Foreclosure Defense: Breathing Life Into A Stale, Time-Barred Truth In Lending Act Claim

Monday, August 25, 2008
Breathing Life Into A Stale, Time-Barred Truth In Lending Act Claim
Earlier this year, an article in the law firm Stroock, Stroock & Lavan’s Subprime Task Force Special Bulletin(1) contained a discussion on the 2008 California Federal Court decision in Monaco v. Bear Stearns Residential Mortgage Corp.(2) which, it appears to me, illustrates a way how, in California and possibly other states having similar state laws, claims for damages on account of conduct that constitutes violations of the Federal Truth In Lending Act (“TILA”) can be pursued even if the one-year TILA statute of limitations has expired. A few excerpts from the article:

* In Monaco, a federal court in California found that standard option-ARM loan documents are “ambiguous,” potentially subjecting the lender to liability for trying to enforce the loan’s terms. Making matters more difficult for the lender, the court further held that the lender’s alleged violation of the federal Truth In Lending Act (“TILA”) could create liability under California’s Unfair Competition Law (“UCL”), which provides for greater penalties than allowed under TILA, even though the borrower’s TILA claim was barred by the statute of limitations.


* Plaintiffs [Monaco & others] seek to rescind their loans by reason of alleged violations of TILA, including failure to disclose the actual interest rate and negative amortization, and, using the alleged TILA violations as a predicate, demand damages and restitution under California’s UCL.


* Bear Stearns moved to dismiss the TILA claims on the grounds that plaintiffs were not entitled to have their loans rescinded because the option-ARMs were refinancings of prior loans and because TILA’s one-year statute of limitations had expired. Second, defendants moved to dismiss the UCL claims on the grounds that TILA preempts California’s UCL and will not permit plaintiffs to win damages and penalties not permitted under TILA.


* Although the California court agreed that plaintiffs could not use TILA to rescind their loans and the TILA claim was barred by the statute of limitations, it nevertheless rejected defendants’ preemption argument:

* A State law is inconsistent with TILA if it requires a creditor to make disclosures or take actions that contradict the requirements of the Federal law. Here, Plaintiffs’ second cause of action under the UCL is based solely on Defendants’ alleged TILA violations. Nowhere do Plaintiffs suggest that Defendants failed to make certain disclosures or take certain actions not encompassed by TILA. Plaintiffs invoke the UCL solely for the additional remedies offered thereunder. Additional penalties are not inconsistent with TILA, but merely provide greater protection to consumers. (Monaco, page 7, at lines 9 through 17).

* Thus, the UCL’s longer statute of limitations enabled the Monaco plaintiffs to pursue their otherwise time-barred TILA claim and to obtain penalties that would not be permitted under TILA.(3)

For more, see Courts Act to Protect Borrowers on Option-ARM and Subprime Loans.

For the court decision, see Monaco v. Bear Stearns Residential Mortgage Corp.

For those of you who are interested, the article also contains a discussion of another pro-borrower decision referred to in this blog earlier this year, the New York decision in LaSalle Bank, N.A. v Shearon, No. 100255/2007 (Sup. Ct. Richmond County, Jan. 28, 2008).

See The Stroock Public Service Project for more on the firm’s service to pro bono matters, organizations and advocacy. The Public Service Project provides a broad array of legal assistance, with a special focus on underserved and under-resourced communities in New York City.

For other posts on homeowners using Federal & state consumer protection statutes to try and undo bad mortgage loans, Go Here, Go Here, and Go Here.
(1) By Julia B. Strickland, a Partner in the Class Action/Financial Services Litigation Practice Group of Stroock & Stroock & Lavan LLP, and Curtis C. Mechling, a Partner in Stroock’s Litigation Practice Group, both of whom are members of Stroock’s Subprime Task Force.
(2) No. CV 07-05607 SJO (CTx) (U.S.D.C. Central District of California, Jan. 28, 2008).
(3) My guess is that, if TILA violations can be used as a predicate for damages under state consumer protection laws of other states, a similar result could be reached in those other states. Und

7 Responses

  1. Cat I read the jury verdict Congradulations this is a huge victory for californians. I’m suprised the court did not pull a fast one on you like they did me.

