Rescission Devil in the Details Tonight on the Neil Garfield Show

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Most lawyers are concluding after much study that what I am saying on the blog is correct, albeit with disgust from the bench that basically regards borrowers as deadbeats trying to get out of a debt.

The purpose of our rescission package is to get lawyers clear on the strategies for people with an old mortgage who (a) sent a notice of rescission (b) were foreclosed after the rescission notice or (c) who want to send a rescission now. Each lawyer needs to study this a bit and stop skimming. And they  need to understand what happens when the rescission is being sent now and whether to file an enforcement action or wait the one year statute at which point the entire debt is waived. Of course at that point — one year after notice of rescission) the borrower is barred from suing to enforce the rescission and is only able to sue for Quiet title because at that point the mortgage and note have been void for over one year.

I want to make sure everyone thought through the process of TILA rescission and specifically that all three duties of the “lender” must be fulfilled before they can even allege a claim for repayment, which claim is obviously not secured by any encumbrance upon real property (because the mortgage (or DOT) is void the moment the notice is mailed).

The three duties are (a) return of canceled note (b) filing a release of the encumbrance in the county records and (c) return of all money ever charged or paid in connection with the loans. It is the last point that makes it unlikely that any entity is going to actually comply. The burden is reversed — it is the “creditor” who must actually pay (not just tender) the money to the borrower before the creditor may claim mo the borrower. No exceptions.

The banks are experimenting with a bluff — saying here is the the note and we filed the satisfaction of mortgage. But without payment to the borrower of all money the borrower or anyone else paid or received in connection with the loan, they are barred from making a claim for repayment. That last issue is going to make everyone previously claiming they were in the position of “lender”  back off — because they would be paying out perhaps hundreds of thousands of dollars to the borrowers in exchange for a dubious UNSECURED claim for repayment (not based on the note or mortgage).

Patricia Rodriguez in L.A. had it right when she said that rescission changes the burden of proof. But more importantly there likely won’t be any proof or evidentiary hearing. A rescission IS EFFECTIVE by operation of law when it is mailed, regardless of whether the borrower is right or wrong about his reasons for rescission, the statute of limitations or any other argument against it. Any argument against rescission is meaningless because TILA RESCISSION is effective by operation of law and is not contingent upon anything, as the Jesinoski decision tersely stated. The creditor who feels that it is aggrieved by the legally binding rescission from the borrower may sue to vacate the rescission and reinstate the mortgage and note which were rendered void at the moment the rescission was dropped in a mailbox. That lawsuit needs to be filed within 20 days from the date the notice was mailed. (Note there is a presumption that the date on the notice is correct as to mailing).

The creditor COULD sue within the 20 days allowed for compliance with TILA Rescission or not. If the “creditor” wishes to do so, they must establish standing. Here is the rub: they can’t establish standing through the note or mortgage which by operation of law (see Reg Z) are VOID as per the cancellation of the loan contract by the notice of rescission.

The creditor would need to allege that it is either the lender who loaned money to the borrower and still possesses the loan in its portfolio (4% of all loans) or that they had purchased the debt for value — otherwise they are not a creditor because there is no debt in their chain. They can’t use the void note or mortgage as a prop or anything else because you cannot seek legal relief or remedy based on claims whose origins lay in a void instrument — the note and mortgage. There is no standing without real risk of actual monetary loss on the debt.

The reason this is so important is that it puts a stake through the heart of the claims by banks and servicers who are playing the part of creditors and authorized agents for loans that were never purchased by REMIC Trusts (securitization fail, as per Adam Levitin). The cases we have won have been exactly on that point.

None of the current players are creditors. The only party with a legitimate claim is the group of investors whose money was used to directly fund the loans. Their claim is in quantum meruit or unjust enrichment because they have signed documentation that says they can’t bring any direct claim for constructive trust for the loan documentation (i.e., allowing them to bring the foreclosure action themselves). But it has always been THEIR money and nobody else. None of the assignments are supported by actual purchases (with rare exceptions). We know that because if they paid for the debt, they would be very quick to allege that they have status as holder in due course and that would put an end to the borrower’s defenses.

52 Responses

  1. I am trying to help someone find their Pooling and Servicing Agreement. The information is below:

    M ERS #: 100091805003039211 SIS #: 1-888-679-6377
    Date of Assignment: March 6th, 2012

    Date of Mortgage: 12/10/2004 Recorded: 12/20/2004 as Instrument No.: 2004-255773 In the County of Honolulu, State of Hawaii.

    Property Address : 82-6291 MANIN! BEACH ROAD, KEALAKEKUA, HI 96750

    James Smith: or 443 677 2799. Thanks

  2. @ Daryl J. Evans…

    I’m not going to look it up for you … everyone is in agreement on the 20 days .. here it is from Cornell Law..

