TILA RESCISSION: The Bottom Line for Now

Probably the main fallacy of the people who say that TILA Rescission is not possible or viable is that they project the outcome of a lawsuit to vacate rescission. Based upon their conjecture, they assume that Rescission is no more than a technicality. Congress, and SCOTUS beg to differ. It was enacted into law 50 years ago in an effort to prevent unscrupulous banks from screwing consumer borrowers.

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I keep getting emails from non lawyers who have a “legal opinion” that not only differs from mine, but also the opinion of hundreds of lawyers who represent the banks and servicers. They say that because disclosures were probably made that rescission is nothing more than a gimmick that will never succeed and they point to the many case decisions in which courts have ruled erroneously in favor of the banks despite a rescission that eliminated the subject matter jurisdiction of the court, since the loan contract, note and mortgage no longer exist. The debt, however, continues to exist even if it is unclear as to the identity of the party to whom it is owed.

First the courts ruled erroneously when they said that tender had to be made before rescission was effective. Then the courts said that no rescission could be effective without a court saying it was effective. That one put the burden on proving the figure to make proper disclosure on the homeowner. The Supreme Court of the United States, (SCOTUS — see Jesinoski v Countrywide) after thousands of decisions by trial and appellate courts, told them they were wrong. As of this date, no court has ever ruled that the rescission was vacated — the only thing that could stop it.

The lay naysayers keep harping on how wrong I am about rescission. Unfortunately many people believe what they read just because it is in writing. In my case I simply instruct the lawyers and homeowners to simply read the TILA Rescission statute and the unanimous SCOTUS decision in Jesinoski. What they will discover is that I am only repeating what they said — not making it up as some would have you believe.

To the naysayers and  all persons in doubt, i say the following:

As I have repeatedly said, in practice you are right, for the time being.
But the legal decision from SCOTUS will undoubtedly change the practice. The law is obvious and clear. SCOTUS already said that. So no interpretation is required or even permissible. SCOTUS said that too. TILA Rescission is mainly a procedural statute, not a substantive one. SCOTUS said that too. On the issue of when rescission is effective, it is upon mailing (USPS) or delivery. SCOTUS said that too. On the issue of what else a borrower needs to do to make TILA rescission effective, the answer is nothing. SCOTUS said that too.

Hence the current argument that you keep making is true “in practice” but only for the moment. SCOTUS will soon issue another scathing attack on the presumptuous courts who defied its ruling in Jesinoski. There can be no doubt that SCOTUS will rule that any “interpretation” that contradicts the following will be void, for lack of jurisdiction, because the loan contract is canceled and the note and mortgage are void:

  1. No court may change the meaning of the words of the TILA Rescission statute.
  2. Rescission is law when it is mailed or delivered.
  3. Other than delivery no action is required by the borrower. That means the loan contract is canceled and the note and mortgage are void. They do not exist by operation of law.
  4. Rescission remains effective even in the absence of a pleading filed by the borrower to enforce it.
  5. Due process is required to vacate the rescission. That means pleading standing and that proper disclosure was made, an opportunity for the borrower to respond, and then proof that the pleader has standing and that proper disclosures were made.
  6. Pleading against the rescission must be filed within 20 days or it is waived.
  7. At the end of one year both parties waive any remedies. That means the borrower can no longer enforce the duties imposed on the debt holder and the debt holder may no longer claim repayment.
  8. The only claim for repayment that exists after rescission is via the TILA Rescission statute — not the note and mortgage. This is based upon the actual debt, not the loan contract or closing documents.
  9. Any claim for repayment after rescission is predicated on full compliance with the three duties imposed by statute.
  10. A court may — upon proper notice, pleading and hearing — change the order of creditor compliance with the three duties imposed upon the debt holder. This does not mean that the court can remove any of the duties of the debt holder nor summarily ignore the rescission without issuing an order — upon proper notice, pleading and proof — that the rescission is vacated because the proper disclosures were made or for any other valid legal reason that does not change the wording of the statute.
  11. The three duties, which may not be ignored, include payment of money to the borrower, satisfaction of the lien (so that the borrower might have an opportunity to refinance), and delivery of the original canceled note.

Virtually 100% of lawyers for the banks and servicers agree with the above. They have advised their clients to file a lawsuit challenging the TILA Rescission because such a lawsuit could be easily won and would serve as a deterrent to people attempting to use TILA rescission as a defense to collection or foreclosure efforts. Yet their clients have failed to follow legal advice because they know that they have no debt holder to whom funds can be traced. If they did identify the debt holder(s) they would be showing that they played just as fast and loose with investor money as they have done with the paperwork in foreclosures.

Does this mean a free house to homeowners? Maybe. Considering how many times the loans were sold directly and indirectly, and how many times the banks received insurance, bailout and purchases from the Federal Reserve, that wouldn’t be a bad result. But the truth is that everyone knows that won’t happen unless the courts continue their decisions with blinders on.

In the end, the homeowners do owe money to the investors whose money was used too fund the loans, directly and indirectly. Whether it is secured or not may depend upon state law, but as a practical matter very few borrowers would withhold their signature from a valid mortgage and note based upon economic reality.

5 Responses

  1. When the a refused to respond to a writ of certiorari filed with the Supreme Court regarding the rescission of a loan, what’s next?

    Wells Fargo Will Not Respond To Petition Seeking Review Of TILA Claims

    (December 20, 2017, 1:36 PM EST) — WASHINGTON, D.C. — A bank on Dec. 5 waived its right to respond to a petition for writ of certiorari filed by a borrower who seeks reversal of a district court order dismissing his claims for violation of the Truth in Lending Act (TILA) as barred by res judicata (Niki-Alexander Shetty v. Wells Fargo Bank, N.A., as trustee, et al., No. 17-794, U.S. Sup., 2017 U.S. S. Ct. Briefs LEXIS 4872).
    (Petition for writ of certiorari available. Document #85-180109-014C.)


    On Oct. 3, 2008, Niki-Alexander Shetty sent a timely notice of intent to rescind and rescission pursuant to TILA, 15 U.S.C. § 1635(f), within three years of the disputed transaction. Shetty filed four lawsuits arising from a nonjudicial foreclosure of his property. In his fourth lawsuit, Shetty sued Wells Fargo in the U.S. District Court for the Central District of California, asserting violations of TILA and other claims. The District Court dismissed Shetty’s complaint based on res judicata. Shetty appealed to the Ninth Circuit U.S. Court of Appeals.

    The Ninth Circuit affirmed the dismissal, finding that the merits of Shetty’s claims were already rejected in three previous actions and barred by the doctrine of res judicata.


    On Nov. 22, Shetty filed a petition for writ of certiorari with the U.S. Supreme Court. The questions presented are: “Where the language of a federal statute is plain and clear and the words of the statute are unambiguous, whether or not judicial inquiry is complete and, if so in failing to enforce it according to its terms would be an abuse of discretion and/or judicial error?” and “Where the District Court and then the Court of Appeals refused to address or resolve material issues and issues raised on appeal of a party should this court issue a writ of mandamus directing the Court of Appeals to adjudicate the unresolved issues and issues on appeal, or explain why its adjudication was deemed unnecessary to the disposition of the case or in the alternative grant a writ of certiorari?”


    Shetty submits that the appeal involves the application of the precedents established in Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 190 L.Ed. 2d 650, 574 U.S. (2015), and Yvanova v. New Century Mortg. Corp., 62 Cal.4th 919 (2016). Both cases dealt with TILA, 15 U.S.C. §§ 1601- 1667(f), and its enabling Regulation Z codified at 12 CFR § 226 et seq. The courts held that TILA only requires that a written notice of intent to seek rescission be provided within the three-year period for exercising that right.

    Shetty argues that the primary issue on appeal was whether the District Court properly granted Wells Fargo’s motion to dismiss in a TILA rescission action involving a timely right to rescind.

    “Whether or not foreclosure by one without standing to foreclose is valid and district court erred or abused its discretion when it dismissed plaintiff’s complaint without addressing the merits of wrongful foreclosure by the defendants, cancellation and expungement of void instruments, and quiet title and requiring tender,” Shetty argues.

    Shetty argues that the District Court ignored his material issues on appeal in relation to the rescission under TILA.

    Shetty is pro se in Woodland, Calif.

  2. Judges hate undoing restitution based suits…which is the associated cause you need to go with rescission under TILA.
    If we can assist anyone in litigation call Consumer Rights Defenders at
    818.453.3585 ask for Steve

  3. I hope your analysis will be applied to cases before the court soon. Thank you for your work. You have been a guiding light for many years and I appreciate you Neil.

  4. Neil, I have a suspicion that “mavin” (from mortgageattack) may be an individual from the quatloos site. I cannot confirm this, but the way he writes and makes ad hominem stinks like it. They, most of them on that site, think that most decisions in the lower courts are the final say in matters.

    Just my 2 cents.

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