According to Truth in Lending laws and RESPA, what type of loan provides a 3-day right of rescission?

The correct answer is a home equity loan. Under Truth in Lending laws and the Real Estate Settlement Procedures Act (RESPA), borrowers are afforded a three-day right of rescission specifically for certain types of loans secured by their primary residence, which includes home equity loans and lines of credit. This right allows borrowers to cancel the loan agreement within three days of closing without penalty.

The three-day right of rescission is designed to protect consumers by giving them time to reconsider their decision to take on additional debt secured by their home. It does not apply to all loan types; for instance, conventional loans, FHA loans, and VA loans do not provide this right since they are mortgage loans that typically involve a purchase rather than a second lien against the property. Therefore, this unique protective measure is specifically associated with loans that utilize the equity in a homeowner's primary residence, making home equity loans the correct choice in this context.