    (b) Return of money or property following rescission
    When an obligor exercises his right to rescind under subsection (a) of this section, he is not liable for any finance or other charge, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has delivered any property to the obligor, the obligor may retain possession of it. Upon the performance of the creditor’s obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value. Tender shall be made at the location of the property or at the residence of the obligor, at the option of the obligor. If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his part to pay for it. The procedures prescribed by this subsection shall apply except when otherwise ordered by a court.

  3. david belanger (@revolutionnow1)

    Nowhere in the statute, code or regulations does it say that the banks have only 20 days to file a suit to contest the rescission or lose all rights to bring up the defense that they own the note and mortgage.

  4. @JA – Did you get a hold of Rod Ciferri? It looks like you set up the banksters so well he might consider the case on contingency. Phone is 650-346-3741.

  5. Hi, everybody.
    My house went into foreclosure in Oct 2008.
    The reason it did was because I quit making my payments.
    Why did I stop making my payments? Its a long story, but I will cut it in half by starting in the middle.
    In late 2007 the economy was falling off a clift , and my business was having a huge drop in business.
    At the time my loan was serviced by Regions Bank, witch was great because I did my banking with them and could make my payments online. After I had made many ontime payments, they offered me a $20.000 open line of credit, and gave me 90 days to activate. So when the economy tanked, I moved to activate, they reneged, on the offer.
    In early 2008 I started looking to once again refinance. I went to the online site of Lending Tree and filed for a loan. I had listed the loan amount I had got from Quick Loan funding that was used to pay off a earlier loan that I had got from Amerquest Mortgage.
    Lending Tree informed me that I had two mortgages on the property for a total of $160,000.00 instead of the $90,000.00 mortgage from Quick Loan, that was to pay off the $70,000.00 mortgage.
    I found out that the last assignment was in the name of Quick Loan Funding, that by 2008 was already out of business.
    I made my last payment in Feb 2008.
    When the Bank got in touch with me, I asked why I should make any payments to them or anyone else, considering the facts?
    The woman I spoke with said she would get back to me and I got her number off the caller ID. I tried to call her back a few days later, and the phone just rang and ranged with no answer. A few days or weeks later I got a notice that my loan had been transferred.
    GAME ON!
    To make it short after a 5 year court battle I won the decision, using advice of Neil, and plagiarized work from Matt Weidner.
    Shortly thereafter Matt wrote a blog
    Second Court of Appeals had ruled that a lender could refile by changing the date of the payments owed, and even cases that had been dismissed with predigest, could be refiled.
    My heart sank.I knew it would happen again.
    I had filed a TILA rescission on 02/11/2009 on the loan of 04/21/2006
    I sent it certified Mail to the attorneys representing the people who claimed to own the note and mortgage. Liquidation Properties, Inc. AKA Citi Property Holdings Inc and to their home office,s and filed it with the court.
    At the first hearing, the Judge asked me why I stopped making my payments? I responded ” I wanted to know that the payments were going to the proper parties”. The people who filed this have no standing
    He did not like it. He also did not like the six page, throw everything at them but the kitchen sink, defense that I got online. He was waving it around, and said “WHERE DID YOU GET THIS?”
    I replied ” I got it from a foreclosure defense group”
    He said “Probably was written by a para legal”.
    I said that the parties who filed this had no standing.
    I then inquired about the Note.
    “WE HAVE A COPY OF THE NOTE” He screamed, and was flipping through the file, he finds it and hands it to me. I make him wait till I read it, and I hand it back to him, and say ” I would be happy to give the plaintiffs a copy of some money”.
    At that point he went ballistic, and was fumbling through his file and asked the plaintiffs attorney “Where are the assigns ” She responded by asking ” Are they not in the file” This was the only thing she said other than her name at this hearing. In Florida the judge prosecutes foreclosure cases.
    “OK, this hearing is postponed, file your assigns!” He says to the attorney
    I motion to my wife to leave, and as we are, he says
    I replied ” I may owe somebody, judge , but I don’t owe them”
    The case was tried in the 6th circuit court of Pinellas County FL. case #08-16377-CI.
    You may review and plagiarize at will, if any of it will help you.
    A few weeks later they filed a assignment from DOCX signed by Korrel Harp, and Linda Green. with a effective date prior to the suit being filed. I studied them and went online looking for their names on assignments of mortgage, and found that they had many different titles. And many different signatures. at this time I stumbled onto Fraud Digest who was ran by Lynn Szymoniak Esq who was calling out for anyone who had assignments of mortgage from DOCX . I emailed her with all the assignments that I had, and she sent me all she had including her own. We then went to work on getting more. She was very successful at gathering a very large amount, and I contacted the Fulton County District Attorney to report a crime. I contacted the Alpharetta GA police to let them know of the mass fraud being committed. I think it did have a effect. Soon DOCX was closed, the law firm of Ben-Ezra & Katz of Fort Lauderdale lost their Fanny Mae funding, and 200 lawyers and 400 support personal, hit the streets when it closed. So sad.

