Foreclosure Offense: Quiet Title and Rescission (TILA and otherwise)



In essence the reverse of a traditional foreclosure where the owner of the property forecloses the claim of the people against whom he he has filed suit claiming the property free and clear of all encumbrances. 

The significance in foreclosure OFFENSE is that the loan has been assigned, sold and transferred multiple times and broken up into thousands of pieces along with many others that were intermingled in portfolios, sometimes with cross guarantees from one portfolio to another. 

This process started before the first payment was due on the mortgage loan and before the victim/borrower came to know the real facts of the loan withheld from him in an asymmetric information environment (see asymmetric information) in an inter-temporal transaction (see inter-temporal transaction). 

Thus the true owner, against whom rescission could be claimed became unknown to the victim/borrower. The quiet title action sues “John Doe” identified as all persons having an ownership interest in the mortgage lien on the subject property. The allegation is made that while the victim/borrower has been notified of a transaction, the victim/borrower, petitioner has not been advised of who the entities or people are who own this interest. And since there are TILA and other fraudulent violations, the victim/ borrower/petitioner wishes to rescind. Efforts to determine the true owners have led the Petitioner to determine that there may be thousands of entities or owners, none of whom have been disclosed to Petitioner despite attempts to secure said information (contained in the TILA report and demand). 


If the court demands that the mortgage servicing company be named as nominal Defendant or Respondent, the mortgage servicing company has only one job: to produce information and proof of ownership of the loan. It is doubtful that anyone, least of all the mortgage servicing entity will be able to fulfill this condition. 

Thus the default judgment will be entered, the victim stops paying the mortgage, and has a recorded judgment relieving his property of any mortgage lien and offsetting the note with the refunds and damages payable to the victim, thus satisfying the entire principal of the note and awarding attorney fees to the victim/petitioner.


The right to reverse the transaction. Ordinarily rescission involves giving back everything you received in exchange for getting back everything you gave. In this setting it means the right to get back ALL the interest, points, closing costs and attorney fees and other costs at or after closing that you incurred as a result of the transaction. Rescission rights exist under Federal Statutory Law (Truth in Lending Act – TILA, State Deceptive Business practice Acts, and at common law. Remember that rescission doesn’t mean you give back the house. It doesn’t even mean you have to give back the money to the lender against whom you are rescinding — THAT obligation commences AFTER the lender admits to the rescission or it is otherwise decreed and then it is reduced by the refunds of points, interest, closing costs you paid plus damages and attorney fees you suffered as a result of the issues raised in this post. Rescission might not even mean you owe any money at all to the lender. It could mean that the mortgage lien is extingunished and so is the note. It could convert a secured debt, non-dischargeable in bankruptcy to an unsecured debt wholly dischargeable in bankruptcy. And unless the party coming into court or the auction as a “representative” of the lender can prove that they have received their instructions and authorization from a party who is authorized to give those instructions, then they lack authorization, they lack legal standing and they are probably committing a fraud on you, the court and everyone else. 

companion tranche

A specific tier or segment of REMIC security. A REMIC tranche that is structured to absorb a disproportionate amount of the volatility caused by variations in the prepayments of the underlying collateral. Companion tranches are created to be more volatile so that other tranches in the same REMIC, called PAC or TAC tranches, may have more stable cash flows. Hence the name companion. Also called support tranches. The significance in Foreclosure defense is that this is one of the devices used in the covenants or indentures of ASBs that assures payment to the holder of the security. Since the holder of the security is the “owner” of the mortgage and note, it is reasonable to assume that either the holder of the mortgage has been paid by a third party or that a third party assumed the liability.

compliance risk

One of nine risks defined by the Office of the Comptroller of the Currency (OCC). The risk to earnings or capital arising from violations of or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards. This risk is incorporated in the Federal Reserve definition of legal risk. Participants in the Mortgage Meltdown of 2001-2008 were virtually all out of compliance and upon filing of an administrative complaint to the OCC, could be prosecuted for violations.

