EDITOR’S COMMENT: I maintain that the limit on the equitable tolling of the right to rescind ONLY applies with respect to the delivery of the right forms regarding rescission and NOT for failure to to make important disclosures (such as the true APR, the identity of the real creditor, and all the people who are taking fees as a result of the borrower signing the mountain of papers.

I still believe that the transaction has not been consummated unless the substantive disclosures and forms have been delivered and signed. Thus the period for rescission can properly be argued to be three days from the time when those documents and disclosures are delivered. If they haven’t been delivered and disclosed, then the transaction is not complete and the borrower, in my opinion, can rescind at anytime. Fraud is not a basis for invoking limitation on the right to rescind.

I successfully used the following (attached case) in a Opposition to Defendants Motion for Summary Judgment early in my case (around 9/2008).


Ken McLeod see Vernon Handy v Anchor Mortgage 464 F.3d 760
464 F.3d 760
Vernon HANDY, Administrator of the Estate of Geneva H. Handy, Plaintiff-Appellant,
ANCHOR MORTGAGE CORPORATION and Countrywide Home Loans, Inc., Defendants-Appellees.
No. 04-3690.
No. 04-4042.
United States Court of Appeals, Seventh Circuit.
Argued April 6, 2006.
Decided September 29, 2006.
Page 761

“The sufficiency of TILA-mandated disclosures is determined from the standpoint of the ordinary consumer.” Rivera v. Grossinger Autoplex, Inc., 274 F.3d 1118, 1121-22 (7th Cir.2001) (citing Smith v. Cash Store Mgmt., Inc., 195 F.3d 325, 327-28 (7th Cir.1999)). As a result, Anchor’s argument that “[t]he most illuminating fact demonstrating the clarity of Anchor’s Notice is that the Plaintiff simply was not confused” misses the point. Whether a particular disclosure is clear for purposes of TILA is a question of law that “depends on the contents of the form, not on how it affects any particular reader.” Smith v. Check-N-Go of Ill., Inc., 200 F.3d 511, 515 (7th Cir.1999).

TILA does not easily forgive “technical” errors. See Cowen v. Bank United of Texas, FSB, 70 F.3d 937, 941 (7th Cir.1995)

Having established that Anchor violated TILA, we turn now to the issue of remedies. Under TILA’s civil liability provisions, a creditor that violates 15 U.S.C. § 1635 is liable for: “actual damage[s] sustained” by the debtor, 15 U.S.C. § 1640(a)(1); “not less than $200 or greater than $2,000” in statutory damages, § 1640(a)(2)(A)(iii); and “the costs of the action, together with a reasonable attorney’s fee,” § 1640(a)(3). In addition, § 1635(b) itself provides that when a debtor rescinds she is “not liable for any finance or other charge”; “any security interest . . . becomes void”; and “[w]ithin 20 days after receipt of a notice of rescission,” the creditor must “return to the [borrower] any money or property given as earnest money, downpayment, or otherwise.”

We agree with the Sixth Circuit’s well-reasoned opinion in Barrett and hold that the remedies associated with rescission remain available even after the subject loan has been paid off and, more generally, that the right to rescission “encompasses a right to return to the status quo that existed before the loan.”

Congress enacted TILA “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit.” 15 U.S.C. § 1601(a). As is relevant to this case, TILA mandates for borrowers involved in “any consumer credit transaction . . . in which a security interest . . . is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended” a three-day period in which the borrower may rescind the loan transaction and recover “any finance or other charge,” earnest money, or down payment previously made to the creditor. See 15 U.S.C. § 1635(a), (b). In the context of “[a] refinancing or consolidation by the same creditor of an extension of credit already secured by the consumer’s principal dwelling,” the right of rescission applies only “to the extent the new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the costs of the refinancing

In addition to creating the right of rescission, TILA requires creditors “clearly and conspicuously” to disclose to borrowers their right to rescind and the length of the rescission period, as well as to provide borrowers with “appropriate forms . . . to exercise [their] right to rescind [a] transaction.” 15 U.S.C. § 1635(a). The Federal Reserve Board (FRB), one of the agencies charged with implementing TILA, has promulgated an implementing regulation, known as Regulation Z, 12 C.F.R. § 226 et seq., that, among other things, requires creditors to disclose the following elements to borrowers:

(i) The retention or acquisition of a security interest in the consumer’s principal dwelling.