    My problem is they did refile. And now I have a summary judgement hearing scheduled for 07/07/2015.
    Help and assistance, is asked of all.

  6. This is what Thomas Jefferson thought about SCOTUS –
    Then in 1820, Thomas Jefferson expressed his deep reservations about the doctrine of judicial review:

    You seem … to consider the judges as the ultimate arbiters of all constitutional questions; a very dangerous doctrine indeed, and one which would place us under the despotism of an oligarchy. Our judges are as honest as other men, and not more so. They have, with others, the same passions for party, for power, and the privilege of their corps…. Their power [is] the more dangerous as they are in office for life, and not responsible, as the other functionaries are, to the elective control. The Constitution has erected no such single tribunal, knowing that to whatever hands confided, with the corruptions of time and party, its members would become despots. It has more wisely made all the departments co-equal and co-sovereign within themselves.[12]

    (Wikipedia, Art. III of Constitution)

  7. @TU – what a waste of blog space. Melissa already stated she lost the appeal. Unless something came up since the appeal, either new case law or a fact that could NOT have been discovered in her case, if the law existed and she chose not to use it in her case, without justification, I’m guessing most judges will deny new causes of action on a decided action.

    And your statement about judicial immunity is pure BS. If a judge rules a party has wasted enough of the court’s time, pulls a gun and shoots the party dead, judicial immunity applies, according to SCOTUS. The defining SCOTUS case was about an allegedly retarded daughter who was sterilized by a court order without her knowledge or consent in a state that had no law authorizing such action. When the daughter married and found out why she couldn’t have children, the judge claimed judicial immunity and got a pass from SCOTUS.

    Even Neil misstated the scope of judicial immunity on his show last night. Judicial immunity is offset by the ability to appeal the decision. The Catch-22 is that SCOTUS can’t be appealed, or even over-ridden by Congressional legislation. In this way the due process of the daughter above was abridged by the actions of a judge who faces no personal liability for the irreversible harm caused by his acts in court. See –

  8. Melissa,
    More opinions and imaginations.

    Unknown places and unknown persons are important.
    A contract must have an agreement of the parties, and no one enters a contract of consent with unknown persons, but we do with known persons.

    Worst case an arranged marriage contract was still entered with the known persons (parents) who joined you with the unknown person.

    If the complaint identifies these people as ‘unknown persons’, they are called to answer how there can be an agreement of the parties if there is no familiarity of the persons in the agreement, and there is ‘standing’ where they show how they had the capacity to make the agreement if they are unknown to you, how did they get your consent to give them what they have (taken).

    See how that matters, unknown places and unknown people will perk the eyes of anyone reading the complaint.
    This is about agreements with people we know and trust and so far, no one you know or trust has made an agreement you consent to.

    Be sure to name any people acting as trustees (who colluded by inaction) and people acting as substitute trustees (who probably self appointed even though most mortgages either say no substitute or only the current trustee can appoint – which he colludes with them and does not, but does not challenge their claim to hold the position – passive collusion)

    Trespass Unwanted, Creator, Corporeal, Life, Free, People, State, Independent, In Jure Proprio, Jure Divino

  9. Melissa,
    I don’t know legal things, in fact I know no thing and if I think I know some thing, I know no thing. I do not give legal advice.
    This is a piece of fiction, if you use it, it is at your own discretion.
    I could tell you what I would do, as I have a great imagination, but when you step into their world, they do not like you to help people, so you can only tell them what you might do if you were in that situation and let them walk their own walk, and talk their own talk, as we are not Gods, but everyone is their own Creator of their world and experiences.
    Step into the Creation and know what you do to create the future you want to see, you will prevail. That is fact. A is A.
    You can CFPB them.
    File a CFPB complaint, if it were me filing, I’d start it off ‘this information is fact under penalty of perjury’ and I would keep it simple.
    I am going to bastardize the rest so you use your own words as you are the Creator of your own experiences in life, whether knowingly or unknowingly you are Creating what you experience, and these people are taking advantage of what you create unknowingly and they profit from it because they will not disclose to you what you have done.
    Have names, as many real names as you can.
    In the Cosmos, the past has happened, and the future is yet to be created, the only real time is now. As best you can, stay in the present, stay in real time.
    The owner of and I are purportedly with contract. When I review the contract, I see evidence of no contract, There is one signature from me but no other, I did send a letter of rescission per the terms of RESPA and TILA but receive no reply,
    These people acting as employees of businesses I have no contract with; work to enforce the terms of the void contract,
    The unknown persons acting as employees, [A, Be, Ce, De, E, Effe, Ge, and hache], acting for the law firm [Blah] used the county offices and records to place documents for use to steal the property, forcing me to go to places unknown to me to talk to unknown persons, such as the man(or)woman acting as the judge of the business, city of municipal(or)county court, who is called [give their name] did say to me I could not keep my property, so I spoke with another regarding what I was told, and the the man(or)woman acting as the judge of the business, city of of appeals court, [give their name] did say the same, that I am not to keep the property that is mine to keep,
    The man(or) I communicate with tell me I cannot keep my property. No one I can identify recognizes my rescission and many unknown persons are acting to keep me from the property I own.

