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It’s procedure, stupid! That is the message coming out of several courts who are subjecting foreclosure actions to increasing scrutiny. They apparently are noticing that the facts are not as assumed in most cases and that the true facts are being papered over with instruments that appear facially valid. Now the long standing rule that a person who takes title with knowledge of litigation might not get title after all. In New York, title was unwound. The conclusions of the authors is what I said years ago. There is no way that continuing litigation would allow for any title to be marketable. That is especially true where the allegation is that the sale was wrongful, fraudulent etc. But it is also true where there are other issues that affect title. Title is clouded as long as there is litigation — at least in this case in New York State.
Filed under: foreclosure |
what is not mentioned is about the foreclosure party following its states statutes to prove standing by proper note certification. if it is not followed at inception it can not be fixed later. how do you fix stupid??? this is the problem we are having in the fla courts. the foreclosure party is not following state statutes, the court does not care because they want the Money for the filed foreclosure. if the homeowner does not show up who cares the house goes to the bank. if the homeowner shows up pro se or with a so-so lawyer they lose the house. only if the homeowner shows up with a lawyer who is very aware of state statutes and state laws does the court THEN say oh yeah i see you didnt follow state statutes bad bank here is slap with a wet noodle, WHAT???????????? that is unfair and aganist the usa constitution giving us due proccess of the law. judges are suppose to uphold laws already in place. this foreclosure law is 3 years old. very sad for floridians. we need help from god above. please wrap your arms around each and everyone of us wether in fla or not. we need your help.
littlefolks2013, hopefully after reviewing their response, in my opinion, you disputed it again indicating their response raised new issues, and provide the new issues it raised.
Also if you feel no one answering has any first hand or personal knowledge of the transaction, it may be worth mentioning. Anything they raise that you do not agree with, ‘silence is acquiescience when there is a duty to speak’, so in my opinion, you do not let stand any statement that is not true, they have a term called ‘misrepresentation of facts’, that you can respond with.
I know nothing, I’m not an attorney. The more I know, the more I know that there is more I don’t know. As such, what I ‘think I know’ today may end up being something I don’t know tomorrow as I learn something new that makes me shelve or discard what I thought I knew today.
It’s just easy to say I know nothing, and it makes people not rely on what I do post as ‘fact’ until they do their own homework and find out for their self as they walk their walk.
Our society makes people Gods, when they see they can do a magic trick and wow them with something they don’t know. If they have a lot of tricks, well then they are soooo smart. No one ever figures out it’s slight of hand or magic, not smarts.
Anyway, CFPB will close a case in 30 days if a complaint receives a response without an additional dispute , and will investigate an additional dispute to a response up to 60 days. If you don’t hear anything by then, they may close it without notification, and you can check to see, and some times their investigation keeps it open beyond 60 days after your dispute of the response.
I am giving generalities, but do not stop learning, because you’ll end up closing the very best door you have, if you don’t go out there and figure out how the complaint process really works and what to expect.
I do think the information may be in the email response letting you know that the complaint has been answered, or maybe on the website if you click to dispute the response, I do not remember, but since I know nothing, I can’t be a god, or one with magic, and that leaves you to find out more about this.
Yes, they will ignore your rescission, and did they divert the attention from the rescission which voids the mortgage and note as operation of law with their response. Did they acknowledge having received the rescission or did they not mention it at all, hoping you don’t dispute they have not admitted to receiving it.
Realize there are smoke and mirrors going on. Take nothing for granted. Read a sentence in their response until you comprehend what was being reported back to CFPB. Draw pictures if you have to, or in my opinion, write each sentence on it’s own line to get a general comprehension of how they will use the response to shut you down or close out the complaint.
Advice from one who only has opinions is not possible.
I know nothing. If I think I know something, I know nothing. I do not give legal advice because I do not know legal things.
Trespass Unwanted, Creator, Corporeal, Life, Free, People, Independent, State, In Jure Proprio, Jure Divino.
Louise: “D, I got news for you: the documents were shredded but no copy with a signature was given to the borrower. They gave you an unsigned, undated copy, which IMHO, means that they knew beforehand that shredding would occur and copies would be used and multiple notes were sold.”
Well, maybe yes and maybe no. As a matter of law (and if this is something one is unfamiliar with, please do look into it since it may actually help some of us), each party to an agreement MUST receive a copy of the agreement, and I now believe (but can’t affirm) it’s of the executed agreement, not a pre-execution copy. Having said that, I can tell you, as a former lender, that many times the borrower’s copy package was made up ahead of time, meaning she walked away from closing with only unexecuted copies. IF the law actually says one must have an executed copy, than I was myself guilty as would be charged. And having said THAT, I can also say there was no untoward purpose; in fact, we thought our pre-closing copy package for borrowers was efficient and beneficial since with exact copies in front of her, the borrower could read along on each document as we went over them. (My company actually went over each and every document.) We closed our refi’s in our office and title closed (presented docs I mean here) purchase loans. (This was YEARS AGO, pre- mers. I could never be in that industry again, since I couldn’t ask anyone to sign a mers anything, and yes, fwiw, this has been problematic). We weren’t banksters who cared nada about our borrowers or the law, and accordingly, we thought we were following the law. Now I don’t know, without researching the executed copy issue (as in should the borrower have gotten copies of the EXECUTED documents?) But, certainly each party to an agreement MUST be provided a copy of that agreement. In fact, the law may find (no, I’ve never looked into it) that failure to provide a borrower with copies of EVERYTHING she signs is cause for trouble for the other party, especially when that other party is the party who created the documents. Like I said, I don’t know if the borrower must be provided with executed copies, or just exact unexecuted copies, and of course, most specifically the note and coll instrument.
Things changed, though, with the advent of mers and secn. It appears to me that any number of yeahoo’s and don’t-kow-nuthin-unqualified people were allowed into the industry, and certainly were allowed to originate loans for bigger fish and to also present critical documents to borrowers, about which the presenter knew exactly NADA. This, to me, is itself unconscionable.
So it may be that there was intent to destroy the note in not giving anyone an executed copy. But imo it was more likely, or just as likely, misunderstanding of the law (IF the law says one must get an executed copy) or just plain sloppiness as a result of unqualified
people hired to do stuff they had no business being in the same room with. But, again, whatever the excuse, each party to an agreement must have at least unexecuted copies of the agreement – or it really is trouble for the other guy and I further believe those copies must be given at the time of execution and not later. (For instance, if one had no copy of the Reg Z Truth in Lending to go home with from closing, what good is a 3 day right of rescission? It’s the reg z which discloses the real cost of credit)
@ dandiener1,
The mission statement for the MERS is best summed by their motto:
“Process Loans, Not Paperwork”.
The MERS is many things:
A phony gambling parlor.
A deliberate attack on collecting county registration fees (Billions lost).
A deliberate attack on proper, lawful title recording (fraud, forgeries etc).
A deliberate misdirection as to lawful claims as “Holders in Due Course.
I also believe it is a deliberate attack on the Sovereignty of the American People.
At the very least, I believe the MERS was created to destroy evidence and obfuscate the Truth.
The central banks are insolvent. It is a farce to suggest anything to the contrary.
The intentionally mislabeled “Federal Reserve”, neither “Federal- while owned by private-foreign banks”, nor possessing ANY “Reserves- our currency is created out-of-thin-air” is bankrupt.
The same bankers that created the “MERS” also own and operate the DTC and DTCC (each created to track and report on derivatives).
Presently, the central bankers are concealing their insolvency, even as they are refusing to report on “DERIVATIVES”.
THOSE DERIVATIVES ARE “SHORT-SALE BETS” MADE AGAINST YOUR HOUSE!
IT IS PAST-TIME, WE THE PEOPLE FROG MARCH THE TRUSTEES INTO FEDERAL COURT IN ORDER TO RETURN SANITY AND THE RULE OF LAW!!!!
DON’T PANIC!
The alternative currency already exists: It is the “Greenback”.
It is a viable, presently-existing, currency sitting on the shelves of the Public Treasury.
Forget about gold and silver- there isn’t enough to go around.
The only workable system is a paper currency backed by the rule of law!
When the central banks increase the interest rate and millions more join the ranks of defrauded, dispossessed, distressed-property dupes, the correct response to central banker deceit goes like this:
INVESTIGATE WALL STREET, PROSECUTE WALL STREET, JAIL WALL STREET!
RETURN THE RULE OF LAW!
END THE FED! RETURN IT AS A PUBLIC UTILITY THAT ENRICHES PUBLIC COFFERS- NOT PRIVATE POCKETS!
FORCE ANY PROSPECTIVE ELECTORAL CANDIDATE TO RENOUNCE MONEY IN POLITICS!
FORCE ANY ELECTORAL CANDIDATE TO UNMASK THE 100-YEAR-OLD, CENTRAL BANKING FRAUD!
RENOUNCE THE BANKERS- REPUDIATE THE DEBT!
COLLECT THE HYPER-INFLATIONARY “FEDERAL RESERVE NOTES” AND RESTORE THE “GREENBACK’ AS THE LAWFUL CURRENCY!
@ dandiener1,
You may reach me at: mikekeane@optonline.net.
The fire chief of our small town was actively engaged with others to participate in “archiving documents”.
One family has turned it into an enormous business.
Both: liens (the administrative, collections portion, ie. terms, rates, conditions, amounts owed, etc) and notes (the “pink slip”, often referred to as the “blue, wet-ink-signature” contract) were shredded by mobile shredder, tossed in the town dumpster and burned in 50 gallon drums while we were drinking beer and watching football.
On MSFraud, I explained, upon the death of one of my brothers-in-law, I helped to clean-up my sister’s house. A number of mortgages, in boxes, ended up under my front porch as I intended to keep them from the weather.
Instead, a family of groundhogs took up residency in those boxes and made a nest of them.
I believe my father and family were used, as patsies, to destroy these documents, once they had been “dematerialized” using desk-top scanners and then, entered into digital format.
I am a voracious reader.
In “The Big Short”, Michael Lewis, and, “Bailout”, Neil Barofsky, both authors admit that multiple revenue streams, with multiple interest-rate variables were made available to multiple gamblers on any given, ONE LOAN.
So… ONE LOAN was used by multiple entities to make multiple predictions on the performance of that ONE LOAN.
IN MY OPINION, THERE CAN ONLY BE ONE PLACE TAKING MULTIPLE BETS AGAINST PERFORMANCE ON A SINGLE LOAN: THE “MORTGAGE ELECTRONIC REGISTRATION SYSTEM”, AKA THE “MERS”.
Those multiple bets now exceed 682 Trillion Dollars (Google “Quadrillion”). 682 Trillion Dollars is 10 times the combined GDP of every country on this planet.
If you read Ellen Hodgson Brown’s, “The Web of Debt”, you will learn the 12 largest banks are carrying those 682 Trillion Dollar’s worth of “Notional Derivatives” as “ASSETS” on their books.
They are doing so in order to deceive people into believing the central banking scheme is still solvent.
At the risk of repeating myself: “Debts, owed as bets, valued at 10 times the GDP of every country on the planet, have already rendered the central banking filth “INSOLVENT”!
And, it doesn’t matter whether one bank or another only took a percentage of each bet and then “laid-off” the residual amount on other banks- the cumulative effect is the same- these filth are hopelessly beyond financial redemption.
Insofar as any other redemption they may come to expect?
You don’t want me to answer that question.
This entire fiasco is a deliberate attack on the pension systems, the-world-over.
By extension, it now manifests as a direct attack on the Sovereignty of the American People, due to the devastating consequences the American Dollar will suffer as “THE SOVEREIGN CURRENCY’.
It is now proven foreign-owned, private-banker-owned, financial entities are using American Mortgages to launder terrorist and drug cartel money (Google HSBC and Wells Fargo).
Eric Holder has done nothing to prosecute these filth and, despite his involvement with the law firm, as an employee of that law firm to bring the MERS into existence, he has allowed this attack on our National Sovereignty to go unchecked.
Presently, Eric Holder has rejoined that law firm as an employee after his resolute betrayal of the American People.
D, I got news for you: the documents were shredded but no copy with a signature was given to the borrower. They gave you an unsigned, undated copy, which IMHO, means that they knew beforehand that shredding would occur and copies would be used and multiple notes were sold.
Niedermayer. .
“Cali”?
Niedermayer,
That’s interesting and may indicate the shredding of ALL original documents was Standard Operating Procedures (SOP) for closing attorneys throughout the nation…. maybe as a possible future defense against charges of fraud – “no certifiable proof”?
That would mean that paper copies of any original documents would only be in the hands of borrowers who kept their closing copies, the copies of closing attorneys, or the county land records?
Nicht Wahr?
dandiener1 ,
I can confirm that OptionOne had their branches scan and shred ALL documents after Cali confirmed receipt of the electronic images ,, this is from the 2007 Orlando branch manager who is a friend of my wife.
What Michael Keane is saying rings true with my (limited) experience.
Both amazon and ebay have books on the federal rules of evidence and the federal rules of procedure which are annotated. Older books (not 2015 editions, say) are fairly inexpensive. Would just have to see if any case cited therein is still reliable (not overruled by a subsequent case) and look for amendments to any rule before citing (this one may do online easily enough).
MK…
When you were “doing the dirty deed” (pun intended), did you (or are you aware of others who) also destroyed the “remainder” of the “closing file” in addition to the “liens and notes”?
IOW, what was actually happening to the closing documents after they were removed from the closing table?
What is this “petition” you are talking about, and what are the details of your “affidavit” you’very mentioned?
Can you provide us a URL for both?
I agree with Neil whole heartedly on this.
Im still in court whether they thought i would be matters not. Onward.
Just found out all the false fraudulent documentation for mortgage was sent to ocwen, where they said in their letter that ‘I’ signed the loan………..I. did not. My name was on the deed. Lol, the only reason they answered was because I sent a complaint to CFPB that my rescission letter fell on the deaf ears of Deutsche Bank, Lend American, Option One, Steven J.Baum, pillar processing, ideal mortgage bankers, Roe, Tatzi, and whoever, MERs. My spouse died 2012.
@ dandiener1,
You wrote: There’s someone on this blog that has repeatedly asserted that once the fraudsters digitized the closing documents, the original paperwork was destroyed.
That is me.
I destroyed thousands of mortgage documents: liens and notes.
I swore an affidavit and also created a petition to say as much.
I am attempting to re-release the petition and hope to do so within the month.
Regarding my “objections” about the move toward “paperless transactions,” I submit the following for you to either “sustain” or “overrule. ”
https://www.youtube.com/embed/V_gOZDWQj3Q?rel=0
@db – I wasn’t aware that MA law was binding out here in WA. So why should I read it carefully? Wouldn’t I do better reading my own state’s law? And I had to laugh that you couldn’t figure out the TILA 3-years to give notice and the 1-year to enforce non-compliance equals 4 years. Likely your cut and paste operation left out the germane elements that would have made this obvious to the reader.
I just hope you haven’t mislead yourself out of your home.
Reblogged this on Deadly Clear and commented:
Very interesting – especially given how many times we’ve seen BONY sell property to Flippers during litigation.
Now, under Altshuler, if any defendant merely files a notice of appeal (truly a ministerial act) from an otherwise final judgment of foreclosure and sale (or from an order confirming a referee’s report of sale), without obtaining a stay, the pendency of that appeal effectively serves as a long and dark cloud on title, preventing a bona fide purchaser in foreclosure from obtaining clean, insurable, title to the foreclosed property until all possible appeals are exhausted. That exhaustion, and that uncertainty, could endure for several years (as it did in Altshuler).
Altshuler serves to caution all foreclosure mortgagees, prospective purchasers, title insurers, and all other parties (such as new lenders, tenants, or contractors) acquiring an interest in the mortgaged property that their bona fide interests could be nullified long after the fact. This is likely to chill the willingness and ability of title insurance companies to issue insurance policies on foreclosed real estate while an appeal could be perfected or has been perfected and remains pending.
to my bank friend elex-
this is mass, reg. on our state tila. read it very very careful.
32.15: Right of Rescission
(1) Consumer’s Right to Rescind. Compliance with 12 CFR 1026.15(a) constitutes compliance
with 209 CMR 32.15(1); provided, however, if the required notice and material disclosures are
not delivered,
the right to rescind shall expire four years after the occurrence giving rise to the
right of rescission, HUM 4 YRS FROM THE ( OCCURRENCE )
or upon transfer of all of the consumer’s interest in the property, or upon sale
of the property, whichever occurs first. In the case of certain administrative proceedings, the
rescission period shall be extended in accordance with M.G.L. c. 140D, § 10(f).
(2) Notice of Right to Rescind. Compliance with 12 CFR 1026.15(b) constitutes compliance
with 209 CMR 32.15(2).
(3) Delay of Creditor’s Performance. Compliance with 12 CFR 1026.15(c) constitutes
compliance with 209 CMR 32.15(3).
(4) Effects of Rescission. Compliance with 12 CFR 1026.15(d) constitutes compliance with
209 CMR 32.15(4).
(5) Consumer’s Waiver of Right to Rescind. Compliance with 12 CFR 1026.15(e) constitutes
compliance with 209 CMR 32.15(5).
(6) Exempt Transactions. Transactions exempt pursuant to 12 CFR 1026.15(f) are exempt
under 209 CMR 32.15(6).
..”presence at the closing table. “
DB
“..Lenders should document their compliance with TILA and request that borrowers acknowledge in writing that they received the lender’s truth-in-lender disclosures at closing.”
Request? Not demand?
Must the borrower reply absent a lawsuit???
There’s someone on this blog that has repeatedly asserted that once the fraudsters digitized the closing documents, the original paperwork was destroyed.
If this is so, and the digitization process included any TILA disclosure documents, TILA Rescission mandates a voiding of the main components of the closing transaction… then the “paper” notes, the security documents, the loan contracts, and, I assume, any and all assignment documents… since they derive from the Note and Security document, must be expunged from the local land records.
To my way of thinking, since the purpose of destruction of the remainder of the closing documents was an effort to “go paperless,” it would stand to reason that *all* paperwork was *also* destroyed…
including the more arcane, ministerial documents packaged in the closing documents folders.
If that’s the case, the only remaining, legal, *paper* documents are the ones recorded in the land records offices of each county in the nation, and in the hands of homeowners.
…Thus, the “request” that those of us who’ve kept paper copies of our closing. .. “affirm” the existence of documents that may or may not be injurious to our hope of obtaining “un-clouded title” to our real estate property may be the *only* way to reestablish Lenders’ “proof” of a presented at the closing table
Since a personal “volunteer affirmation” of my personal “TILA Disclosure documents” may provide these rascals leeway to subpoena my private records, I am disinclined to respond in *any way* to such an “extra-judicial” request – besides that, I may be “unable to locate” such alleged private papers.
Taking this “paperless trail” to it’s logical conclusion, “all records” sent by the scammers to quasi-government agencies or REMIC Trustees are also likely to have become “digitized” to avoid the expenses associated with storing “worthless paper folders and the paper documents contained therein.”
In this Biblically – based “Year of Jubilee,” it would be sweet justice to see the God-denying perpetrators of this massive Ponzi scheme… to be “hoisted by their own petard” as was the fate of the Biblical scoundrel, Haman.
BTW, read Jonathan Cahn’s books. They will open your eyes about what’s happening in the newspapers and being said by media “talking heads.”
Maybe DB can explain what the phrase “timely notice” means with respect the Jesinoski ruling in his post at 11:40. I’m guessing it has something to do with the Beach ruling.
Maybe DB can explain how his statute of limitations argument regarding equitable tolling of sales of securities is relevant to a right that is extinguished after 3 years. Also found in the ruling he cited =
“Equitable tolling, though generally read into every federal statute of limitations, cannot be applied in the face of contrary congressional intent. [Citations.]” (Meadows v. Pacific Inland Securities Corp., supra, 36 F.Supp.2d at p. 1251″
One of the major issues here is that we are dealing with servicers, and we really do not know who the creditor/lender is, and the servicer will not tell us, because they are staling the money for themselves. If they have to answer the letter with a credible entity as creditor, they cannot.because it does not legally exist.
In Sagehorn v. Engle, 141 Cal. App. 4th 452, 460-61, 46 Cal. Rptr. 3d 131, 135 (2006) the California Court of Appeals held:
“Equitable tolling “halts the running of the limitations period so long as the plaintiff uses reasonable care and diligence in attempting to learn the facts that would disclose the defendant’s fraud or other misconduct.” (4 Wright & Miller, Federal Practice and Procedure (3d ed. 2002) Commencement of Action, § 1056, p. 255.) The doctrine “focuses primarily on the plaintiff’s excusable ignorance of the limitations period. [Citation.] [It] is not available to avoid the consequences of one’s own negligence.” To establish that equitable tolling applies, a plaintiff must prove the following elements: fraudulent conduct by the defendant resulting in concealment of the operative facts, failure of the plaintiff to discover the operative facts that are the basis of its cause of action within the limitations period, and due diligence by the plaintiff until discovery of those facts.” So as a threshold issue in any type of legal case TILA or otherwise, where any party wants to rely on this legal doctrine, facts to justify the imposition would need to be explored to see if an honest and reasonable argument can be made.
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HOME > SPECIAL ASSETS LITIGATION > U.S. SUPREME COURT RULES BORROWERS MAY RESCIND RESIDENTIAL MORTGAGE LOANS BY WRITTEN NOTICE
U.S. Supreme Court Rules Borrowers May Rescind Residential Mortgage Loans by Written Notice
By Adam B. Brandon on March 31, 2015
Posted in Special Assets Litigation
The Truth in Lending Act (“TILA”) requires lenders to make certain disclosures to borrowers before the parties close on a residential mortgage. TILA also affords borrowers the right to rescind a mortgage for any reason for three day after the transaction. Furthermore, if a lender fails to make the disclosures that TILA requires, then the borrower may rescind the transaction within three years or until the sale of the secured property, whichever comes first.
On January 23, 2015, the U.S. Supreme Court issued a significant opinion that clarifies how a borrower may exercise the right to rescind. Previously, many federal courts required a borrower seeking rescission to file a declaratory judgment action. If the borrower failed to file suit within three years, the borrower lost the right to rescind forever. However, in Jesinoski v. Countrywide Home Loans, the Supreme Court ruled that the plain text of TILA only requires a borrower to provide timely written notice of rescission to the lender.
In this case, Larry and Cheryl Jesinoski refinanced the mortgage on their Minnesota home by borrowing $611,000.00 from Countrywide Home Loans, Inc. (now part of Bank of America). The couple then used the funds to pay off multiple consumer debts. Exactly three years later, the Jesinoskis sent “all interested parties” a letter stating that they never received the required TILA notices and were rescinding the mortgage. Denying that it failed to comply with TILA, Countrywide refused to recognize the validity of the Jesinoskis’ rescission notice. One year later, the couple sued Countrywide seeking a court-ordered declaration of rescission as well as monetary damages.
Since the Jesinoskis filed their lawsuit four years after the original transaction, Countrywide claimed the borrowers were outside of the three-year window to rescind the mortgage. Countrywide further argued that rescission was a judicial remedy that could only be obtained through a court order. In other words, the Jesinoskis could not unilaterally void their mortgage with a mere letter. Relying upon prior precedent, both the district court and the Eighth Circuit Court of Appeals sided with Countryside.
In a unanimous opinion, the Supreme Court reversed the Eighth Circuit. Justice Antonin Scalia noted that 15 U.S.C. § 1635(a) specifically provides that a borrower “shall have the right to rescind . . . by notifying the creditor . . . of his intention to do so.” Countrywide argued that § 1635(a) only applied to cases where both parties agreed that the lender failed to provide the truth-in-lending disclosures at closing. However, Justice Scalia countered that TILA does not distinguish between disputed and undisputed rescissions. The Court also noted that TILA eliminates the common-law rule that a borrower must tender the proceeds received in a transaction before rescission may occur. In other words, a mortgage is canceled the moment the borrower notifies the lender in writing of the rescission.
Some fear that the Jesinoski opinion permits borrowers to frivolously rescind mortgages. However, lenders may take some steps to protect their legal rights:
Lenders should document their compliance with TILA and request that borrowers acknowledge in writing that they received the lender’s truth-in-lender disclosures at closing.
Upon receipt of a written rescission notice, lenders must decide whether to contest the rescission. If the lender agrees that it failed to comply with TILA, then the borrower must return all payments and the lender must terminate its security interest. The Jesinsoki ruling, however, does not indicate what will happen if the borrower cannot return the principal. This is likely to be an area of future litigation.
If the lender objects to the validity of a rescission notice, then the lender should send a letter to the borrower that details its compliance with TILA’s disclosure requirements. At that point, either the lender or the borrower may file a declaratory judgment action to determine the validity of the rescission. Alternatively, the lender may file a foreclosure action with the recognition that the borrower will likely raise rescission as an affirmative defense.
While many questions remain unanswered, Jesinoski makes clear that borrowers preserve their recession rights simply by providing writing notice to the lender. Even if a borrower submits a baseless rescission notice, a lender must take prompt action to preserve its legal rights
.scotsmanguide.com , The Leading Resource for Mortgage Originators.
Supreme Court TILA decision may only confuse mortgage rescissions
A recent U.S. Supreme Court decision clarified a Truth in Lending Act (TILA) provision that allows borrowers to cancel a mortgage, benefiting borrowers — but the decision may have only distorted the process for lenders, legal experts say.
At its most basic, the unanimous Jan. 13 decision in Jesinoski v. Countrywide Home Loans addressed the method of how consumers enact a rescission: do they have to file a lawsuit, or can they just write a letter to their lender?
The court said that consumers only have to write a letter to their lender. The decision did not clarify what happens after a lender gets that letter.
“Now that we know what the answer is, what does it mean?” said Joseph Lynyak, a partner at the law firm Dorsey & Whitney. “We’re now going to have a period where people are going to look at the implications — the implications for state law — and determine effective policy and procedures to address what’s going to be a larger issue that has emerged.”
Opponents of the written notice procedure said, among other arguments, that many borrowers who seek to rescind are also trying to get out of a foreclosure or default and that the intent of TILA is not to make getting out of a mortgage easier. Though reasonable, that argument was futile, with the Supreme Court only addressing the method of rescission.
TILA provision
The first version of TILA passed by Congress in 1968 allowed unlimited time for rescission, but Congress amended that clause in 1974 to a maximum of three years. Congress did not in 1974 — or at any other time — specify what method consumers must use to give a rescission notice.
TILA also allows a three-day “cooling off” rescission period at origination, allowing borrowers to rescind if they do not get TILA notices, which lenders are generally OK with because the loan usually has not been disbursed.
After a borrower writes a notice of rescission, TILA requires the creditor to stop charging interest, and requires that the creditor and borrower find a way to unwind the loan. The creditor is supposed to tender “all loan proceeds back to the consumer.”
The plaintiffs in the Jesinoski case had sent a written rescission notice to their lender, Countrywide (later Bank of America), but Countrywide refused to recognize it because the Jesinoskis did not send the notice via a lawsuit.
The Supreme Court decision upholds the written notice procedure, as long as it happens within three years. The court did not decide how consumers and creditors should resolve payments of loans.
“In terms of getting certainty out of the decision, the balance has shifted toward borrowers,” said Snell & Wilmer attorney M. Lane Molen. “We all know that lenders don’t like uncertainty.”
“It really is going to force lenders, once they’re aware of rescission, to take some sort of action, possibly in the nature of litigation in order to address the impact of rescission, which is in effect saying a lien is void,” Lynyak said.
Two sides
The Jesinoski decision resolved two opinions about rescission that had played out in other cases in federal circuit courts. Some circuits held that a consumer would have to file an actual lawsuit in order to rescind.
Consumer groups and attorneys general from about 26 states supported the three-year written notice rescission procedure. In a legal brief, the states said that requiring a consumer to hire an attorney and sue a lender is too high a burden. They also argued that written notice would help governments enforce TILA.
“Protecting consumers from mortgage and foreclosure-related abuses is one of the highest enforcement priorities for [the states],” according to the brief. “But state and federal officials lack the resources to pursue and deter all potential violations related to home loans or mortgage lending — the very reason that TILA empowers consumers to act as private attorneys general when creditors violate the law.”
A variety of industry groups, including the Mortgage Bankers Association (MBA), the Consumer Mortgage Coalition and the American Bankers Association, authored a legal brief opposing the written notice method.
“Petitioners’ approach would fundamentally undermine the finality and clarity Congress intended this statute to provide. It would do so for the sake of a remedy that borrowers may invoke … not because there was any mistake or misunderstanding of a loan’s terms at inception, but instead when the borrowers in default, has no genuine basis to rescind, and has no ability to tender the loan proceeds required,” read their brief.
If borrowers were required to file a lawsuit to rescind a mortgage, they would likely have to provide proof that a lender did not provide the proper TILA notices. A written notice likely would not include any supporting documentation, placing the burden of proving proper TILA notification on the lender, the brief argued.
Prepare for rescissions
Molen and Lynyak advised that lenders should double check their record keeping in case they receive a rescission notice — however, Molen pointed out that the Jesinoskis had in fact signed documents acknowledging receipt of TILA disclosures.
“Lenders need to have a firm handle on their record keeping and be able to document what was provided to the borrower in terms of disclosures,” Molen said.
“Once you’ve answered the question of what’s a proper rescission, what do you do? And then again, since there is a high correlation of rescission and being in default, what do you do if the loan is in process of collection? If you don’t have a lien, how are you going to foreclose on an underlying property?” Lynyak said.