conventional mortgage

A mortgage loan based solely upon the value of the mortgaged real estate and the creditworthiness of the borrower. A mortgage loan without insurance or guarantees from a government agency. The significance is that with securitization of the loans there is (a) insurance to the holder of the CLO (b) guarantees of payment from third parties and (c) in practice, guarantees from the Federal Government (witness the Federal Reserve bailout of Bear Stearns and the Federal Reserve policy of allowing investment bankers who are holding CLOs to use those CLOs for loans at the Fed window). The securitized transactions thus converted the original transaction from a conventional loan to a complex consumer credit, insured, guaranteed, pooled security transaction falling far outside of the TILA exemption regarding residential home mortgages eligibility for rescission. 


Transactions in which the commencement of the terms at the execution of the deal contains terms, risks or provisions that differ from a later time. The significance of this insider term in the MORTGAGE MELTDOWN is a classic real story: the victim is a black man with a perfect (800) FICO score has lived in his house many years and has only 5% left to pay off on his mortgage. He is approached by carefully trained predatory salesman for subprime lender — a lender that the victim had no need for because his credit, finances and personal reputation were excellent. Victim could therefore have qualified for any conventional loan on conventional terms. Victim does not know because it is not disclosed to him that he is being approached with a subprime lending program and that he qualifies for much better terms that are being offered to him — nor that he would be better off NOT refinancing since he is so close to paying off his house. He is convinced to get a new mortgage for interest only payments set at 1% while another 9% accrues. $20,000 in mortgage broker and yield spread premium rebates (kickbacks) are paid up front along with the mortgage proceeds. Within a few months he starts getting notices of increases in his payments which eventually are larger than his entire income. Qualification of the loan by the “lender” was at the payment rate at 1% interest, not at the future rates that would be applied, for which his income would NOT qualify. Victim ends up with risk of foreclosure and blemished credit score. Happy ending. Legal aid stepped in and unwrapped the deal. Many borrowers are seduced into accepting these deals believing that the extra money they are getting out of the mortgage proceeds will help them indefinitely to make future payments. It is the lender’s obligation to disclose that this is not the case, that the borrower’s income does not cover the amount of future payments which the lender understands and the borrower does not (see asymmetric information). 


An series of events (stemming from the 1983 introduction of derivative securities) created by a tacit cartel of investment bankers and other financial institutions in which borrowers were (approved) “loaned” money on purchase money mortgages based upon false appraisals in the context of contemporaneous securitized transactions where the investment capital was procured by fraud in unregulated security offerings to “qualified” investors, based upon false assurance, false ratings, false insurance backing, and false appraisals of underlying property, income of borrowers and many other factors. The logistics of this scam were revealed in pieces and have threatened the very existence of many financial institutions and the financial markets themselves. Indexes, such as LIBOR, were indirectly manipulated by U.S. financial institutions to hide the true facts. Despite a brief period in which certain arcane “auction markets” froze up (in places and events unknown to the public, business has resumed as usual. The lack of regulation from a responsible, accountable agency or group of agencies has spawned hundreds of lawsuits and millions of foreclosures, many producing counterclaims for far more than the original mortgage and note. No immediate fundamental change is in process in the regulatory scheme, hence it may be expected that the mortgage meltdown will replay in one form or another shortly. 



10 Responses

  1. Please see my profile if you are interested in quiet title actions!


    We purchased our home November -06 (jointly) it was a full income verification 100% interest only… after a year and 3 months of paying interest only, I lost my job and the property went into foreclosure. Though I felt I purchased the home at a good value (100k under appraised value) the market was starting to slide and the appraised value dropped… (yes I know, probable to where it should have been in the first place….) I filed a chapter 13 (pro se) to block the Foreclosure and in hopes of finding a job and recovering… Times continued to get worse. I converted the CH13 to a CH7. Shortly there-after BK court received a MOTION TO REMOVE THE STAY from the property.
    The first motion was filed as “MOVANT” foreclosing. I filed a motion to dismiss as MOVANT was to general and there were no recordings in my county showing any new title holders. They filed an amended motion to show Aurora Loan Servicing as the party of interest and supplemented the motion with a CORPORATE ASSIGNMENT dated and notarized approximately 30 days after my closing and recently recorded in my county. This C.A. (Corporate Assignment) transferred ownership from AEGIS WHOLESALE LENDING (my original lender) through MERS to Aurora Loan services. The Judge ruled in favor of the removal of stay and the Foreclosure processes began.