    You can, file a judicial conduct complaint against the judge and be clear as to the reason you were there in the court in the first place was not to conduct business, but you were delivered a paper and its contents contained words that if you did not go to that location on a specific day and speak to the man or woman acting as judge in that business, you would be prevented from keeping your property. So you went and spoke, but the man [give his name] or woman [give her name] made an agreement with unknown persons to give them your property without your consent.

    You can file a complaint with the state attorney general office, and give the name of the judge and the law firm and the trustees, and every name on every piece of paper, what did they do to you.
    [man by name], an unknown person, knocked on your door and you were not expecting company and he placed in your hand a paper and told you, you had to respond to the words written in that paper by a certain day.
    You read the paper and unknown persons, named [a, b, c, d, e] acting as employees for the business named [law firm] had written things to coerce you to go to an unknown location on a specific day or according to the words in the document you gave up your right to keep your property.
    So you went to the unknown place and did see unknown persons, including a man (or woman) called [give their name] and so on and so forth.

    We let people tell us these agencies will do nothing.
    Everyone that listen to the people that say that, do nothing so then the agency does nothing because no one did anything to move them to do anything. We are the reason we are in our own situations and get no remedy cause we let unknown persons tell us what to do and we don’t communicate with as many known persons or agencies as we can to tell them what happened to us so those unknown persons can see the ‘light of day’ when their name is in a complaint with an agency that regulates their business’.

    Judges don’t have immunity, neither regular or appeals.
    Why do i have that opinion? Because immunity comes from doing what is right by law, and they never do what is right by law so they give up their immunity and rely on you to believe they have it, and in you believing they have it, you give it back to them (you don’t complain so they stay immune). See how you create things without knowing you are doing it?

    If there was law, the poorest man would not have to give his last coin to a judicial business to keep another man from stealing it.

    They are businesses, with names that sound legal, just like the Federal Reserve is a business with stockholders with a name that sounds federal and enough influence to get their name placed under the Department of Treasury (also a business) but the two are not connected and one is not an oversight of the other.

    Lift the veil with the rest of us.
    All those people stole your property and they used buildings with fancy names to get you to think of power and submission, but the building didn’t do a thing, only had a name, and the people got you to go there to enter contracts they created and signed, only their signature are on the agreements to steal your property and
    only your signature is on the agreement to purchase.

    Wake up Melissa and go get your property back.
    (notice I did not write home, and neither should you)
    You have an un a lien able right to property
    unalienable means you can’t contract that right away even if you were deaf, dumb, and mute
    So if you have it and don’t have it and you can’t give up that right, someone stole it.
    Call it what it is and go get it back.
    the agencies will hear you if you tell them what happened but they can’t do anything if they don’t know WHO did it. and a fictitious name of a building makes you look unintelligent, so don’t say stuff like Bank of America did this or city of huntsville did that. Everybody and their mom know those things cannot do any thing, someone is the puppetmaster, acting in a position and signing things trying to hide behind the name of the thing that did no thing.

    Keep it real —- pull it out of the fiction
    …..– see it for what you see, not for what you think you see

    Melissa, Go do your thing. Go create the outcome you want.

    only my opinions and the opinions are not for sale because they are worth no thing, and I know no thing

    Trespass Unwanted, Creator, Corporeal, Life, People, Free, Independent, State, In Jure Proprio, Jure Divino

  10. Elexquister
    I partly agree with you. Still is a issue with table funded loan which is a clear violation of tila. Also if UBS not licensed in WI and NovaStar was that is a problem. Again contract law and tila.

  11. @Melissa – The judge will hear your answer to 1 question then likely rule against you. The question is whether you made a payment on the loan or not. If so, the loan was consummated (and ratified by you), and your 3 years started to run (in 2008) and your right of rescission was extinguished in 2011. Since you lost your appeal you likely lost chance for adverse claim defense in BK, forcing creditor to prove their claim. Creditors can use the judgment against you to get a quick ruling from the BK Court. This may be the reason your attorney is directing you to get a loan mod.

    The alternative is to assess your chance of loan mod, especially in light of likely demands for creditor for extraction of your remaining cash for payments first, then deny you modification. Would you be better off not paying attorney fees for BK, and not paying creditor demands for your remaining cash, and becoming a renter instead? Or do you have enough equity to sell property and come out ahead? If you are underwater, the creditors have an arrangement with the courts (you may have noticed) to extract as much of your cash as possible before kicking you to the curb.

