Rescission Article for the Banks

Hat tip to anonymous tipster

I have previously posted articles written by lawyers who researched and analyzed the TILA rescission statute 15 U.S.C. §1635 et seq. The bottom line is that they all have come to the same conclusions that I have after 12 years of study. The latest one brought to my attention was written probably before January, 2015, when the Jesinoski decision was published by the United States Supreme Court (SCOTUS).

The interesting thing about this article, written for in-house counsel for lenders, is that it obviously predates the Jesinoski decision (January, 2015) by SCOTUS. The thrust of the article is that borrowers must bring a lawsuit to effectuate TILA rescission within 3 years. The law of the land is that borrowers do NOT need to file suit to effectuate rescission and that to do so would be redundant because TILA Rescission is effective on delivery “by operation of law.”

Despite thousands of court decisions based upon that exact premise, the U.S. Supreme Court reached the obvious conclusion that such a view conflicts with the wording of the statute that says the rescission is effective, by operation of law, on the date of delivery or mailing. In effect SCOTUS reversed thousands of decisions by trial courts, appellate courts and even State Supreme Courts.

So the interesting point is that once you read the whole article you must read it again and exclude or remove the notion that there is some burden, rule or law that requires the homeowner to bring it to court and that the burden of going to court and applying for relief from the TILA rescission is squarely on the creditor, and must be exercised within 20 days; any ability of the “lender” to stonewall or extend the 20 day period would enable the foreclosing party to block the ability of the borrower to obtain alternative financing to pay back the principal. The session notes for the legislation make it very clear that Congress was removing all possible tools for the banks to “stonewall” the TILA rescission.

You must remember that the banks were instrumental in drafting TILA back in the 1960’s. There is no surprise here. Faced with two potential methods of policing the banks Congress chose the one advocated by the banks — a provision handing the control over the loan contract completely and entirely to the borrower. The results were draconian to be sure, but they were intended to be draconian because Congress did not want to establish a new federal agency to review all loan contracts.

So once you read the article for a second time you will come to the same conclusion that I did in 2008 — that the attorneys for the banks agree with my statements and analysis 100%. But what these attorneys don’t know is that their clients have no way of introducing a party with standing to challenge the TILA rescission. Hence the advice of filing a motion in court to establish rescission procedure is falling on deaf ears.

And the second thing these attorneys for the banks don’t understand is that TILA rescission is a risk factor to the issuance of “certificates” by an alleged trust. It’s a risk factor that was never publicized. And when the borrower is successful, by operation of law, in sending a notice of rescission it is game over — nobody except the owner of the debt can possibly bring the challenge to the TILA rescission. There MIGHT be some wiggle room as to whether the 3 year limitation is a statute of repose (barring equitable tolling) or a statute of limitations.

But either way, applying the express wording of the TILA Rescission statute, any challenge to a notice of rescission must be made by a party with legal standing within 20 days of the date on which the rescission became effective. Standing after any notice of TILA rescission cannot rely on ownership or possession of the note or mortgage. They were rendered void by sending the notice.

A claim may not be based upon void documents. There simply is no subject matter jurisdiction where, after notice of rescission has been delivered, the claims against the borrower for repayment of the debt are based upon the void (by operation of law) note and mortgage.

See Locke Lord TILARescission-Perdew


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7 Responses

  1. @ john gault

    So that you will be included, please make an e-mail contact with “Bob G.” at his posted address, and then standby for further updates:

    @ Papergate

    You’re in too.

  2. John Gault:
    It is easy to see how well self regulation has worked. It is what happens when industry writes the laws that are supposed to regulate them.
    What you say is true, and please do mention that the loans were not actually loans and were void from inception based on real law.
    In my case, I could never find out who the real lender, if any, that had my “alleged” loan was. The “Lender” never had to prove anything to the fact, in court, that they were the holder of the note or anything like that. Fraud upon the court and all of U.S. There was a price to be paid for these actions, and will be again… And… I don’t think it will be anyone but U.S.that will pay that price again the way things are still going.

  3. I just can’t emphasize enough how TILA was formulated to even out the playing field in the world of lending; its mission was to force lenders to self-regulate, mostly as to advertizing and disclosure, by prescribing a nasty penalty for false advertizing and errant figures on the Truth in Lending Regulation Z disclosure which is a part of every home loan paperwork. If you can get this, that TILA was as much for lenders (unfair practices / unfair competition as a result of misleading advertizing) just as much as it was for borrowers, maybe it will make more sense that allowing rescission by the borrower was designed to punish lender-offenders while and by offering borrowers a way out of loans wherein real loan costs weren’t properly disclosed. The borrower rescinds by notification. If the lender doesn’t like it, it must be the party to file suit and challenge the rescission. As far as I can now recall, the scope of “permissible offenses” by the lender for a borrower to rescind are limited when one relies on TILA. Also, whether or not one must cite specific TILA violations in the notice to rescind I also don’t remember. Acc to TILA, it’s illegal to advertize a rate without its corresponding a.p.r., but many lenders do it and get away with it. And that’s unfortunate because it’s the annual percentage rate which tells the tale about the loan’s true cost. Lender A can tout a rate of 4% with an unmentioned a.p.r. of 5.36%, while Lender B may have a loan at 4.5% note rate with an a.p.r. of 5.11%. THIS is one thing TILA was meant for lenders to disclose in advertizing to prevent unfair competition and hence it’s stiff penalty for non-compliance: Lender A wasn’t to get a leg- up on Lender B by non-disclosure.

  4. This is an eye-opener! How does one go about this process while in foreclosure proceedings? Can it still be done without loss of property?

    I agree with the comment by ‘sunman’. The question still remains, though-fraud is still fraud and that is a crime! Do the banks win?
    Thanks for this. I must research this and try to find relevance in my mother’s case of actual ‘fraud’. You rock, Neil!

  5. So what happens to all of us that were foreclosed on fraudulently more than three years ago? I had no knowledge or ability to do so. Theft, fraud is still theft and fraud no matter the length of time has passed. Any recourse that works?

  6. as the anonymous tipster…
    BTW – IMHO

    The borrower can always perform post TILA Rescission and after the verified lender and holder of the debt performs its 2 duties under TILA by:

    1) Providing the cash amount remaining on the verified debt
    2) Establishing a new loan with a new lender with more advantageous terms to the borrower to discharge the older verified debt
    3) By voluntarily surrendering the subject property “in-kind” as payment (with borrower stated stipulations and negotiated agreement with the original verified debt holder for the time frame and terms of such surrender)

    The advantage to the borrower of TILA Rescission vs. Foreclosure is that while both procedures may eventually lose the subject property, proceeding via TILA Rescission allows the borrower to be unscathed by the negative credit effects of foreclosure on their credit history and allows them to rebuild their life without that huge derogatory “ding”.

    For a court to decide that it does not matter which course is taken since the result of losing the subject property is the same, is 1) legal advice from the bench (anathema) and 2) a violation of the borrowers rights (unconstitutional).

  7. Thanks for the article Neil.

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