SAFE MLO TILA & Regulation Z question: pay off the old mortgage and wire the borrower's cash-out on Wednesday

SAFE MLOTILA & Regulation Z

On a rescindable refinance consummated Monday, the title company wants to pay off the old mortgage and wire the borrower's cash-out on Wednesday. No holidays fall that week. What does Regulation Z require?

A Hold the funds until the rescission period ends and the creditor is satisfied no one rescinded
B Release only the payoff on Wednesday and hold the cash-out
C Release the funds on Wednesday if the borrowers sign a statement that they will not rescind
D Release the funds once the deed of trust is recorded

Show the answer and explanation

Answer: A. Hold the funds until the rescission period ends and the creditor is satisfied no one rescinded

During the rescission period, no money may be disbursed other than into escrow, no services performed and no materials delivered until the period has expired and the creditor is reasonably satisfied the consumer has not rescinded (12 CFR 1026.23(c)). From a Monday consummation the period runs Tuesday, Wednesday and Thursday, so funding is Friday at the earliest. A routine 'I won't rescind' statement is not a valid waiver; only a bona fide personal financial emergency allows one (12 CFR 1026.23(e)). Source: 12 CFR 1026.23(c), (e) (as at 11 Oct 2026).

Common mistake

Disbursing the payoff portion early because it goes to the old lender, not the borrower.

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A borrower takes a $300,000 loan and pays $4,500 in prepaid finance charges (origination fee and discount points) at closing. What is the amount financed on the Truth in Lending disclosures?A refinance of a principal dwelling is consummated on Thursday, April 9, 2026, and the borrowers receive the rescission notice and all material disclosures at closing. No holidays fall in the period. When does the rescission period end?A borrower takes a 12-month loan to finance construction of a house; a separate permanent loan from another lender will pay it off. Under Regulation X, how is the construction loan treated?

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Original study material mapped to the public NMLS Content Outline; not a real test question.Not affiliated with or endorsed by NMLS, CSBS or SRR. Verify figures and rules against current guidance before relying on them.