(ii) The consumer’s right to rescind the transaction.

(iii) How to exercise the right to rescind, with a form for that purpose, designating the address of the creditor’s place of business.

(iv) The effects of rescission. . . .

(v) The date the rescission period expires.

Nor are we persuaded by Anchor’s argument that TILA’s safe harbor provision protects it, an argument Anchor raised below but the district court did not reach. This provision requires a creditor to “show[] by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” 15 U.S.C. § 1640(c). As far as we can tell, there is no evidence in the record that Anchor maintains any such procedures. Although Anchor’s general counsel, who was called as a witness by the company, was asked twice what procedures the company had in place to prevent the type of mix-up that occurred in Handy’s case, she was unable to describe any system used to ensure that the correct rescission forms are provided to borrowers.

17 Responses

  1. Ian

    Well put.

  2. ANONYMOUS- I will look for PJ to chime in. I know you believe that alot of refi’s were not acually refi’s,but modifications. So everyone who thought they were refinancing or remortgaging their loan,paid points,loan origination fees,probably a redundant title ins.policy, broker’s commission, points,etc.- Where would that lead to as far as fraud claims are involved? It is actually unthinkable that these activities were just a change in terms-maybe the servicers fronted the small payouts from these refi’s and are trying to recoup their payouts through their various servicing scams,bogus “legal fees”, drive by appraisals,etc.

  3. Ian

    Think PJ has more info on this than me. I have stated that changing of account numbers is a “red flag” — While servicer may claim that a change in account number is to accommodate new system, it is also part of a “system” in which once a loan is written off — cannot collect on it anymore – thus, new account number is assigned by party who purchases collection rights (note bank can keep collection rights — but would have to do reverse accounting entry after it wrote off — and then collected). But no one will divulge this information — they just keep saying the “current” creditor is the trustee to such and such trust — even though collection rights may have been swapped/sold — many many times.

    I have seen loans with so many account numbers — how is anything even valid?. Further, the original trust mortgage schedule is for a specific loan number only — the original loan number. No adjustments are made for a change — meaning investors should not have any rights under new loan number — does not belong to trust. .

    As far as MERS — system is a mess — and, as I state, believe many refinances were not refinances at all — so MINs number should not have changed — but, this does not mean it did not change!!.

    Hope PJ reads — he has more info on this — and feels strongly about changed account numbers..

  4. ANONYMOUS- regarding refinances where the underlying “loan” may not have been paid off, can you discuss the importance of loan acct. numbers again? When must a loan number change? What if the loan number changes and you haven’t refinanced? And what are the rules,for what they are worth, of the MERS min #? Is that supposed to change when a refinancing takes place? Or? Thanks.

  5. DyingTruth

    Difficult — but I do not state this without evidence. You need to go back and start digging before the last refinance. And, this is not easy to do. Need to find out where loan was before the refinance — that is, if it was in a securitized trust – and who was the last Master Servicer. Last trust should have received payoff. Need to get all the documents — including canceled check if you can (even if electronically concerted – there still should be a copy from checks written at closing)- and whether prior trust (master servicer) actually has a receipt of payoff. Also look at discharge of prior mortgage — could very well mimic what we see in foreclosure “Robo signing”.. Gets records from settlement agent. May be job for AGs. But, if there are suspicions – you need to get to government agencies.

    Whoever had your loan prior to refinance — was NOT about to easily let it go — by just giving it to someone else. This also addresses the funding issue — if refinance was actually just a modification of prior loan — there was no real funding (except of any cash disbursements).

    This is only, of course, for refinances- not new purchases. But, many many of subprime mortgages were refinances.

    Also evidence that some loans may have been intercepted from Fannie/Freddie — that is, falsely placed in default — with insurance paid to GSE. Believe this could be subject of new DOJ investigation – and could also apply to new purchases..

