9TH CIRCUIT: TILA RESCISSION REVIVED AND RETURN TO NORMAL RULES OF PROCEDURE

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“so long as the plaintiff alleges facts to support a theory that is not facially implausible, the court’s skepticism is best reserved for later stages of the proceedings when the plaintiff’s case can be rejected on evidentiary grounds.” In re Gilead Sciences Securities Litigation, 536 F.3d 1049, 1057 (9th Cir. 2008).”

9th circuit opinion upholding TILA recission 01022012

EDITOR’S COMMENT: The Balderas Opinion is a New Year’s present for all those attorney and litigants who complain that the Judges are not following the law. The 9th Circuit sets them straight, and returns to the requirements of the Truth in Lending Act (TILA), rescission and the proper time to raise presumptions and introduce evidence. It corroborates my prediction that TILA is making a come-back and that it the perfectly de signed hook for Judges to hang their hat on to escape the consequences of all their previous bad decisions in which they accepted oral assurances from counsel for foreclosers at a point in the proceedings where there was no evidence being considered.

Those analysts who are downplaying the TILA AND FORENSIC LOAN ANALYSIS are making a mistake. In the final analysis, for all matters concerning the security instrument (mortgage or deed of trust) and for many relating to the note, rescission and tender, the specific wording of the TILA statutes is going to be the focal point of litigation and the ability of the borrower to recapture payments, attorney fees and even pursue damages.

The case should be read in its entirety. The recitations of the facts pled by the borrower will come as familiar patterns known to many borrowers, complete with putting the borrower under siege until they signed the papers.

NOTABLE QUOTES FROM BALDERAS V COUNTRYWIDE 10-55064 9TH CIRCUIT

Three days later, on the evening of Monday, September 25, 2006, Cazakov showed up at their home with a notary public and loan documents also written in English. He told them that Countrywide “demanded” their signatures “that night” and he couldn’t and wouldn’t leave without getting them. The Balderases protested and asked to arrange the loan signing when their English-literate daughter could attend. But Caza- kov said that Countrywide had instructed him to stay until he got the signatures, and he “engaged in a series of actions designed to intimidate, harass, and pressure [the Balderases] into signing the loan documents.” After six hours of unrelent- ing pressure by Cazakov and several unsuccessful attempts to read the paperwork, the Balderases capitulated and signed the documents just after midnight.

Under the “borrower’s remorse” provision, consumers can rescind a loan up to three business days after the loan transaction. See 15 U.S.C. §1635(a). But this right is extended up to three years “[i]f the required notice or material disclosures are not delivered.” 12 C.F.R. § 226.23(a)(3); see also 15 U.S.C. § 1635(f).

Balderases claim that Cazakov falsely promised not to submit their paperwork to Countrywide “for a few days” in case they decided “not to proceed with the loan after their daughter had reviewed the contents.” And, when the Balderases tried to exercise their right to rescind, Cazakov and Countrywide told them, incor- rectly, that it was too late,

the district court relied on Exhibit 14 to the complaint. Exhibit 14 is the rejection letter Countrywide sent in response to the Balderases’ written rescission demand. The Balderases attached the letter to their complaint, an important object les- son as to why it’s unwise to use a complaint as an ersatz doc- ument production. Attached to the rejection letter is a properly completed Notice of Right to Cancel bearing the Balderases’ signatures. Immediately above the signatures is a statement to the effect that the borrower “acknowledge[s] receipt of two copies of NOTICE of RIGHT TO CANCEL.” Countrywide’s rejection letter points out that the Balderases acknowledged they had received proper notice, which meant the period to rescind was only three days.