    IANAL, (I am not a lawyer), but given the few facts you presented, those would be some of my considerations as a distressed homeowner. I sympathize with your situation, having been there myself, and I am presenting the worst case in hopes I may be wrong, but that you have some idea of how to plan a recovery from this bump in life.

  12. @Melissa, I hope you find a quickly to address the issues you raised. However, the truth in lending act stipulates that all assignees of a rescinded loan are bound to observe the rescission. Ocwen, as usual pulled a fast one on you. Good lUCK.

  13. E.Tolle,

    I have a bunch of questions to Tila. 1st I sent my notice in Jan. 2014, based on the loan was never consummated. UBS Securities was the originator, but NovaStar was the named the lender and is on the note and mortgage as the lender. In my opinion I am still at the closing table waiting for NovaStar to bring the funds. By the way the note and mortgage is from 2008. Problem is I am still in my house but I am at the end of the line. Lost my appeal, had a sheriff sale for last week and had to go to a chapter 13 to stop it. The lawyer I have for the chapter 13 doesn’t want to do anything with the Tila. He tells me my best option is to try and get a loan mod. I would fight for the Tila, but Neil said if you sent a notice AFTER a judgment you would have to get it VACATED, before the notice would be effective. Now I don’t see this any where in the Tila Statues, but I also can’t find a lawyer who knows and WANTS to handle this. I am truly stuck between keeping the house by way of a loan mod. or fight and lose on Tila. One more thought, Ocwen was the servicer at the time I sent the rescission and all they said was the could not comment on the rescission because they were not part of the origination at he time.

    Any one that has a suggestion, I would appreciate it.

  14. “Equitable tolling” is the tip-off. A right is a question of law, considered before questions of equity. You either have a right, or you don’t. SCOTUS has been consistent that after 3 years, you don’t. Once the 3 days to rescind have passed, then the 3 years limitation begins. Your right is extinguished after the 3 years runs.

  15. The consummation aspect of the newly ordained TILA ruling would seem to play big time into the AWL scam, where America’s Wholesale Lender was named as the corporation serving as the lender, when in actuality, it was Countrywide or unknown 3rd parties etc., etc.

    Anyone have any input into this hocus pocus act? The way I see it, consummation couldn’t have possible occurred given that AWL was a phantom, like all those that visited Bob Marley’s nightmarish dreams…..or was it Bob Marley’s hash escapades?

    More importantly, neidermeyer, tell us more about Bob and Glenda and Jane….inquiring minds want to know…..

    But back to AWL, could equi-tolling be considered effective given these facts? Anyone?

    And, should Bob stay with Glenda if she’ll still have him?

  16. I find the equitible tolling argument to be quite persuasive. While I agree that consummation is when the rubber hits the road in rescission on the 3 year maximum to claim… The simple fact that for most people we consummated with parties that are not named on the note.. Bob Married Glenda but it was Jane in his honeymoon suite… The marriage with Glenda WAS NOT CONSUMMATED and therefore Bob is free and clear to claim equitable tolling… Hell , he’s not only within 3 years but he’s not even on DAY # 1.

    Someone show me TILA suits where equitable tolling was argued correctly….

  17. Personally i dont believe fir 1 nanosecond that these judges ruling unanimously – did not know exactly what they were doing.

  18. James – read the ruling for heavens sake

  19. To use the cliche ” this is where the rubber meets the road” i believe after all we have been through in court and all the crap rulings we have been forced to stomach, this right of rescission clarified in tne SCOTUS – jesinoski v countrywide is a great tool to force the banks into submission – that theres no true creditor and they are collecting an unsecured debt AND taking our homes AnD getting tax dollars AND claiming loss in a bogus capacity. aND and and

  20. Everyone keeps jumping to conclusions on this TILA Rescission, but isn’t there a statute of limitations of 3 years on this?

  21. 12 CFR 5.34 – Operating subsidiaries.

    There is 1 rule appearing in the Federal Register for 12 CFR Part 5. View below or at eCFR (GPOAccess)



    Authorities (U.S. Code)


    prev | next
    § 5.34 Operating subsidiaries.
    (a) Authority. 12 U.S.C. 24 (Seventh), 24a, 25b, 93a, 3101 et seq.

    (b) Licensing requirements. A national bank must file a notice or application as prescribed in this section to acquire or establish an operating subsidiary, or to commence a new activity in an existing operating subsidiary.

    (c) Scope. This section sets forth authorized activities and application or notice procedures for national banks engaging in activities through an operating subsidiary. The procedures in this section do not apply to financial subsidiaries authorized under § 5.39. Unless provided otherwise, this section applies to a Federal branch or agency that acquires, establishes, or maintains any subsidiary that a national bank is authorized to acquire or establish under this section in the same manner and to the same extent as if the Federal branch or agency were a national bank, except that the ownership interest required in paragraphs (e)(2) and (e)(5)(i)(B) of this section shall apply to the parent foreign bank of the Federal branch or agency and not to the Federal branch or agency.

