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Can a lender cancel a refinance deal in rescission period?

Author: Jessica Bennet
Community Mentor
Ask Jessica
Posted on: 24th Jul, 2007 04:18am
As per the Truth in Lending Act, homeowners have been offered a 3-day right of rescission on all refinance transactions. This offers you the chance to review the loan within 3 full business days and even cancel the deal in case you feel so. Even the lenders have the rights to cancel a refinance deal during the rescission period. Here are some reasons behind the cancellation of the deal by the lender.



  1. Disputes in credit reports

  2. When a home buyer applies for refinancing, the lender reviews his/her credit report. The lender checks the report thoroughly and makes sure that the homeowner has not obtained any new, undisclosed debt. If the lender finds some disputes in the credit report, then he/she has all the rights to rescind the deal.


  3. Discrepancy in the employment records

  4. Before offering you a loan, the lender checks your income documents, including the pay stubs. If the lender finds some discrepancies, he/she can cancel the agreement in that 3-day period.


  5. Low appraised value of the house

  6. The refinance loan amount is a certain percentage of the value of the property. In case the appraised value of the property is not high enough, the lender may not be interested to make the offer. In that case, lender may request you to borrow less or the lender may charge a high rate of interest.


  7. Mismatch in public records

  8. Sometimes, homeowners may not disclose the information on the purchase of a new house to the lender. However, lender can get to know about this information by verifying the public records. In such case, lender can cancel the deal.


As a homeowner, you need to have unblemished records. Otherwise, your refinance application may be rejected by the lender.
Posted on: 24th Jul, 2007 04:18 am
We are about to refinance and have already been approved. Now, I'm just awaiting the appraisal. The appraised value is lower than what we expected. But even then it is $12000 higher than what we are borrowing. Do we need to be worried that our refinance approval may be cancelled?
Hi Smith,

Welcome to the forums.

Your refinance loan can be cancelled as the amount you borrow is a percentage of the property-value. So, if the appraised value isn't high enough, the lender may not be willing to offer you the loan. Or else, you may have to borrow less. The lender may even charge you a higher rate of interest.

Take Care
Posted on: 24th Jul, 2007 04:27 am
Hi Smith,

Welcome to Mortgagefit discussion board.

After this new appraisal the refinance loan will be for what percentage of your property's value? If it is not going over the 80% mark then there is no major concerns which can result in cancellation of your refinance request. And many lenders will be willing to refinance for higher ltv ratios too.

But in Texas for instance a refinance cannot be for more than 80% ltv. So if you are in Texas, check what the refinance is going to be for and if it is crossing the 80% limit because of the lower appraisal you have received.

Thanks
Blue
Posted on: 24th Jul, 2007 06:41 pm
If your appraised home value is lower than the refinance loan amount, the it is really a matter of concern. It will affect you more if you need extra cash from the refinance. This is because the lender will not be able to provide you with loan amount higher than your home value.
Posted on: 25th Jul, 2007 05:22 am
"But in Texas for instance a refinance cannot be for more than 80% ltv. So if you are in Texas, check what the refinance is going to be for and if it is crossing the 80% limit because of the lower appraisal you have received. "

Wow I did not know that Blue. So lenders cannot loan more than 80% LTV. Is that only for refi purposes?
Posted on: 26th Jul, 2007 12:25 pm
Hi Mike,

It is known as the A6 law and is applicable for cash out refinances. In Texas a cash out refinance can be up to 80% of property value. I myself was not aware of it and came to know just few months back.

I came to know about it after I read this previous discussion on this topic: http://www.mortgagefit.com/texas/a6loan-law.html . Please take a look.

But in my previous post I did a mistake by stating that it was for refinances in general. This rule applies only for cash out.

Thanks
Blue
Posted on: 26th Jul, 2007 12:48 pm
Hmm. very interesting. Thanks for the link!
Posted on: 26th Jul, 2007 12:55 pm
:)
Posted on: 26th Jul, 2007 01:18 pm
my appraisal is 100,000 less from last year when i refinanced due to the house next door short sale that they used for compts im now at 89% what can i do
Posted on: 01st Apr, 2009 03:18 pm
I don't think you've much to do if your property is appraised 100,000 less from last year when you refinanced. Property values are declining in all parts of the country right now. If you are facing hardship in paying off the dues, immediately contact your lender and check out your options.
Posted on: 01st Apr, 2009 09:39 pm
maxwell, i'm not sure you actually had a question there. if your loan to value ratio is 89% now, and you are trying to refinance again, you can do so as long as you're not seeking any cash back. keep in mind that you'd likely have to bring cash to your closing to take care of associated costs.
Posted on: 02nd Apr, 2009 08:01 am
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