    After Reviewing the Corporate Assignment very closely a giant flaw existed (conspiracy to commit Fraud) .The C.A. was dated December 5th, 2006 in 5 different places on the two pages and the Notary witnessed it on that day signed and notary stamped. The Notary stamp showed an expiration of Sept. 2012 and in the State of Nebraska (state document was created) Notaries have a four year life. Therefore it was not possible for her stamp to have existed in 2006 the alleged year of that document. I filed a new motion with fraud and the Removal was reversed. I requested the notary application for the last two periods from Nebraska and she listed employment her Aurora Loans Servicing. The C.A. was coming from MERS to Aurora Loans. I also found that Notary had signed a separate C.A. as an officer of MERS and an officer of Aurora Loans. I believe they “back dated” the C.A. because AEGIS went out of business four months after closing my loan and MERS had to show the assignment prior to AEGIS closeing because MERS would no longer be relavent. (A lender must be approved by MERS to use them)

    My BK was discharged, my credit mortgage -0- included in BK and I’m still living in the house. Unfortunately my wife is still showing a balance and the home in Foreclosure. I have now just completed my “process” on requesting the original Note and deed of trust. They are now in Default. I am getting ready in the next two weeks to file a Quiet Title to remove all parties.

  3. “Quite Title”

    This is from a while back, but perhaps needs to be revisited since many things have changed during this time.

    A friend asked after reading this blog, why they should not file a Quite Title, even if they are not in foreclosure, given the state of affairs arising with securitzation in home mortgages.

    Anyone have an opinion.

  4. to Livinglies: I just noticed this thread and the fact that no one responded on point to your suggestion. I hope you are monitoring the thread and contact me.

    Quiet title is one of the first things that came to my mind with the foreclosure defense cases I’ve been getting that contain the lost note count. In fact I have a hearing coming up (Pinellas County) requesting leave of court to file a quiet title counterclaim against Indymac. In my opinion, by either losing the note or mal-indorsing it, or failing to prove ownership (eventhough you prove holdership) creates a cloud on title impeding the client’s ability to pass good title on to a buyer or to obtain clear title by paying it off directly.

    If you are interested to see how my hearing turns out give me an email or call.


    This is for Jamie, or anyone interested. I found this article very thought provoking. As far as rescission, I don’t know if you have your answers. If you did not receive proper disclosure you have 3 years rather than 3 days. One year from closing to claim the penalties from such violations.

    If you are not still in your home and have lost through bankruptcy or foreclosure, this can be part of your claim. And… there is rescission as a means to resolve your fraudulent appraisal.

    I am wondering about bankruptcy, I am considering as a possibility. I am alone, pro se, not by choice. My attorney has taken leave of me. I have been charged over $50k and only been able to cover approx $20k of that, so he pleaded out. The thing is though, my attorney was not living up to standard.
    When we first signed on with him, he said he would have to think about it to see if this was a conflict with him, as he mostly worked for banks, turns out mostly meant only. He came back with a contract and a request for deposit. However, shortly after he took the case it seemed he did not really know too much of the subject. Quoted regulations inacurrately, and eventually in general did not seem to be looking out for my best interest. I repeatedly asked him if he had a conflict. He never ownesd up to one, but did say, I have never represented your lender. Well, that was not exaclty the question. Now, I believe I may have found a conflict, though not sure.

