9th Circuit: Trustee is Not Debt Collector But Reverses Trial Court on Rescission

This decision could be a lot worse for the banks and servicers than it might appear. The Trustee for a valid REMIC trust that owns the debt (and doesn’t just control the paper) is clearly NOT a debt collector. But considering that no Trustee has EVER claimed to be a holder in due course and that the Trust is in fact a holographic image of an empty paper bag, they most certainly are debt collectors. The catch is you have to plead correctly and undermine the assumption that they own the debt.

But the 9th Circuit reversed the trial court on the issue of TILA rescission. As to TILA Rescission, the 9th Circuit was merely restating the obvious after the unanimous Jesinoski decision render by SCOTUS. “The Court noted that it recently held in Merritt v. Countrywide Fin. Corp., 759 F.3d 1023, 1032-33 (9th Cir. 2014), that a mortgagor need not allege the ability to repay the loan in order to state a rescission claim under TILA. However, this was the basis of the trial court’s dismissal of the TILA claim.”

Apparently restating the obvious is what is necessary to get trial courts to fall in line with the fact that rescission is effective when mailed and is legally a perfect defense to foreclosure. But trial courts keeping adding caveats that are not in the statute even after the Supreme Court made it crystal clear that trial courts had no such option. The statute is clear on its face. Trial courts have no right to re-write the statute as they think it should have been written.

The failure of the banks to contest the rescission within the 20 day window is not the fault of the homeowner. And the inability of the banks to file such an action to vacate the rescission is a problem for the banks who have nothing to lose anyway in most of the foreclosures.

As for the three year “expiration” or “statute of limitations” there is still a simple answer. Once you mail the rescission it is effective. Once you record it in the public records, the whole world knows that the mortgage or deed of trust is void. Once you mail it using US Postal Service the parties claiming through the note and mortgage or deed of trust have no further claim unless and until they either perform the three duties specified by statute or they file an action to vacate the rescission.THAT they won’t do because they are not really the owners of the debt.

So THEY have a choice — either go along with the rescission or file something in court contesting the rescission. And the fact that they can’t file anything is testimony that they are not the owners of the debt and do not have any authority to pursue the claim on behalf of the owner(s) of the debt. If that were not true they would gleefully produce the proof to establish the identity of the creditor and their authority to pursue claims on behalf of that creditor. And so far I have seen no lawsuit or even a motion that seeks to vacate the TILA rescission. Foreclosures that proceeded despite the rescission and without the ruling by the court that the rescission was void ab initio are themselves void as of the date of mailing the rescission notice.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.

see http://www.insidearm.com/news/00042303-9th-cir-holds-foreclosure-trustee-not-fdc/

9 Responses

  1. Was consummation challenged? Can I look up your case? I’ll be raising same issues.

  2. CA state court dismissed my case on rescission and violations of CHBOR, attorney stated that they failed to respond to my rescission letters within the 20 day window. The judge did not care, he said i was beyond the 3 year S.O.L, on to appeal court but CA judges want to rule in banks favour any which way they can.

  3. Randall, thank you for that. Checking on it now. 11th Circuit of Florida?

  4. James, lots of reading to do. UCC3, UCC 9, find the Cully testimony
    Then delve into bankruptcy remoteness. See you in a year.

  5. FASB 140-3
    AB 1122

  6. I am trying to find a compiled list of all of the SEC Laws that are normally broken that take place with securitized loans.

  7. Something to consider is that pursuant to 15 USC 1602(g), the only statutorily designated “creditor” with the right to contest the rescission within the 20 day deadline is ONLY – the “creditor” named in the note and deed…there are no provisions for transferring “creditor” status after the fact. This is something that will need to be litigated; so far, it has not.

  8. Servicer would be considered debt collector? How could lawyer miss this? Serviced considered dc if loan transferred in “default”. Are u affirming debt if pursuing FDCA along w rescission?

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