Ace the CRCM Challenge 2025 – Master Compliance Like a Pro!

The correct answer pertains to home equity lines of credit (HELOCs) and adjustable-rate mortgages (ARMs) used as second mortgages because these types of loans come with unique regulations regarding the right of rescission. The right of rescission is a consumer protection provision that allows borrowers to cancel certain types of credit transactions within three business days of signing documents.

When dealing with home equity lines of credit and ARMs, lenders must ensure they do not disburse funds until the right of rescission period has expired. If funds are disbursed before this period ends, borrowers may not have the opportunity to reconsider their decision, which could lead to further complications or potential violations of regulatory requirements.

In contrast, purchase-money mortgages typically do not have a right of rescission; therefore, compliance scrutiny regarding disbursing funds is different. Refinancings of installment loans without new money advanced may or may not trigger the right of rescission requirements, depending on various factors, but they don't inherently pose the same compliance issue as second mortgages in this context. Lastly, while renewals of HELOCs might raise some compliance concerns, the focus of the question is more appropriately placed on the specific risks associated with disbursing funds under home equity and ARM second