If you’re being threatened with foreclosure, and want to stop the process in its tracks, then you can do so cheaply and easily by using a part of the Truth in Lending Act, called The Right Of Rescission.

Not every kind of mortgage is covered by the act, but if yours is, then read on.

The right of rescission covers home-equity loans, home-equity lines of credit, and refinances of existing mortgages in which the refinancing is done with a lender other than the current mortgagee.

Most people understand the right of rescission to mean that they have a three day cooling off period during which time they can change their mind if they don’t like something in the contract, and that is the exact meaning of the law.

What only a few people know however is that there is an ‘extended right of rescission’ which can last up to three years, if the original paperwork was in some way inaccurate or misleading.

Around 95% of loan contracts contain information which can normally be construed inaccurate or misleading, but you’ll more than likely need to have a lawyer or accountant find the errors for you.

Immediately after your contract has been checked and errors found, the next course of action is to send a Notice of Rescission to the lender.

This action immediately removes all obligations in relation to the loan and the lender has to remove the Trust Deed from the property within twenty days.

Without a trust deed, the lender cannot foreclose the property!

Bingo, and if you think that sounds great, then just get a load of this!

The letter of rescission doesn’t just mean that the foreclosure process stops immediately, it also means that the lender is required by federal law to return all monies received in connection with the loan.

“All monies”, means exactly that.

The original deposit, all mortgage payments, and closing costs too.

After the borrower receives the money, he or she then has the choice of giving the lender the property, or its reasonable value in cash.

Moreover, the lender is forbidden from adding anything negative to your credit report because the loan and note were rescinded, and this means that you’ll most likely be able to get an excellent refinancing deal should you want one.

You can finance the house with a new loan, or take the cash and use it to buy another property.

If the lender doesn’t return the money within twenty days as required by law, and most don’t, then they are also required to pay all attorney fees, meaning that the whole process ends up costing you nothing.

It needs to be said that most lenders will resist paying you the money, but while they’re waiting for the courts, you won’t have to make payments, and nothing negative will appear on your credit rating.

As soon as the notice of rescission is filed, the lender finds himself in an extremely difficult position. He can’t foreclose, can’t evict, doesn’t get mortgage payments, and if he doesn’t pay you your money, then he’ll get hit with all the legal fees too.

In practice, this means that the borrower will be offered all kinds of incentives to coax him into resigning a contract.

A significant loan modification, including reduced interest rate, reduced mortgage payments, reduced principle balance owed, loan reinstatement, the inclusion of loan assumption language, or waiver of “due on sale” clause.

You’ll be truly amazed at what you’ll be offered, and instead of being foreclosed, you’ll get lots and lots of goodies and choices, just by hiring a lawyer, an accountant, or a good real estate agent for a few hours, and then sending out a notice of remission.