Rescission Returns in 3rd Circuit Opinion

Forbes has taken notice. There is a shift toward borrowers in mortgage litigation. The decision points back to the origination of the loan. This decision follows a similar decision in the 4th circuit. It all comes down to what actually happened at closing? And we don’t actually know if the decision to allow rescission indefinitely on second mortgages will extend to the first mortgage if it is all part of the same transaction. The result of rescission is that all payments of every kind must be returned to the borrower plus interest and attorney fees and potentially treble damages. All payments mean closing costs, fees, costs, expenses, principal interest, escrow and anything else. If the “lender” doesn’t do that the mortgage lien is expressly invalidated by operation of law, which is the same as being subject to a recorded satisfaction of mortgage. TILA is back!! — at least until the Supreme Court gets to weigh in on this ongoing dispute.

TILA requires only a clear statement and communication that the borrower wishes to rescind the transaction. The statute is clear that the burden shifts to the “lender” to either agree to rescission or sue to disqualify the rescission that must be supported by allegations and proof that the lender violated disclosure requirements at the time of origination of the loan. To be sure, there is a loophole created by the courts — that the rescinding borrower have the money to give back to the lender. But that is exactly what is going to cause the problem for Foreclosers. If the borrower can show some credible source of funds, the “lender” is screwed — because the lender is not the party who was named on the note and mortgage.

So the offer of the money will immediately cause an inquiry and discovery into the question who actually was the lender? We certainly don’t want to give the rescission money to the named party on the note and mortgage when the source of funds was a party with no legal relationship to the named “lender.” The facts will show that the mortgage lien was never perfected —and that therefore rescission under TILA is potentially unnecessary.

Either way, the debt turns up unsecured and can be discharged in bankruptcy. The problem for Wall Street is how they will explain to investors why the investors were not identified as the lenders in each closing. The answer is that Wall Street Banks wanted to use those loans as “assets” they could trade, insure, hedge and even sell contrary to the prospectus and PSA shown to pension Funds and other investors who advanced funds to investment banks as “payment” for mortgage bonds underwritten by those banks.

When the limelight is focused on the original closing, Pandora’s box will open for the bankers. It will show that they never used the money from investors to buy bonds issued by a REMIC trust. It will show the trusts to be unfunded. It will show the unfunded trusts never bought or funded the loans. It will show that the disclosure requirements and the reason for TILA (borrowers’ choices in the marketplace) were regularly violated.

That in turn will lead to the inquiry as to the balance of the loan that is now due. Rescission means giving back what you received. But what if, by operation of law, you have already given back some or all of the money? The investment banker will be hard pressed to describe itself as anything but the agent of the lender investors. As agent, it received payments from insurance, hedges and sales to the Federal Reserve. How will the Wall Street Banks explain why those payments should not be applied to reduce the account receivable of the investor lenders? How many times should the lender be paid on the same debt?

Remember that there is no issue of subrogation, contribution or other claims against the borrower here. They were expressly waived in the contracts for insurance and credit default swaps. Hence the payments should equitably be applied to the benefit of the investors whose money was used to start the false securitization scheme under false pretenses. Once the investors are paid or considered paid because their agents received the money from third party co-obligors, what is left for the borrowers to pay? Will the court order the borrower to pay “back” a lender who never made the loan?

Dreamli Zs 6:22pm Sep 28
Court Decision Gives Lenders A Headache, Borrowers An Ace In The Hole
A court ruling gives borrowers an unlimited deadline for rescinding second mortgages

15 Responses

  1. I’m a little late to the game here, but just who ARE these “investors” that put up the money? Are they a select group of special people…or are they you & me & our neighbors & our retirement plans? Or, are they foreign interests? I’m confused…I didn’t seek a degree in this stuff for a reason…

  2. Keepon,


    On this site, whenever you tell it like it is, you are called unpatriotic, traitor, un-American and summarily told to “go back to your country”.

    Of course the world is watching! All 7 BILLIONS of them. And the world is also looking at whether the country will implode under its own arrogance, ignorance and apathy, leaving behind that gorgeous piece of real estate, or whether it will finally shape up, shed that immensely overinflated ego and take its rightful place, among countries that pillaged 2/3 of the world and must now atone by fixing the damages they caused… We’ll see…

  3. Now, wouldn’t that just be the ultimate humiliation, for other Nations, those before whom we have held our capitalistic democratic republic as the greatest Nation on earth, for other (obviously ‘lesser’ 🙂 Nations to have to tell the US, all right Obama, you’ve ‘dicked your people around’ long enough. We’ve waited long enough for you to straighten this out. We KNOW you get it, now, ‘get out da way!’ We’ll show you how it’s done. Your bankers set the entire globe on its can. You can either b there, or b square, but make NO mistake: the whole world IS watching!

  4. The war is on and it isn’t with cannons and nukes. More on central banking and why, whether 320 million people in this country do anything, will make little to no difference. Can’t bring an entire world to its knees and expect 7 billions to sit in front of their TV and watch Oprah they have no use for… Countries are taking action. If this one doesn’t it will be the end of it.

  5. And just for the hell of it, if you thought digging into MERS and foreclosure was an assignment and a half, try finding out worldwide where the money is… It is our money. Where the hell has it gone?

    How to unearth public records: a global guide
    By Sasha Chavkin
    September 24, 2013, 11:45 am

  6. ICIJ is relentless in its tracking of money worldwide, as any investigative journalism should be. First, the offshore account holders. Now, the insanity of non-profit tax heavens allowing CEOs to pocket enormous amounts unaccounted for.

    Don’t anyone tell me we’re not in the midst of a substantial revolution. People are sick and tired of paying, paying, paying and seeing nothing in return. Going after the banks is a good start and I happen to think that the recent crackdowns on banks have a lot to do with it. Going now after “charity” [which, as we all know, begins at home…] is a huge step forward as well.

    ICIJ is international. And completely independent from any Murdoch-owned media. Those guys risk their lives. i applaud what they do.

    Investigating charities: How to search the finances of nonprofits and foundations
    By Margot Williams
    September 27, 2013, 10:30 pm

  7. I have a little info about NOTE and MORTGAGE :

  8. sorry for not using spell ck.

  9. my point- I was denied the opportunity the verbage was Deborah is willing and ready ” tender minus equittible setoff” to the real party in interest that is..

  10. so you see why under fOIA questions re assets sold, disposition and remic status are taboo.

  11. well might be good, I did rescind both first and second and raised it in my BK after which onewest/indycrap froze, however I was told I could not do that I was not allowed THIS WAS A FIRST MONEY LOAN, same transaction. may help me another day my suit is up on appeal but game on if I make it.

  12. Thanks so much for all that you do. It is very much appreciated we are out here and you have our attention. Freddie Mac just foreclosed on my home, after years of fighting with pretender lender in and out of court now on appeal. CitiMortgage was pretender lender, origination papers on Freddie stationary, JP Morgan trustee in MBS. Thank You..

  13. Reblogged this on Deadly Clear and commented:
    This is a point that needs to be driven home to each and every judge until he yells “Uncle!”: “The answer is that Wall Street Banks wanted to use those loans as “assets” they could trade, insure, hedge and even sell contrary to the prospectus and PSA shown to pension Funds and other investors who advanced funds to investment banks as “payment” for mortgage bonds underwritten by those banks.”

  14. Wow, Why did Micky say the TILA was not a good ploy in the foreclosure cases?


  15. Been saying this for a few years now. Start up a company that puts up the money to pay off the mortgage. The pretender lender, servicer, LOWLIFE debt collectors will run for the hills.

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