The acknowledgment created a rebuttable presumption that the required disclosures were delivered to the borrowers. See 15 U.S.C. § 1635(c). This presumption will no doubt be very valuable to Countrywide when the trier of fact is called on to decide whether the Balderases did or did not get proper TILA notice. But evidentiary presumptions “are inappropriate for evaluation at the pleadings stage.” 5B Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1357 (Supp. 2011). The Balderases allege in their complaint that they did not, in fact, get a properly pre- pared notice. If they testify to that effect at trial, the trier of fact could believe them, despite their signed statement to the contrary.

momentary delivery defies both the purposes of the TILA and common sense. The revered second edition of Web- ster’s New International Dictionary defines “deliver” as “to give or transfer” and “to yield possession or control of.” Web- ster’s New International Dictionary 693 (2d ed. 1939). We interpret “deliver” to mean that the consumer must be allowed to keep the notice. When you have pizza delivered, you don’t sign for it and let the deliveryman take it back to the restau- rant. And when a newspaper boy delivers a paper, he doesn’t show you the headlines and then return it to the printer.

Delivery under the TILA requires a permanent physical transfer from one party to another. The Balderases claim that
BALDERAS v. COUNTRYWIDE BANK    21515
didn’t happen here. Instead, they were given documents to sign and those documents were then taken away. All they were left with were incomplete documents that didn’t tell them how long they had before they could renege on the loans. That missing information turned out to be critical when the Balderases told Countrywide they wanted out and were falsely told it was too late.

even if it turns out that the Balderases were left two copies of the completed form, as per Exhibit 14 of the com- plaint, Countrywide may well have an additional problem: The form purports to have been signed on Monday, Septem- ber 25, and notifies the borrower that they have until Septem- ber 28 to rescind. The Balderases, however, claim that the actual signing of the loan documents occurred after midnight, which would mean the loan transaction wasn’t consummated until Tuesday the 26th. According to this narrative, the rescis- sion period extended until Friday the 29th. See 15 U.S.C. § 1635(a).

“so long as the plaintiff alleges facts to support a theory that is not facially implausible, the court’s skepticism is best reserved for later stages of the pro- ceedings when the plaintiff’s case can be rejected on evidentiary grounds.” In re Gilead Sciences Securities Litigation, 536 F.3d 1049, 1057 (9th Cir. 2008).

A complaint containing allegations that, if proven, present a winning case is not sub- ject to dismissal under 12(b)(6), no matter how unlikely such winning outcome may appear to the district court.

20 Responses

  1. Rescission is all but dead in the 9th Circuit Court thanks to McOmie-Gray v. Bank of America. I wrote a blog about a new case that is a win for borrowers today about a ruling in the 3rd cir that disputes the McOmie-Gray ruling which states that a borrower must not only RESCIND within the three year statute of repose, but also must sue the lender for not complying with the rescission WITHIN the three year statute. It’s an appallingly bad ruling in McOmie-Gray, but caused me to lose my case in WA state.

    I hope Neil will expand on this important topic soon, you can see my rebuttal of the mis-informed article in FORBES here: http://theresalbaker.typepad.com/social_apocalypse/2013/02/mcomie-gray-v-bank-of-america-guts-rescission-remedy-for-borrowers-in-9th-cir-court.html

    I urge everyone to follow the link there to the FORBES article and comment on it. They frame the ruling as a headache for banks and a windfall for borrowers and it is NOTHING OF THE KIND. It’s simply a judge ruling according to the law for once.

    Please contribute to helping the judiciary see the mistake that is McOmie-Gray v. Bank of America!! TERRIBLE, FAULTY RULING affecting THOUSANDS!

  2. ANONYMOUS,
    No it was a refi. I was born and raised in that house. Trust me it was covered for rescission under TILA and rescission was exercised properly and tender was offered while in district court, but still the prick judge dismissed the case with prejudice, no leave to amend or anything.

  3. joann

    You are right. Many who are are still paying have no idea who is their creditor, who is their mortgagee, and who is their “security investor” as to pass-through of their payments. As long as they can still keep paying, they are not worried. Once income is in jeopardy, they are in the same boat. And, that is why the administration is so focused on employment. But, employment is not coming back easy to this country. We have given away employment to the rest of the world. Free Trade Agreements/Outsourcing/Mergers for the benefit of CEOs/State worker downsizing due to deficits due to security fraud, and all by which there is no fair play.

    Homeowners too busy eating at their favorite restaurant to get involved. They do not know — they are already involved. But, the government knows. The government knows. The “mess” will get bigger.