  22. @DB – quoting a law firm that supports your contention is not the same as quoting an in-house attorney for a bank. That huge post of yours is irrelevant without a reference to either a statute or judicial opinion, and an annoying waste of time to read.

    What got glossed over is the 1-year period from notification by obligor to enforce the rescission. Why wouldn’t that apply to the creditor as well?

  23. even the banksters know, they have only 20 days, to act. and they have been telling them to act.

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    Financial Services Litigation and Compliance
    No Lawsuit Required to Rescind: U.S. Supreme Court Clarifies Mortgage Rescission Notification Requirements for Borrowers under TILA

    Financial Services Litigation & Regulatory Compliance Alert
    Background of Notice versus Lawsuit Issue

    The Truth in Lending Act (“TILA”), as implemented by Regulation Z, provides borrowers with a powerful tool: the right to rescind certain mortgage loan transactions. This rescission may occur under two circumstances. First, borrowers have an unqualified right of rescission until midnight of the third business day following consummation of the transaction if the creditor complied with the TILA disclosure requirements. If a creditor fails to provide the required rescission notice or material disclosures, the right of rescission extends for three years after the consummation of the transaction or upon transfer or sale of the property, whichever occurs first. Borrowers may elect to rescind their loan at any point during these time frames, as applicable, “by notifying the creditor…of his intention to do so.” The term “notify” is not defined under TILA or Regulation Z.

    Over the past several years, the United States Courts of Appeals, as well as numerous federal district courts, have offered conflicting interpretations of this notification requirement. The Third, Fourth, and Eleventh Circuit Courts of Appeals hold that borrowers have satisfied the notification requirement if they inform the lender in writing of their desire and intent to rescind the transaction within the three-year time frame. The First, Sixth, Eighth, Ninth, and Tenth Circuit Courts of Appeals, however, require borrowers to file a lawsuit within that three-year period to properly rescind.

    No Lawsuit Required

    On January 13, 2015, the United States Supreme Court resolved this long-standing circuit split and clarified the necessary actions borrowers must take to assert their rescission rights. In Jesinoski v. Countrywide Home Loans, Inc., the petitioners, Larry and Cheryle Jesinoski, refinanced the mortgage loan on their home in Minnesota by borrowing $611,000 from Countrywide Home Loans, Inc., d/b/a America’s Wholesale Lender, a predecessor-in-interest of Bank of America, N.A. (“Bank of America”) on February 23, 2007. The Jesinoskis did not exercise their three-day right to rescind at that time and received their loan funds. Exactly three years later to the date of consummation (February 23, 2010), the Jesinoskis mailed a written notification purporting to rescind the transaction to “all known parties in interest,” including Bank of America. The Jesinoskis alleged that they received an insufficient number of copies of the TILA notice and disclosure, and thus, had a right to rescind the loan. Bank of America replied on March 12, 2010, denying that borrowers were entitled to rescission. Rather, Bank of America asserted that the Jesinoskis signed the TILA disclosure and Notice of Right to Cancel at the loan closing, and acknowledged the “receipt of two copies of NOTICE OF RIGHT TO CANCEL and one copy of the Federal Truth in Lending Disclosure Statement.” Bank of America claimed that because the parties disputed the adequacy of the disclosures and thus, the continued availability of the right to rescind, written notice alone was insufficient. The Jesinoskis then filed a lawsuit in federal court on February 24, 2011, four years after their loan transaction. The district court granted judgment on the pleadings in favor of Bank of America, holding that TILA requires a borrower to file a lawsuit within three years of the credit transaction’s consummation. The Eighth Circuit Court of Appeals affirmed, further explaining that the written notification sent by the Jesinoskis did not preserve their right to rescind.

    In reversing these judgments and resolving the circuit split, the Supreme Court relied on the statutory language of TILA, which states that consumers must “notify” the creditor of their intention to rescind. According to the Court, this language “leaves no doubt” that rescission is effected when borrowers provide any written notification to the creditor of their intent to rescind. The statute does not expressly require that a lawsuit also be initiated within the three-year time frame. Because the Jesinoskis mailed Bank of America a written notice of their intent to rescind within the statutorily prescribed time period, their rescission rights under TILA were properly exercised and preserved. This was the position advocated by the Consumer Financial Protection Bureau, AARP, National Consumer Law Center, American Civil Liberties Union, National Association of Consumer Advocates, and Center for Responsible Lending as amici curiae. The counter-position was argued in amici briefs by American Bankers Association, American Financial Services Association, Consumer Bankers Association, Consumer Mortgage Coalition, Independent Community Bankers of America, Mortgage Bankers Association, and Structured Finance Industry Group, Inc.

    Impact on Business Operations

    The relaxation of TILA’s notification provision may produce unintended consequences for the banking industry. Mortgage servicers and others should review and revise their existing rescission procedures to ensure that they comply with this newly relaxed notification requirement

    . Any mortgage servicer receiving a written notice of rescission will now be forced to respond within twenty days and litigate the matter in court to prove compliance with TILA disclosure requirements.

    Additionally, the written notice standard currently does not include an express or textual prohibition against frivolous lawsuits, and lending institutions may see an influx of meritless rescission claims by borrowers motivated to avoid foreclosure in response to nonpayment. While this decision does not relieve borrowers of their contractual obligation to pay their mortgage or otherwise return the funds, it nonetheless forces mortgage servicers to litigate any written claims of rescission. The Supreme Court’s decision, however, left unresolved the time frame in which a borrower must file a lawsuit following the written notice of rescission. Thus, the threat of litigation could hang over servicers for years.

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  24. I learned of the TILA rescission when I looked at a website called new jersey legal services back then ..the reason I started looking around is because my new servicer at the time, WF, was jeking me around and saying fannie mae was the investor …and I noticed a Trust Bank of Ohio was listed on my homeowners insurance as the first mortgagee or first position … I had been paying WaMu and then this had my head spinning because WF couldnt answer my questions. But the rescission was never acknowledged by anyone all these years. But its still a longshot because we don’t see any victories yet, its going to be fought evert inch of the way, and the way it was written leaves questions that are still unanswered …im just offering my arguments and opinions, we still need to see this play out … The judges are not happy and will continue to act defiant …this might have to go all the way back up again regarding the 20 days does the lender lose if they fail to act? I dont think we have a case that says that …they are going to fight like crazy when they see this angle argued by borrowers.

  25. @DNJ – judges don’t care about how someone feels, unless it is to determine damages. And I saw a couple of cases reversed recently based on Jesinoski (Fla?).

    Too bad there isn’t a “3-strikes” law for judges – if they are reversed in 3 cases over same legal topic, they lose their retirement and seat on the bench. It’s not likely the banks will be able to hire all of them.

    I’m amazed you acted on your intuition about rescission in your case within the 3 years. That bodes well for you.

  26. How do you think the Supreme Court feels about all those borrowers who did rescind in a timely 3 year window, but were denied by the judges who were misinterpreting the statute , claiming the borrowers didn’t file a lawsuit, or the borrowers didn’t tender when they mailed the rescission … And for those of us who did rescind timely, but were ignored by the lender, why would the law make our note and mortgage void if the law also rewuired us to file for enforcement and prove the reasons we were rescinding? It would have been tied together, that upon proving the TILA violations your loan then becomes void. But they wrote it the other way , it is void …void without any requirement other than sending the notice. Which makes it seem that the intent was to lean heavily in the borrowers favor …meaning since its a protection for consumers , all they need do is mail to rescind …at that point it voids the contract ..and at the same time it triggers a 20 day window for the process of unwinding to begin. If the lender ignores and refuses to comply with the unwinding process, he should not be rewarded for his non-compliance …otherwise no lender would ever need to comply, they would all delay and intentionally run the 3 years off to prevent the borrower from rescinding … But that doesn’t make sense because the mortgage was void …and its still void 4 years later, 5 years, 6 years …So since it is void when you rescind …it only makes sense that its still void six years later when the servicer attempts to foreclose. They do not get rewarded for ignoring a rescission letter, that would mean the entire statute is meaningless if it allows an ignoring party to destroy your right to go refinance with a new lender.

  27. What happens is if a homeowner tries this rescission on a loan older than 3 years, the (alleged) creditor will go ahead and foreclose and sell the property by trustee sale, triggering a second condition precedent – that the property has not been sold. And as stated below, the Supreme Court seems adamant to holding to the 3 year limit. Whatever happened in Beach wasn’t enough to change that.

  28. DNJ – You were on a roll until the very end, when you used those fatal words you’ll never hear from a winning attorney – “… it only makes sense” … There is a whole subject taught to lawyers about legal construct. If a statute is particular about some actions necessary to be taken, the presumption is that it is particular in its silence about other actions. if the only time for creditor to respond in any manner was in the 20 days, you would expect the statute to include protesting the notice by the obligor as a statement. Such is not the case.

  29. SC it was not by choice i ended up working backwards
    The case got “carried” that way” 😗 just trust me on that one point.