    One of the defendants has me and my husband scheduled for depositions on the 8th of Jan. The attorney never gave my response to last part of interrogatories, even though they were due before the leave was given by court. I am really lost and don’t know what to do. One of the parties the Mortgage co called to see if I was quitting since I did not have an attorney, these are people who were nearly completely non compliant the whole time, now they are coming out or the woodwork. I told him I have been in for 2 years, I won’t quit unless I get an appropriate settlement, as it would be a plus to just move on.

    Good Luck!

  6. Literally 2 years out of Bankruptcy we were granted an 80/20 loan on stated income. I found that our appraiser, has had his license revoked for multiple violations including inflation of a property within 20 blocks of our residense. Furthermore, it was determined that an appraisal review fee was paid to First Franklin in the amount of $100.00 to verify its accuracy, (appraiser’s license has since been revoked for knowingly inflating appraisals to push through approval of loans). Being that the home was 100% financed by FF, and did not (even after charging a fee for the service) demonstrate due diligence I think we may be in luck! Please see below a California ruling in regards to a loan financed by National City (parent company of FF) in which the loan was 100% financed (80/20 stated income loan such as ours), that relieved the debtor from financial responsibility:
    “However, the Bank’s suit fails due to its failure to prove the sixth element of its claim: i.e., the reasonableness of its reliance.6 As stated above, the reasonableness of a creditor’s reliance is judged by an objective standard. In general, a lender’s reliance is reasonable if it followed its normal business practices. However, this may not be enough if those practices deviate from industry standards or if the creditor ignored a “red flag.” See Cohn, 54 F.3d at 1117. Here, it is highly questionable whether the industry standards–-as those standards are reflected by the Guidelines–-were objectively reasonable. However, even if they were, the Bank clearly deviated to some extent from those standards. In addition, the Bank ignored a “red flag” that should have called for more investigation concerning the accuracy of the income figures. . . .

    Based on the foregoing, the Court concludes that either the Bank did not rely on the Debtors representations concerning their income or that its reliance was not reasonable based on an objective standard. In fact, the minimal verification required by an “income stated” loan, as established by the Guidelines, suggests that this type of loan is essentially an “asset based” loan. In other words, the Court surmises that the Bank made the loan principally in reliance on the value of the collateral: i.e., the House. If so, the Bank obtained the appraisal upon which it principally relied in making the loan. Subsequent events strongly suggest that the appraisal was inflated. However, under these circumstances, the Debtors cannot be blamed for the Bank’s loss, and the Bank’s claim should be discharged.” [ In Re Hill Decision, AP 07-4106 (Filed 5-23-2008)]

    In our case events strongly suggest that the appraisal was knowingly inflated (or intentionally overlooked). Furthermore, since the transaction was stated income, and the decision above states that the transaction (financed 100%) is “asset based” even though it is a mortgage for a primary residence, would it not qualify for TILA rescission, similar to a refi? We are currently in foreclosure and have filed for bankruptcy.

  7. I meant to ask this question in my post…

    Our refinance in May 06 paid off the previous mortgage. I did not receive my original note back from my previous lender. I believe a lender is liable for any assigned loan, and I have read articles on lender liability in a refinance, My question is, if a lender does not send original note back to borrower, is that contract in affect still open to rescind? even though someone has paid that amount on my behalf? But if the lender does not take the required steps in paying off this loan in a refinance why would they not be responsible? Is the lender with whom we have refinanced liable for paying a loan that has discrepancies in the paperwork, or when the bank they paid off did not follow through in their returning the original note to borrower? What documentation is exchanged between banks when a loan is paid off?
    Can this lender be responsible for this paid off amount as part of my law suit, thus leaving us not in debt for the amount that was paid by them? There are many complicated issues with this case. This has made it hard for the attorneys. I have sent a link to your site to my attorney. Thank you.