  6. Brian,

    Could you please come to Oklahoma? We could so hook you up!

    I’ve always thought you were definately onto something when you talked about refinances never actually pay off old loans, but how do you go about obtaining definitive proof whether they have?

  8. b davies,

    But does Sheila know that the servicers cannot do a modification without identifying the current creditor?? Must be a new contract — and “servicer” has no authority to sign — it may negotiate — but not sign. Sheila should know this.

    “Mods” cannot be done under the name of the servicer.

  9. fighting mad, mad as hell,

    Ah — but were the loans really paid off by refinance???

    As to mods/refinances — these people are not the current creditor either – -i.e. — they cannot do.

  10. I haven’t been able to find an attorney either and that is why I have been proceeding on my own.

    It is terrible that the very few lawyers that are helping people only do it in there own counties, so I am told.

    That is what I have been told every time I inquire.

    I’s so sorry that you have lost your house. I hope that you are able to get it back or get justification through a monetary judgment.

  11. Ok If this is all true then why can’t I find a lawyer in Maryland that will help me get my house back. The mortgager was Saxon …I have posted on here before with no response. I don’t want a free house I just want justice for the wrong that was done to me…I want my house back!!!!!!

  12. mortgage servicing news

    FDIC chairman Sheila Bair is calling on residential servicers to step up their efforts to modify loans and compensate homeowners harmed by the foreclosure process as part of a settlement with the federal government.

    “It’s time for the government and industry to reach agreement that will finally bring closure to the crisis and pave the way for a lasting recovery in our housing and mortgage markets,” Bair told attendees of a servicing conference sponsored by the Mortgage Bankers Association.

  13. Banks drop foreclosures in Lee County & Southwest Florida.Hundreds of lawsuits dismissed.
    April Charney, a Jacksonville-area legal aid attorney who’s an expert on foreclosure issues, said for the most part banks have no way to prosecute their cases because the mortgages in mortgage-backed securities were never actually legally transferred to the trusts
    By DICK HOGAN • • January 19, 2011

    1:10 A.M. — Banks in recent weeks have been dropping hundreds of their Southwest Florida foreclosure lawsuits instead of facing defendants at trial, according to local attorneys and court records.
    Opinions varied sharply on whether that means banks are just taking a breather before refiling with stronger evidence – or giving up for good on hopelessly flawed cases.
    Some foreclosures at large law firms were never actually read by the attorneys who filed them here and elsewhere, and some of the mortgages that ended up in mortgage-backed securities sold to investors were never legally transferred by the banks, defense attorneys have alleged.

    “We think they’re going to come back and refile,” Lee County Clerk of Court Charlie Green said.

    That’s an expensive proposition, he said, noting foreclosure suits carry a hefty filing fee: about $1,900 for a $250,000 house, for example.

    What happens is lawyers for the banks are asking judges to dismiss their cases, which is “very much out of the ordinary,” Green said. “You don’t see cases dismissed without prejudice that often.”

    Foreclosures were rare in Southwest Florida until the housing market crashed at the end of 2005, bringing on waves of mortgage defaults by investors and homeowners.

    Green said he hasn’t calculated exactly how many foreclosures are being dismissed.

    But eight voluntary dismissals were filed Tuesday alone by seven different banks including Bank of America, one of the largest filers of foreclosures in this area. Bank of America did not reply to a request for comment Tuesday.

    At one court hearing alone, attorney Kevin Jursinski said, one of his associates watched as “50 in a row” were withdrawn.

    “Can they re-litigate?” Fort Myers-based attorney Carmen Dellutri asked. “I don’t think so.”

    Most of the mortgages in dispute were sold to Wall Street and sold in bundles to investors as mortgage-backed securities, he said. But so many mistakes were made in the process it’s unlikely the banks can win those cases.
    Some mortgages still held by the bank that made the loan might be defensible but those are in the minority, Dellutri said.