  30. sC you are RIGHT to go to the core of the contract no argument here

  31. I refered to the 20 days they must file a declaratory action, not the borrower – please.

  32. Sorry to confuse you Dwightnj
    i not blog when exhausted.

  33. A Trustees actions outside the scope of his authority is ineffective.

  34. The Trustees can not pull themself up by their own bootstrap and ratify a Void Trustee action .

  35. Deb … The lenders do not enforce …and the borrowers are not under a 20 day window … your post is confusing.

  36. Deb … Not sure what you are trying to say regarding 20 days, can you explain in more detail? Thank you.

  37. When you start at the beginning …. It becomes clear why they left a rubbage trail to trip you up.

    I just had to know why……sighs.

  38. Working backwards always bring you back where you started.

  39. Sc unfortunately i gotta work backwards
    Good thing is theres such a messy trail they left, not even funny.

  40. And Re 20 days – all they need to do is prove what they are entitled to enforce. How hard should that be, although easy to see why they use ( abuse) that power of sale in contract deed of trust states because the court believes them – and the burden if proof is unfairly on the borrower, tila levels the playing field, and they dont get that, hence it took jesinoski to the us supreme court.

  41. Did Beach claim Breech of Contract?

  42. Did Beach claim there was no consummation?

  43. Sorry Deb. .. but I am going to the core of the contract at origination.

    Everything else is a distraction.

  44. Delivery & Acceptance

  45. Sc you complicate matters

  46. So if escrow doesn’t close there is no consummation.

    If there is no consummation. . TILA does not apply.

  47. The highlight that elex posted below regarding the “Beach” ruling is saying that the borrower waited until six years after the consummation to finally attempt to rescind as a defense to the foreclosure.

    But as in my case, I mailed my rescission letter inside the 3 year window allowed , which means I can raise it years later as a defense to my foreclosure. As long as you mailed the rescission inside 3 yrs, it became effective by operation of law.

    Somewhere it is written that as long as the rescission was sent inside the 3 yr window, then it can be raised into infinity against anyone trying to foreclose years later. As a foreclosure defense rescission has no time limit, as long as it was done inside the 3 year window. I swear I saw it written somewhere , maybe someone will stumble across it again and re-post it. But that would make sense, and it would also support the theory that if the lender fails to act within 20 days, the rescission is effective 6 years later regardless of no lawsuits, no enforcement actions, no foreclosure complaints …because the rescission does not need anything else to validate it.

    Now for people rescinding outside of the 3 year window, then we need to come up with the legal argument that equitable tolling should apply.

    I have not read the Beach case, but I’ll bet the borrower failed to argue for equitable tolling …which would explain why the Supreme Court went against him …he was basically claiming that he should be allowed to rescind 6 years later because its a defense to a foreclosure, but he misunderstood the meaning of why they said rescission could be raised indefinitely, for eternity, forever against foreclosures ..Yes its true , as long as it was mailed insude the 3 years. But yes, if the lender ignores it and eventually attempts to foreclose 10 years later, you can raise it as a defense, as I did in my case, I showed a copy of the letter that was dated and mailed back in 2007, inside the 3 yrs of my 2004 refinance closing. But in Beach , he was trying to rescind right then, six years after the fact …thinking wrongly that he could do it anytime as a defense to foreclosure, he misunderstood . He should have argued for equitable tolling and made the Supreme Court rule on that issue, but it sounds like his argument was misplaced, made the wrong argument.

    The 20 days to respond is written into the statute David …

    This is all new territory we’re blazing now ..there probably is no old caselaw that says the lender needs to file a declatory judgment, because the old caselaw was all based on bad law, bad rulings by bad judges who were perverting TILA.

    The 20 days for them to act was explained perfectly by Rod Ciferri on an earlier post thread …he covered all of the reasons why and the legal arguments about why they have waived the remedies available by not acting in 20 days. The lawmakers wrote it so that they had to act in 20 days , so it only makes sense that if they disagree then they still need to act in 20 days or thus waive their rights to contest the rescission.

  48. Presuming all necessary conditions were met, consummation of the loan would be when escrow closes and the funds are distributed.

    IANAL (I am not a lawyer) so that is from my pro se perspective.

  49. Estate Corporations by Edward N Cahn

    Google It

  50. elexquisitor,
    you quote Beach v. Ocwen
    “initiated six years after the loan’s consummation.” Can you give me the definition of “consummation”

  51. Right from the Jesinoski ruling –

    ” Our observation in Beach v. Ocwen Fed. Bank, 523 U. S. 410, 417 (1998) , that §1635(f) “govern[s] the life of the underlying right” is beside the point. That case concerned a borrower’s attempt to rescind in the course of a foreclosure proceeding initiated six years after the loan’s consummation. We concluded only that there was “no federal right to rescind, defensively or otherwise, after the 3-year period of §1635(f) has run,” id., at 419, not that there was no rescission until a suit is filed.”

  52. neil, and company, please show where in federal statues,or law , that it says the banks have only 20 days to file a suit to contest the rescission. and lose all rights to bring up, defense of we own the note, mortgage. as it is void once rescission is sent.

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