  8. We refianced in July 05, partly for construction funds. I have since found is not kosher.
    In September of 05, broker referred us to 2nd broker, to lend us 2nd half of necessary funds for construction. He also coerced us into securing unsecured business debt, with the promise of turning it into an unsecured business loan, at a later date. He also promised to really halp us grow my husband’s small business. We were looking for a bigger location. He said he knew a possible partner for us, he suggested we would be on the other side of the table lending other people money. Well who would not mind that? 2/3 of debt he secured to our mortgage, was not in either of our names, but in husband’s Mother’s name. Each time we met with him, he did not have time to talk about business. Second broker split up construction funds into two loans. Broker # 2 was also represented by both # broker2 as business adviser. We should have every confidence in Broker #, according to Broker #1. He took over the handling of my husband’s business, taxes, business and personal. May 06 came a 4th loan, with which Broker #2 paid off bulk of loans he lent us. He tried to get more paid off in a last minute change to Settlement HUD 1 document. (so it appears) In a fifth loan, he paid off the remainder, at 3% higher than the prior loan, cash out, which was used to pay high mortgage. Weeks after the refinance in May, (unbeknown to us) the mortgage company was still trying to get a new HUD 1, along with (so it appears) signed mortgage documents. We later found out there were a least 3 or 4 new HUD 1 settlement documents prepared and signature supplied by someone other than me. My husbands name was also forged. The final settlement HUD 1 was not printed until 7/7/06, a good 6 or 7 weeks later. The represented this set as the True and only set of Settlement HUD1 documents. We found out in March of 07.
    They claimed it was signed on in May 06

    First mortgage has been rescinded in June of 06. The Mortgage co. was non compliant, not responding to us at all. Not until approximately 10 to 11 weeks later did they respond. We have not paid on that loan since June 07.

    Second mortgage, also rescinded, also non compliant, until a later than required time. This loan has been unpaid since March 07.

    In subpoenaed docs it was revealed that my income was recorded at 10 times the actual amount. Plus many more misrepresentations.
    The Mortgage co, despite granting weeks after rescission, immediately send big tough guy to present a document and push for answers on when they would get their money. A second man came weeks later, despite the promise of no more of this. He left with out giving me anything.In March of 08, despite a written statement to NJDOBI, that they would not attempt to foreclose, they made a complaint in foreclosure court. They ignored my calls. Finally after weeks of people driving by, taking photos, checking the place out like vultures, expecting a deal in a foreclosure, They withdrew the complaint. But not with the court until I was considered default in responding. Also, a permanent Neon yellow stamp on my Mortgage, recorded at the county, saying LisPendens. Cancellation of Lis Pendens, with out prejudice.

    Another promise to our attorney, in writing again, to not foreclose. A month ago, I received another Certified Letter, yes another threat to foreclose. $35,000 later, a bit less than half still unpaid to my attorney, I am broke and expected to spend several thousands on experts to prove my case. Judge insists, I believe. Judge also says he has a hard time believing these cases, after all, they signed the loan, he said. But he is really looking forward to it, since this will be his first Predatory Lender, Fraud, ect case. Yeah, I have goose bumps just thinking about it, a Judge who has already judged and looking forward to the entertainment. The Senior attorney with my Attorney’s office wants payment of outstanding debt now. We have not done depositions yet, and Court date is over a year away.

    Oh, ps, Broker #1 and Broker #2 became parters in Broker #2’s business, during our association. The same Mortgage man, Broker #1, same Title Ins closer as at least 3 of the several loans. The Mortgage company was our lender, by a different name in a previous loan. This was my first experience with owning a home, and we were very naive. But I guess they saw us coming.

    By the way, I have only just found your site. It is really top knotch. A really great source for people in my situation. So much of the information that I have spent endless hours researching, all in one place. Wish I had found you sooner.
    Thank you.

    Abundant Blessings to you Sir.

    Sincerely, Juli

  9. wow! You should give a a seminar in new York I have 50 lawyer’s that will attend.

  10. Neil, my wife and I are extremely thankful that you’ve come out of retirement to help all of us fight these crooks!

    Keep up the great work!

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