Loan Officer Practice Exam

If a refinance transaction subject to Regulation Z closes on a Monday, when does the rescission period expire?

1. Thursday

2. Friday

3. Wednesday

4. Saturday

The correct answer is: Thursday

In a refinance transaction subject to Regulation Z, the borrower has a right to rescind the transaction within a specific period, which is typically three business days. This starts from the closing date of the loan. When the transaction closes on a Monday, the three-business-day rescission period would include Monday as the first day. The following days would be Tuesday and Wednesday, making them the second and third business days, respectively. Since the rescission period is inclusive of the closing date, it ends at midnight at the close of the last business day. Thus, the rescission period ends at the close of business on Wednesday, which means that the correct answer is that the rescission period expires on Thursday. This is important for borrowers to understand, as they must provide written notice to rescind the loan before the expiration of this period.