What action allows homeowners a three-day period to cancel a mortgage contract after closing?

The action that allows homeowners a three-day period to cancel a mortgage contract after closing is known as rescission. Rescission is a consumer protection provision under the Truth in Lending Act (TILA), which provides borrowers the right to reconsider their mortgage transaction. This right is especially applicable in certain situations involving refinancing or home equity loans, giving borrowers the ability to cancel the agreement if they feel it is not in their best interest.

The three-day period starts after the closing of the mortgage, during which the borrower can evaluate the terms and implications of the loan. This provision is designed to protect consumers from high-pressure sales tactics and allows them time to ensure they are making a well-informed decision regarding their mortgage. Understanding rescission is vital for loan officers as it plays a critical role in safeguarding consumer rights and is a key aspect of mortgage practices.