  2. my trial is at 9:00 am tomorrow.
    Sunday night, january 31, 2010

  3. I am hoping you have a set of jury instructions on hand for the TILA.
    anyway here is my opening statement against our eviction; from home of 58 years, let me know what you think.
    The defendant would like to make the jury aware, that I am asking you to seriously undertake the chore of understanding the purpose and function of the Truth In Lending Act, and also to enforce the statues and provisions governing the mortgage loan consumer’s self enforcing rescission rights as guaranteed by The Truth In Lending Act and the Consumer Protection Act.
    The operation of the law and citations quoted in this case are quite straight forward. The Truth In Lending Act was created for the consumer to have remedy for fraud without judicial intervention. I want you to understand also that the defendant’s assertions in this case may be of critical importance for all mortgage fraud victims who may not have sufficient resources to retain legal counsel; particularly the elderly and or handicapped predatory lending victim, and or the non-English speaking predatory lending victim must be allowed to rely on substantive provisions and strict liability rules of the Truth In Lending Act, which was enacted by our Federal Government, to provide automatic relief for the predatory lending and financial fraud victim without the requirement of the services of an attorney or use of court procedure.

    The Fifth Amendment of the United States Constitution states, “no individual shall be deprived of life, liberty, or property, without due process of law… “According to the Fourteenth Amendment of the United States Constitution, Due Process Clause and Equal Protection clause (Section 1), expressly declares no state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law…”
    Due Process of law is denied when a meaningful hearing is denied, when the victim of predatory lending, lacks the financial wherewithal to retain counsel to protect their rights of due process of law to retain their homes and property.
    In 2008 alone, 2.3 million families faced foreclosure proceedings, the highest number since the Great Depression.
    Most of these families were innocent victims of a vast and complex change in how America does business called securitization.
    Not too many years ago, banks made responsible loans, ensuring that the consumer understood all the consequences, and had a secure income to support their financing. With the onset of securitization, and the selling off the consumer mortgage loan downstream, to the vast mortgage servicing machine; to be profitable the banks simply wanted to make as many loans as possible.
    With the onset of bulk selling of consumer mortgage loans downstream, in a process called securitization, the bank was no longer the ones who would be responsible to collect the mortgage payments, and therefore, it was no longer economically important for the bank to make a responsible loan.
    How easily we crossed that line! The cost to our individual families is hard to measure, and the cost to our American economy has been staggering: using the Joint Economic Committee estimate of $78,000 per foreclosure.
    Millions of American consumers are truly innocent victims who have lost their homes due to predatory sub-prime loans with multiple lending law violations. The predatory lenders and their partners in the mortgage servicing industry are having a heyday, feeding off the resultant carnage.
    As long as deceptive lending practices go unsanctioned the predatory lenders and their partners in the mortgage servicing industry will thrive at the expense of the American people.

    In response to my 84-year old mother’s predatory lending issues, I made an exhaustive effort to retain counsel, extensively interviewing more than 25 attorneys. What I discovered is that due to the current foreclosure crises, most real estate and property attorney require a retainer of at least $20,000 to even review complex title fraud and financial fraud issues, and the predatory lending specialist attorneys who are willing to work on contingency basis commonly often require from 60-80% of any amount rescinded from the predatory lending victim’s title, resulting that ultimately, the victims attorney will soon become the victims landlord. The predatory lending specialist attorneys are typically brokers with little or no sympathy for their clients.

