interest.
Are business days the same in every rule?
No. Regulation Z uses two definitions, and the more precise one - all days except Sundays and specified holidays - applies to rescission and the Closing Disclosure waiting period.