    He said he’s seeing cases withdrawn in large numbers in Lee, Collier and Charlotte counties, and he heard from an attorney in Jacksonville the situation is the same there.
    April Charney, a Jacksonville-area legal aid attorney who’s an expert on foreclosure issues, said for the most part banks have no way to prosecute their cases because the mortgages in mortgage-backed securities were never actually legally transferred to the trusts.

    She said much of the recent wave of voluntary dismissals may be a result of a Massachusetts Supreme Court ruling Jan. 7 upholding a judge’s decision two foreclosures were invalid because the banks didn’t prove they owned the mortgages, which he said were improperly transferred into two mortgage-backed trusts.

    Now, she said, many mortgages simply aren’t fixable. “You can’t go back and securitize. You run a red light, you can’t go back and unrun it.”

  14. Diane Barker- I would think that,in BOA’s case,for instance,they settled with Fannie/Freddie for $2.8billion,for hundreds of billions of questionable loans which they sold to them. They had to be reserving alot more than 2.8bn,and made the paper entry of moving the overage onto their balance sheet. It was stated in congressional testimony by an exec of Clayton Holdings that a large percentage of loans failed under reps and warranties. So BOA slunk away from the truth and settled for a miniscule amount.

  15. Sorry this question is somewhat unrelated to this post, but I would like anyone with knowledge to comment on this.

    The banks, Wells, Chase so far, have reported huge Q4 profits. If you read deeper, those profits are in part due to them recapturing previous loan loss reserves into income, or reducing the amoun they are taking in loan loss reserves. WHY are they doing this? Do they know something we don’t know?

    In my small part of the world where I do litigation support for homeowners, we get 2-3 clients a week who are telling us they just stopped or are going to stop making payments. And I am in a small town.

    I don’t get it. AND I am a CPA. Can someone enlighten me? This is just plain weird.

  16. Going over the paperwork checking to see if things were in order to start a rescission, I found that the mortgage had been discharged in 2007 by Wells Fargo Trust, after the refinancing in 2006.
    The lender is named in the original note but not the refinance note. Doesn’t a refinance pay off the original note and start fresh?
    Since a warranty deed has already been recorded back in 2004 and the mortgage was discharged in 2007 does this mean we can submit a Satisfaction of Mortgage and file for a Quiet title or go ahead and try for a rescission or what?

    This is what the record says:

    Dated Date: 06/12/2007
    Reception Date: 07/02/2007
    Entry Date: 07/05/2007

    Document Type: DISCHARGE

    Grantor Name(s)

    Grantee Name(s)
    1 xxxx xxxxx


    The mortgage was assigned in 2010 to Bank of New York Mellon by MERS.

    IMHO, they should cancel all the mortgages and give everybody a refi or modification and restart.
    I understand why nobody wants to give a modification or refinance now, these people are not the original lenders and have no reason, no incentive to do a new loan, they didn’t loan anyone any money in the first place!
    You have to see the records to begin to understand just how messed up things are. And at that you have to go over the information several times to make sure you didn’t miss something important.

  17. Not related to TILA—-but important for all WAMUites

    WaMu shareholders appeal ruling on plan
    stumbleupon: WaMu shareholders appeal ruling on plan digg: US Works With Sudan Government Suspected Of Aiding Genocide reddit: WaMu shareholders appeal ruling on plan WaMu shareholders appeal ruling on plan

    RANDALL CHASE | January 19, 2011 12:35 PM EST | AP

    DOVER, Del. — Washington Mutual Inc.’s shareholders are appealing a Delaware judge’s ruling that a legal settlement underlying the company’s reorganization plan is fair and reasonable.

    In court papers filed Wednesday, WaMu’s official committee of equity security holders questioned how the plan can be deemed fair when there is no evidence of any legal analysis of the claims being settled.

    The shareholders claim the bankruptcy judge substituted her own analysis about the claims instead of relying on the evidentiary record. They are seeking to bypass a federal district court and go directly by the Third Circuit appeals court.

    WaMu’s plan is based on the settlement of lawsuits stemming from the collapse of its flagship bank in 2008 and sale of its assets to JPMorgan Chase.

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