    Need to protect the foreclosure victims NOW. Where are the rest of the people??? What are they doing in spare time (besides eating) ??? Do not have a clue because the Media refuses to tell the truth.

    I am not one of them. I am not in foreclosure. I am fighting for the victims. Not too busy eating.

  4. @enraged
    “That is the most efficient and radical way of getting rid of the banks, without any intervention from our government.”

    Agree with you. It should never have come to this but here we are. The mainstream and those paying on time need to get it that they are paying the wrong creditor and that the real creditor doesn’t care if he is paid or not – he isn’t harmed by non payment. He’s already been paid. He already got rich many times over off the signature used fraudulently. Investors and homeowners got shafted. People who are paying on time don’t want to lose their home and be branded a deadbeat for the rest of their lives…..maybe there should be a homeowner’s union…..60 or 80 million signatures…..all ready to default unless laws enforced (these laws already exist and have not be enforced) – true creditor disclosed and accounting for amount owed true creditor disclosed.

  5. DyingTruth,

    Was your loan a new purchase? Not covered by TILA rescission.

  6. Hi Ian

    Although the TILA Amendment appears to substitute Holder or Servicer for the creditor, the Fed Reserve Opinion (now Rule) undoes the error. The Fed Res Opinion states servicers and security investors (trustee is for security investors) are not the creditor. That is why you need both. The Fed Res opinion does not address MERS, but it does claim that there must be legal title, and MERS does not own legal title.

    You bring up a really good point. We still not know our lender/creditor – all we know is our originator. Of course, if it was a subprime refinance, we never even had a lender/creditor since there are only have collection rights. Collection rights never had to be “funded.” And, in this case, we have not only been defrauded, we have been denied TILA protection when we signed the “contract.”

    Dying Truth — going to look your case up. Did you plead the TILA Amendment? Is a valid lender/creditor disclosed? Who did they disclose as the creditor?? Did an attorney disclose your (false) creditor to the court? Maybe you should consider Fraud Upon the Court, and go all the way back up to the Ninth. Have to see your case. .

  7. what are the people who have already taken their properly pleaded TILA rescission cases up with the 9th and had them slapped down, supposed to do?

  8. Getting out the message

    http://www.huffingtonpost.com/2012/01/02/occupy-the-rose-parade-pr_n_1179519.html

    NEVER AGAIN.

    A VOTE FOR BARAK HUSSEIN OBAMA IS A VOTE FOR THE BANKSTERS.

  9. Off topic but very useful site on how states have ruled on standing.

    Amazingly, one of the states most favorable to homeowners on the issue of standing is… Ohio, both in state court and in federal court.

    This site was recently updated and contains fairly recent decisions.

    http://msfraud.org/LAW/Lounge/Standing.html

  10. ANONYMOUS- well said. The TILA, and the 2009 Fed Amendment to TILA, unfortunately substituted the terms “holder” and “servicer” for Lender or Creditor. Sort of like when someone asks “who’s your Bank? or, “who’s your lender” ? The answer, of course, is that we aren’t dealing with a bank. Unless it is a bank as Trustee, which is just some papers in a file somewhere. And our lender was an originator, not a lender. People get that confused look in their eyes. I was in the office of a successful real estate person the other day, and to get to the point, the person has never heard of MERS. Really. “what’s that”? she asked. Oh well. And a prosperous New Year to you as well.

  11. TILA is the way to go. And, although we are grateful for any positive decision from OUR courts, this (above) is a technical decision (two copies). However, the source of borrower protection adjudication is very powerful under the TILA. The TILA is our major source of proper pleading. This includes the TILA Amendment and Federal Reserve Opinion — now Rule to the TILA Amendment.

    No matter how we try to argue before the courts, we must always argue the consumer law protection to win. The courts do not care about corporate accounting, as to the borrower, and the courts do not care that someone else “advanced” payment for the borrower. The courts only care, as to borrowers, the consumer law as it now stands. The TILA Amendment AND accompanying Fed Res Opinion have not yet been adjudicated.(except consideration in Alabama). YOU NEED BOTH.

