TILA RESCISSION: Who Pays the Money?

The menu of items that are due to the borrower as a condition precedent to making a claim for repayment is expansive and frankly in many cases is equivalent or nearly equivalent to the total amount of the principal claimed as loan repayment. 

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While everyone is resisting the idea of enforcing rescission, some are asking the right questions. Here is the answer.


The rescission is effective on the date of mailing. The lender must comply within 20 days from date of notification. Compliance means (1) return of cancelled note (2) release of the encumbrance on record in tech county records and (3) return of all money paid by the borrower, directly or indirectly with certain minor exceptions.


The answer to the question of how much is due is that there needs to be an accounting because the statute 15 USC §1635 requires the return of all money paid by the “borrower”, directly or indirectly.


The fact that the fee or compensation or “profit” was not disclosed to the borrower does not remove it from the list of the charges paid by or on behalf of the borrower nor the liability to pay it to the borrower once rescission is effective (i.e., upon notice — mailing).


This leads to some interesting issues that will need to be dragged out of the “lender”, including all the other “lenders” going back to the original transaction. Most of the money received as compensation by third parties was not disclosed to the borrower, hence the need for an accounting. Many of the charges were slipped in to the loan without the borrower’s knowledge or consent. This brings in possible violations of the FDCPA, the FTCA and the “little FTC” acts passed by individual states.


The menu of items that are due to the borrower as a condition precedent to making a claim for repayment is expansive and frankly in many cases is equivalent or nearly equivalent to the total amount of the principal claimed as loan repayment. 


And that in turn brings up the most interesting question of all: who is liable to return those fees, compensation and finance charges? You can be sure that once the accounting is ordered by a court there will be scrambling amongst the players in the “Securitization” market. The whole point of masking their scheme was to avoid liability for this sort of thing. Hence the obfuscation of the actual creditor or lender. And this is one of many break points where the securitization players will start sniping at each other rather than the borrower.


Nobody wants to hand all that money that was “earned” through the hard work of chicanery. And nobody wants to assert that they are the actual creditor since that would be an admission against interest that they had been misrepresenting the true creditor all along. And it would be waiving the 5th Amendment right against self incrimination for criminal charges.


In any event, here are the REG Z rules on what constitutes a finance charge, which by the way, means that they should ALL have been been disclosed without exception.

§226.4   Finance charge.

(a) Definition. The finance charge is the cost of consumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction.

(1) Charges by third parties. The finance charge includes fees and amounts charged by someone other than the creditor, unless otherwise excluded under this section, if the creditor:

(i) Requires the use of a third party as a condition of or an incident to the extension of credit, even if the consumer can choose the third party; or

(ii) Retains a portion of the third-party charge, to the extent of the portion retained.

(2) Special rule; closing agent charges. Fees charged by a third party that conducts the loan closing (such as a settlement agent, attorney, or escrow or title company) are finance charges only if the creditor—

(i) Requires the particular services for which the consumer is charged;

(ii) Requires the imposition of the charge; or

(iii) Retains a portion of the third-party charge, to the extent of the portion retained.

(3) Special rule; mortgage broker fees. Fees charged by a mortgage broker (including fees paid by the consumer directly to the broker or to the creditor for delivery to the broker) are finance charges even if the creditor does not require the consumer to use a mortgage broker and even if the creditor does not retain any portion of the charge.

(b) Examples of finance charges. The finance charge includes the following types of charges, except for charges specifically excluded by paragraphs (c) through (e) of this section:

(1) Interest, time price differential, and any amount payable under an add-on or discount system of additional charges.

(2) Service, transaction, activity, and carrying charges, including any charge imposed on a checking or other transaction account to the extent that the charge exceeds the charge for a similar account without a credit feature.

(3) Points, loan fees, assumption fees, finder’s fees, and similar charges.

(4) Appraisal, investigation, and credit report fees.

(5) Premiums or other charges for any guarantee or insurance protecting the creditor against the consumer’s default or other credit loss.

(6) Charges imposed on a creditor by another person for purchasing or accepting a consumer’s obligation, if the consumer is required to pay the charges in cash, as an addition to the obligation, or as a deduction from the proceeds of the obligation.

(7) Premiums or other charges for credit life, accident, health, or loss-of-income insurance, written in connection with a credit transaction.

(8) Premiums or other charges for insurance against loss of or damage to property, or against liability arising out of the ownership or use of property, written in connection with a credit transaction.

(9) Discounts for the purpose of inducing payment by a means other than the use of credit.

(10) Charges or premiums paid for debt cancellation or debt suspension coverage written in connection with a credit transaction, whether or not the coverage is insurance under applicable law.

8 Responses

  1. Has anyone anywhere in the U.S won a TILA Rescission case since the Jesinoski ruling? Also, the bank has 20 days once the Notice is mailed and if nothing ever happens, if they do not file a lawsuit to try and vacate the Rescission or they don’t comply by unwinding the loan, where does that leave the loan? Only the CREDITOR can file the lawsuit so if the servicer files, shouldn’t that be invalid since they’re not the true creditor? Also, if the homeowner eventually files suit to enforce the rescission, isn’t there a statute of limitations which would prevent the homeowner from filing and collecting thus creating a stalemate?? The homeowner’s time is up and so is the creditor’s. Any comments/feedback?

  2. Concerned for u have case info for CA consummation case? Thanks

  3. Concerned,

    Please contact me at echomng@hotmail.com. I have identical issues regarding CW. I am in California. My case is on appeal.

  4. A few issues:
    1) in California, a ‘similar’ loan to my own was viewed to have never been consummated. Therefore the CA Supreme Court determined the loan was void but could NOT be rescinded since it had never been consummated.

    2) if the consummation issue can somehow be avoided, I have other issues with who would pay since the players have been abusing the issue of “Pretender-Lender – itis” My loan names the lender as “America’s Wholesale Lender Corporation”, a New York Corporation per the Deed of Trust, yet said corporation has never existed. The lower CA courts routinely look the other way with the claim that this was simply a Countrywide D/B/A. This was NEVER DISCLOSED in the loan documents. In fact, I have items in the closing documents where they “disclosed” that the “lender”, AWL Corp, did NONE of the loan servicing. Also in those loan disclosures was the document claiming the SERVICING RIGHTS had been PRE-SOLD to Countrywide (CW hereafter), and thus I was informed my payments would go to CW as the SERVICER, but NOT as my LENDER. Therefore, the contention of CW and then Bank of America, that the loan was a “Countrywide” loan is contradicted by those disclosures. Either the disclosures are false, or the later claim of who the ‘lender’ was is WRONG since if CW was the LENDER from the get-go, the claim in the disclosures that the ‘lender’ did NONE of its own SERVICING is at odds. So if the loan avoided the consummation issue somehow, then would Bank of America magically revert to only being the SERVICER?

    3) With the supposed securitization of the loan to a REMIC trust with BNY-Mellon as trustee, and two attempted serial, self-serving transfers to that trust that both occurred only AFTER Countrywide no longer existed, if the courts ever really start enforcing rescission, will Bank of America suddenly claim no knowledge of what Countrywide did and attempt to dump this on the purported REMIC trust? Bank of America claimed to have the right to transfer servicing of the loan after they acquired CW.

    [Remember, the supposed funding of this type of loan was via a co-mingled account at BNY-Mellon that had received funds across multiple prospectuses, and involving funds from multiple actual fund investors. Thus, no funding came from ANY PARTICULAR REMIC trust account.]

    [Self-serving assignments, and also CA assignments where the companies such as Countrywide no longer existed as of the date of the purported assignment, are both issues that have been addressed on the weekly Garfield talk show.]

  5. What aboit the idea that insurance CLAIMS are paid to “lenders”, servicers on manufactured default?

  6. Neil, in virtually all rescission cases, the home went down in value after the loan was made – so how does the bank get its money back – or is that not a problem (for the borrower) the courts will even care about? George

  7. Excellent !!!
    finance charges, fees….Yes!!!!

    Who advanced them indirectly on behalf of the borrower?

    Question? If grandpa borrows $150,000 …
    Why do they claI’m grandma owe $243,000 to payoff or refinance her mortgage?

    Uh Oh?

  8. (3) return of all money paid by the borrower, directly or indirectly with certain minor exceptions.
    Would that , on a refi , include non-cash down payment money … say you borrowed 65% of the appraised value. Obviously that increased the value of the note to the person reselling it forward.

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