Loan Officer Practice Exam 2026 – Comprehensive All-in-One Guide for Exam Success!

Under Regulation Z, which implements the Truth in Lending Act, a borrower has the right to rescind or cancel certain types of loans, specifically those secured by a borrower's primary residence. This right applies to transactions involving refinances of their primary residence and home equity loans, giving borrowers a specific timeframe to reconsider their decision.

The correct duration for the rescission period is three business days. This means that from the date the borrower signs the closing documents, they have three business days to cancel the loan without any penalty or obligation. The purpose of this cooling-off period is to give borrowers a chance to review the terms and conditions of the loan, ensuring they are fully informed before proceeding.

The other choices do not align with the provisions set out under Regulation Z, making them incorrect. The choices reflecting 0 days, 30 days, or 24 hours misinterpret the established timeline for rescission rights under federal law. Understanding these timelines is crucial for loan officers as they assist borrowers in navigating their rights and responsibilities concerning loan agreements.