    We need the TILA. We have little as to consumer laws. We must always use the law as it best protects the consumer. Once we start saying that “security investors” are the creditor ((which the new law negates), we have lost our ability to challenge the few and remaining laws available to the borrowers. This has been my major gripe here for a long time. You must work within the law.

    While many try to approach with different avenues, albeit respectable conclusions, if they do not address consumer protection law, they will not survive. All we have is the few consumer protection laws, BK protection, and precedent law. Must utilize the best we can. And, to date, we have not done that.

    Know I will get criticism from the Cowboy and Neil. And, I respect their opinions. I do not criticize. But, I will stand and take that criticism from them, because I stand strong.

    Happy New Year to everyone. May it be a better one. May we have new direction. May we focus on what we need to focus upon. And, most of all, may we find justice.

  12. […] 9th circuit opinion upholding TILA recission 01022012 EDITOR’S COMMENT: The Balderas Opinion is a New Year’s present for all those attorney and litigants who complain that the Judges are not following the law. The 9th Circuit sets them straight, and returns to the requirements of the Truth in Lending Act (TILA), rescission and the proper time to raise presumptions and introduce evidence. It corroborates my prediction that TILA is making a come-back and that it the perfectly de signed hook for Judges to hang their hat on to escape the consequences of all their previous bad decisions in which they accepted oral assurances from counsel for foreclosers at a point in the proceedings where there was no evidence being considered. […]

  13. We’re in CA and never even receied or signed a right to rescind form when we got our loan in 2007. We also didn’t receive our final breakdown of funds until closing (there’s proof at the top of the page that it was faxed to the broker after we closed). However, we would still have to tender, right?

  14. All kinds of good things will happen this year. I’m not the only one to feel it.

    http://www.foreclosuredatabank.com/foreclosures-blog/article/3009/could-2012-be-the-year-of-the-citizen-in-the-ongoing-foreclosure-crisis

  15. And BTW, when was the last time you looked at your escrow account…?

    http://www.nakedcapitalism.com/2012/01/more-bank-chicanery-double-charging-on-escrow-fees.html

  16. We have no clue how bad it really is… From the standpoint of the homeowners, the worst it is and the better it is: states don’t have the capacity to foreclose at the pace needed to make a dent in the backlog nationwide, which means that everyone must and should stop paying their mortgages.

    That is the most efficient and radical way of getting rid of the banks, without any intervention from our government.

    In other words, our government is useless, obsolete and we can handle ourselves and the current situation without it.

    http://www.nakedcapitalism.com/2012/01/michael-olenick-is-shadow-housing-inventory-vastly-larger-than-widely-believed.html

  17. Don’t know if it applies in all states, but their failure to rescind within 20 days gives you permanent posession here in GA. See equitable tolling clause–unaffected by time constraints–no statute of limitation on fraud. You can rescind when you discover evidence of fraud, even if it’s many years later.

  18. Is that decision published? If so, that top link doesn’t take me to it.

  19. In 2003 My husband and I faxed a rescission on the second day, and they called us and said they got it. Then the “old loan” they were to have paid off (if the new loan was made) suddenly switched servicers) and now here 9 years later, I find the legally canceled loan, listed as the payoff party on a subsequent loan. After that cancelation , an all the future refinances they conned my elderly husband into, I was no longer on the “loans” and only signed Deeds of Trust. That way I never saw the docs. Then, after getting my name in the Notary Journal, Countrywide just forged my signature to whatever BS Deeds of Trust they wanted. I had no reason to suspect this massive fraud, as my husband paid all the bills, and I did not know they were preying on him.

    If you are elderly, black or Hispanic, or made good money, they have defrauded you.

  20. I too have a Countrywide mortgage that I sent a notice to rescind due to failure to leave TWO notices of that right. They wrote back after a year and said that I had signed the form stating I signed two forms, however, the paperwork left with me at closing has a table of contents and there is only one page alotted for the TWO documents they supposedly left. Over three years since I stopped paying–and still living there! However BOA has started rattling sabres—but I won’t quit until they drag me out!

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