Mortgage Loan Originator (MLO) Licensing Practice Test

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Prepare for the Mortgage Loan Originator (MLO) Licensing Test. Study with flashcards and multiple-choice questions, each with hints and explanations. Get ready to succeed on your exam!

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Is the right to rescind applicable to transactions for a Home Equity Line of Credit (HELOC) secured by a principal residence?

No, it is not applicable
Yes, it is applicable
Yes, but only for certain borrowers
No, unless it is a new loan

The correct answer is: Yes, it is applicable

The right to rescind is indeed applicable to transactions for a Home Equity Line of Credit (HELOC) that is secured by a principal residence. This right is established under the Truth in Lending Act (TILA), which provides consumers the opportunity to back out of certain credit transactions if they involve their primary home. When a consumer takes out a HELOC, they are essentially using their home as collateral. The law recognizes that this can be a significant financial decision, allowing borrowers a three-day period where they can reconsider the terms of the loan and decide to cancel the transaction without penalty. This safeguard is in place to protect consumers from making rushed decisions in potentially complex financial agreements. The other options suggest limitations or exceptions that do not apply under the standard provisions of TILA related to rescission. The right to rescind remains a critical consumer protection feature for all HELOC transactions secured by a principal residence.