    When a creditors becomes so eager to profit by foreclosing on the consumer’s property, that he usurps the consumer’s constitutional right to protect their property through due process of law, as guaranteed by Consumer Protection Act, The Real Estate Settlement and Procedures Act, and the Truth In Lending Act, and ignores the loan consumers duly issued and delivered, Truth In Lending Act Notice of Rescission and thereby tramples the mortgage loan consumer’s rescission rights under RESPA and does not appear disposed to follow and to abide by the rule of law regarding the deadline and obligations required by regulation Z and the Federal Truth-In-Lending Act; The Court requires a termination of the creditor’s ownership interest of the mortgage loan contract, against the violating creditor, for their failure to comply by illegally proceeding with a foreclosure action or eviction action against the loan consumer despite having received duly issued and Notice of mortgage loan rescission under the Truth In Lending Act.
    On October 14, 2007, I founded the Kokopelli Community Workshop Corporation, a non-profit public assistance program, providing educational classes and workshop groups to assist elderly and disabled victims of predatory lending and create avenues of relief from deceptive and illegal debt collection practices by the mortgage servicing industry to assist families and individuals in crises due to predatory lending fraud.
    I have undertaken, the In Pro Se, litigation of this case not only to save my mother’s home of 58 years, from the unfair, and unconscionable deceptive lending practices of an abusive and unresponsive mortgage servicing industry, but to create a path that others may follow.
    I wish to thank you in Advance for your efforts to undertake to study the laws and citations that I offer here, and provide a just and reasonable determination.

    A verdict to dismiss plaintiff, MTGLQ Investors L.P., wrongful eviction action will not deprive the lien-holder of his rights to recover his investment; but merely forces him to accountability, of the correct amount due, as determined by a forensic loan audit and finally to be determined by a judicial rendering, thereby allowing the property owners to equitably refinance their debt.
    Thank you for your consideration.

    Catherine Bryan, defendant DATED
    In Pro Per

  4. I was introduced to the mortgage industry in January of 2003. I recently took a business law class, and it seemed to me that most of the loans that were consumated as Option ARMs, ARMs, and Hybrid ARMs were easily defendable. Upon research I have found this to be the case. First of all the loan officer is considered and expert on whom a reasonable person would rely on advice when deciding on a loan. The size, the complexity, and the inability of a reasonable person to understand the loan documents, requires him or her to depend on the expert opinion of the loan officer. The expertise of the loan officer also gives the loan officer the ability to coerce the borrower into signing a document that if a reasonable borrower understood the actual terms of the mortgage agreement would not have signed the mortgage agreement. Any case that includes fraudulent misrepresentation is cause to have the mortgage contract declared invalid.

  5. That is very important section. You are possibly that a good broker. Thanks.

  6. TILA’s statute of limitation is subject to equitable tolling, so the court is not automatically deprived of subject matter jurisdiction. Ellis v. General Motors Acceptance Corp., 160 F.3d 703 (11th Cir. 1999) Without equitable tolling, “consumers whose cause of action was fraudulently concealed from them until after a year had passed could not pursue a cause of action under TILA.” Id. In King v. California, 784 F.2d 910, 914-15 (9th Cir. 1986), the Ninth Circuit held that TILA’s statute of limitations is subject to equitable tolling. Every other circuit that has considered the issue has held that TILA is subject to equitable tolling. See Ramadan v. Chase Manhattan Corp., No. 97-5282, (3rd Cir. Sept. 22, 1998); Jones v. TransOhio Savings Ass’n., 747 F.2d 1037, 1041 (6th Cir. 1984); Kerby v. Mortgage Funding Corp., 992 F.Supp 787 (D. Md. 1998); see also Lawyers Title Ins. Corp. v. Dearborn Title Corp., 118 F.3d 1157, 1166-67 (7th Cir. 1997) (citing King and TransOhio with approval). Tolling applies apparently to damage claims under TILA, but probably won’t work to get beyond the 3-year bar on recission.

  7. What if the case is beyond the TIL statute of limitations, but it was not a failure to notify the borrower, but it was a deliberate attempt to defraud the borrower. I have a case in New Jersey where the broker falsified the income by 300%, paid a CPA to fabricated a letter, then gave him a fully adjustable arm, when she told him it was a 5/1 arm. What do you do in this case.

Contribute to the discussion!

%d bloggers like this: