“Unconscionable” Mortgage Can Lead to Equitable Rescission

Posted on March 7, 2016 by Neil Garfield
WE HAVE REVAMPED OUR SERVICE OFFERINGS TO MEET THE REQUESTS OF LAWYERS AND HOMEOWNERS. This is not an offer for legal representation. In order to make it easier to serve you and get better results please take a moment to fill out our FREE registration form https://fs20.formsite.com/ngarfield/form271773666/index.html?1453992450583 
Our services consist mainly of the following:
  1. 30 minute Consult — expert for lay people, legal for attorneys
  2. 60 minute Consult — expert for lay people, legal for attorneys
  3. Case review and analysis
  4. Rescission review and drafting of documents for notice and recording
  5. COMBO Title and Securitization Review
  6. Expert witness declarations and testimony
  7. Consultant to attorneys representing homeowners
  8. Books and Manuals authored by Neil Garfield are also available, plus video seminars on DVD.
For further information please call 954-495-9867 or 520-405-1688. You also may fill out our Registration form which, upon submission, will automatically be sent to us. That form can be found at https://fs20.formsite.com/ngarfield/form271773666/index.html?1452614114632. By filling out this form you will be allowing us to see your current status. If you call or email us at neilfgarfield@hotmail.com your question or request for service can then be answered more easily.
================================

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

—————-
Hat tip to Jim Macklin
As if things were not confused enough, A California court came on board with something I suggested in 2007 — that if the loan terms were unconscionable, then there was no right to foreclose. Spencer Scheer wrote the following notice that sums up the decision. I would add that if the loan was “predatory per se” as defined in Regulation Z, then the same logic applies. The parties seeking foreclosure are coming in with “unclean hands.” Whether they have some other remedy like an action at law for money damages remains to be seen. But in most states foreclosure is an equitable remedy which has always meant until the recent era of the mortgage meltdown, that the court ways all factors to achieve a fair result.
*
But this court went further. It said that if the transaction is unconscionable then the “borrower” can equitably rescind. This may be different from both common law rescission and it is different from TILA rescission in which the notice of rescission alone (upon mailing) immediately cancels the loan contract, and voids the note and mortgage — even if the rescission is disputed on grounds of the 3 year limitations etc.
As Justice Scalia said, “the statute makes no distinction between disputed and undisputed rescission.” Thus the rescission is effective even if it APPEARS As though the right to rescind under TILA may not have existed on the date the notice of rescission was mailed.
NOTE TO LAWYERS: ANY OTHER INTERPRETATION WOULD REQUIRE THE “BORROWER” TO FILE SUIT TO MAKE THE RESCISSION EFFECTIVE WHICH IS THE OPPOSITE OF THE TILA RESCISSION STATUTE, REGULATION Z AND THE UNANIMOUS DECISION OF THE US SUPREME COURT IN JESINOSKI. THE STATUTE PUTS THE RESPONSIBILITY FOR PUTTING THE EFFECTIVENESS OF THE TILA RESCISSION IN ISSUE SQUARELY ON THE PARTIES PURPORTING TO BE THE LENDER AND THEY ONLY HAVE 20 DAYS FROM RECEIPT TO FILE A LAWSUIT SEEKING TO HAVE THE RESCISSION VACATED.

Here is the notice sent to me by several readers:

Date: March 1, 2016
To All SLG Clients and Affiliates.
From: Spencer Scheer
Subject:  Client Alert: From the Scheer Law Group:  Foreclosure Appellate Decisions Heating up. The Orcilla v. Big Sur, Inc., Case is of Extreme Concern.
In Orcilla v. Big Sur, Inc., No. H040021, 2016 WL 542922 (Cal. Ct. App. Feb. 11, 2016), The Court allowed the borrower/appellants to assert an action to equitably rescind a foreclosure sale and held that: If the facts and circumstances surrounding  the origination of the loan are unconscionable it can lead to a challenge to the enforcement of the loan including rescinding a foreclosure sale to a BFP.  The greater the degree of unconscionability the greater the scrutiny into the right to enforce the loan.  This case has far-ranging implications on the finality of foreclosure sales and BFP rights.
Consider what this means: The particular facts of this case drove the result (non-English speaking borrowers with little education, signing loan documents in English with relatively bad terms).  However, the rationale for the case “tramples” other areas of law and imposes quasi-fiduciary duties on a lender to ensure that the borrower is not misled or taken advantage of. In essence, under the ruling of this case,  If a judge finds your loan terms are not fair, he or she can allow a borrower to challenge any default/collection actions you take, including challenging a completed foreclosure sale.
To make sure that you really can’t’ sleep at night, the court went even further and found that the rights to challenge a loan that is unfair extends to “trump” a foreclosure sale where there is a BFP who purchases at the sale. While the Court  in this case allowed the BFP to evict the borrower because it had obtained a UD judgment, it found that the rights allowed to a BFP do not supersede the borrower’s rights to challenge the foreclosure. This will add further uncertainty to foreclosure sale and the willingness of title companies to insure, if the case is not overturned or ignored in jurisdictions outside of the one issuing the opinion.
This case has ramifications that are just as far-ranging and disruptive as the recent California Supreme Court holding in the Yvanova v. New Century Mortgage Corp, et al., Docket No. S218973 (CA Supreme Court February 18, 2016).
Please call me if you would like to discuss
Spencer Scheer

Filed under: foreclosure | Tagged: , , , , , , , |

« »

23 Responses

  1. pat pritchard, on March 8, 2016 at 9:20 pm said:

    yes, yes, a thousand times yes

  2. Sheri Daniel, on March 8, 2016 at 9:16 pm said:

    Your docs sound exactly like mine…..yikes! I believe they deceived a lot of homeowners with these false loan mod docs. Go get ’em!

  3. pat pritchard, on March 8, 2016 at 9:11 pm said:

    Hi Sheri, yes that is what I am thinking, but the mod. docs. clearly state them as “lender”, which I hope will be in our favor. thanks, Pat

  4. Sheri Daniel, on March 8, 2016 at 9:02 pm said:

    Wells and ASC are most likely the SERVICER not the lender at the time of the loan mods…..invalidating the docs. show them to your attorney or the court and ask.

  5. pat pritchard, on March 8, 2016 at 8:59 pm said:

    Hi Sheri, I looked more carefully, the 2006 original mtg says BNC lender, but all mods. say wells fargo and/or ASC is lender, The assignment ffrom 2012 is the default assignment. thank you for info, I will look into it. Pat

  6. Sheri Daniel, on March 8, 2016 at 7:49 pm said:

    @pat…I cannot give you legal advice but the atty who told you to tell the bankruptcy court to my mind seems to be right on…..ask if your state has a statute that requires an entity to disclose if they are signing for another….and if Wells/ASC signed as lender/creditor and they are not the lender/creditor then ask if the documents are valid contracts.

  7. pat pritchard, on March 8, 2016 at 6:53 pm said:

    Hi. Ian, What does authentication of out of state documents do? I looked it up, it really does not tell much. I am willing to try anything as long as it’s legal.thank, Pat

  8. pat pritchard, on March 8, 2016 at 6:50 pm said:

    Hi Sheri, I looked at some papers. Earlier loan docs were ameriquest & BNC. The 2010 loan mod. docs. are wells fargo, the 2011 are wells fargo and ASC.These say they are the lender, but i don’t think they can be. They make no mention I can see of an actual lender. I had asked ASC a few times for name of actual lender, they wrote US bank, which apparantly is not the case, but it was just in a letter. There is an assignment that says BNC bank, but no note or mortgage. Ithink that assignment is the default assignment. If you need info, I can look at it to make sure it is the default one. We have a 6 month doomsday ordered by bankruptcy ct., which last payment is due in April. I will need to do something fairly soon about this. I was supposed to get a modifcation by Feb. 1st according to judge, but ASC not cooperating, in fact going out of their way not to. Considering our bankruptcy atty. has not been answering my phone calls and has not answered my questions about what to do about the doomsday & not getting a mod., I think I have to find a different atty. Atty. I saw yesterday said he thinks I need to take it to bankruptcy ct. thanks, pat

  9. pat pritchard, on March 8, 2016 at 3:31 pm said:

    Hi Sheri, yes I would appreciate a copy of your case. I am currently looking for another attorney, have 1 for bankruptcy, but he won’t do anything about fraud. Am having problem finding atty. around here that is willing to do fraud. The atty I saw yesterday thinks I should take it up with bankruptcy ct. I may end up doing it pro se., but it’s hard since I really don’t know much. I am getting more good advice from you and others on this group than my atty. thanks

  10. Sheri Daniel, on March 8, 2016 at 3:27 pm said:

    Find your papers….when I did my loan mods (2 different houses-one with Wells one with ASC they sent me a package of 4 docs….a cover letter, a loan mod doc on their letterhead, a truth in lending form and a loan mod doc on Fannie standard form (typically used for recordation) on all the docs there is no mention of the actual lender……that’s what I used to prove that they did not disclose and the contracts are invalid

    Sheri

  11. pat pritchard, on March 8, 2016 at 3:23 pm said:

    Sheri, We had mod., 2008 ASC wells fargo bank, in 2010 wells fargo bank lender, also loan mod. wells fargo lender. Other papers also mention wells fargo and ASC as lender. All except one was not even what I would consider to be a modification. I did not ask for it, one is about the bankruptcy, the other about step up interest rate. BNC is also mentioned. Loan is non HAMP. I don’t believe our loan papers mention US bank on them. (computer upstairs, papers downstairs, don’t have all with me up here). thanks

  12. Sheri Daniel, on March 8, 2016 at 3:21 pm said:

    Oh boy is this familiar. Wells & ASC…..they executed docs naming themselves as lender when in fact US Bank is the actual lender (maybe trustee)…..in Virginia there is a statute (law) that if someone is signing on behalf of someone else on a deed they must disclose the someone else……in my case Wells & ASC did not disclose on the loan mod docs but they did on the foreclosure docs….I had an attorney tell me that invalidates the loan mod documents….they are not valid contracts…..that they got me to sign…( which included very predatory terms) …I then was able to show for the court very clearly very simply that they used the invalid contracts for the foreclosures (numbers are from loan mods not the original deed of trust)…..rendering in my opinion the foreclosures invalid. Courts in Virginia have been trying to sweep this under the rug….but NOONE will tell me these loan mods are valid contracts and the foreclosures are valid. I am not an attorney and I only spell out the similarities…..I cannot give you legal advice…but if you have an attorney I can give you copies of my case to see if it is comparable to yours. When I found the case in Maryland, it dawned on me that Wells and ASC may have done this thousands of times…..and now one in wisconisn……

    Sheri

  13. pat pritchard, on March 8, 2016 at 3:09 pm said:

    Hi. Sherri. Our loan modifications are from wells fargo, lender and america’s servicing co., lender. There is also a default assignment by wells fargo bank. ASC is a division of wells fargo, isn’t it illegal, maybe against TILA for them to make money servicing a loan while at same time being listed as lender, collecting the payments as well? When I asked ASC who real lender is, they said US bank. There is an account number on one paper, so i called US bank, account # doesn’t match, tried both our soc. sec. numbers, and address. They have no record of us. They must not be lender Other papers say BNC mtg., oldest are ameriquest. Also we got papers in mail from Deutsch bank, 2 different spellings, 1 note, 1 mortgage, same 5 numbers, different sequence, accompanied by blank and near blank papers with unreadable writing on them. Also there is a notice of no oral agreements, we signed it 1/1/11, you can see our signatures are a photocopy, in all papers. Date typed at top says 2/1/11. This was signed same time as addendums for wells fargo, part of a modification. Same ASC person Haben Tafesse who claims to be a VP loan modification, but is actually an operations clerk, some copies are notarized, some not. The addendums have correct date. How could we sign something a month before it was typed? Something is rotten in Denmark.

  14. Sheri Daniel, on March 8, 2016 at 2:55 pm said:

    @pat pritchard…you are in wisconsin? Are loan mod docs in name of ASC, servicer or US Bank, the actual lender (more likely trustee for some trust) . This is exactly my fraud case here in Virginia with the same cast of characters. ASC & US Bank. I have seen one other case in Maryland in 2012. What year was your loan mod? was it HAMP or non-HAMP?

    Sheri

  15. pat pritchard, on March 8, 2016 at 2:46 pm said:

    thank you, I will look it up. ASC told me in letter US bank is the lender, I called them, gave an account # which is supposedly ours, and even our socials. They have no record of us. Another lie from ASC.

  16. Ian, on March 8, 2016 at 9:17 am said:

    Pat Pritchard- there is a legal avenue called “authentication of out-of-state documents”. Sorry i dont have a link, the info is on the hard drive of my computer which failed last year. This may help you rather than deposing someone with an attorney.

  17. Sheri Daniel, on March 7, 2016 at 8:39 pm said:

    @pat pritchard…the loan mods that you did with ASC….were they done in the name of ASC, the servicer or the actual “lender”?

  18. pat pritchard, on March 7, 2016 at 8:28 pm said:

    I am confused. Went to atty.whose name I got from Milwaukee’s atty. referral. They said he knows real estate law. Went to him, showed papers from the 1st mtg. up to now, he says the other mortgages (we had modifications) do not count, and if we file for rescission we wll have to pay back all money owed on the mortgage except fees & interest. We had to file bankruptcy in 2013 because they would not allow foreclosure mediation. Atty. did look at a modification agreement, says it appears to say we did not have to make payments until sometime in 2013, so I would think if that’s case we are not in arrears. I showed him robosigned papers, incl. a notice to lift automatic stay supposedly signed & notarized by a VP loan mod., which she does not have any executive level job. He said it probably would make no difference, only thing to do would be to go to her state, get an atty., and have him interview her, to get truth out of her, which would be very expensive. There are many things I can see wrong with loan, including latest info from servicer ASC, like at least 12 (1 each month) drive by inspections, and late fees for payments made by phone that I know I made in time, showing them to be 1 day late, several. Addendums to note also robo signed, assignment registered at courthouse for latest mod., no mortgage or note. Last name misspelled on allonge to note, typed, but handwritten letters added as well as part of address. I did not hire this attorney, just went for consultation. He does not want to take the case. I see other mistakes as well. There apparantly are not many attys. here in WI that want to take on the banks accused of fraud.What alternatives do we have? Should we sue in federal court?Do not want to move due to illnesses of husband, house underwater by a lot, over double amt. Can we do pro se and sue them? Despite what this atty. said, can we file rescission and not end up having to pay them back money, which would make us loose house anyway?They have been lying to us right along, latest letter proof. I could write a novel if I write every thing I found wrong. thanks

  19. Melissa Klapper, on March 7, 2016 at 6:37 pm said:

    Jim,
    Jesinoski and The Supreme Court stated, Within 3 years of consummation of the loan. Every competent att. knows the difference.

  20. Jim, on March 7, 2016 at 6:24 pm said:

    This statement: “the notice of rescission alone (upon mailing) immediately cancels the loan contract, and voids the note and mortgage — even if the rescission is disputed on grounds of the 3 year limitations etc.” is not true. The Jesinoski court made it clear that the homeowner has no case if notice was not sent within 3 years. Every competent atty. knows this.

  21. cindahazlewood, on March 7, 2016 at 12:13 pm said:

    Thank you for the latest news on the rescission. So appreciate any help on the subject! We have been debating to even bother due to the three year statute they would use against us on a foreclosed home in Texas, 2003…..New Century Mortgage OCWEN go figure? What happens when OCWEN goes bankrupt like some of these others to our cases?

  23. Sheri Daniel, on March 7, 2016 at 10:18 am said:

    Does anyone have a like to the opinion in Orcilla v. Big Sur? Would like to read the full opinion…..thank you.

Contribute to the discussion!

%d bloggers like this: