Rescission is generally the act of making void or canceling. The right of rescission is a borrower's statutory right under the Truth-in-Lending law that allows borrowers who pledge their homes as collateral on a loan to rescind or cancel the loan within a three business day “cooling-off period” after closing.
The right of rescission rules are part of Regulation Z, found at 12 CFR 226.23.
All persons must receive a copy of the material disclosures as well as 2 copies of the Notice of Right to Rescind. The right of rescission applies to any person who has an ownership interest in the principal dwelling being pledged, whether or not that person is a named borrower, or a party to the transaction.