Tonight! 2 Cases You Should Use Against False Claims of Securitization And Against Fake Defenses to TILA Rescission

Thursdays LIVE! Click in to the Neil Garfield Show

with Charles Marshall and Bill Paatalo

Or call in at (347) 850-1260, 6pm Eastern Thursdays

Today with Bill Paatalo we will discuss the Illinois Supreme Court case of Financial Freedom Acquisition LLC (One West Bank, N.A., Appellee) v. Standard Bank and Trust Co et al., Appellant. This case has many elements of interest to our listeners, and established the following legal points:

1. Illinois Land Trusts can be treated as consumers for purposes of the TILA rescission statute;

2. An Obligor to a TILA transaction need not be the same entity or person as the consumer-borrower, the latter of whom is the party to whom credit is extended–it is the Obligor who has and retains the right to rescind under TILA;

3. Reverse mortgages are by definition consumer credit transactions, an implication of which–to be discussed today on the Show–but not addressed in the IL Supreme Court opinion–is that institutional Defendants who sometimes escape rescission claims through claiming mortgages are not consumer credit transactions–will be barred from so escaping when the mortgage at issue is a reverse mortgage.

4. When certain issues on appeal are not part of a lower court order involving the ending of the lower court case, they may be raised and discussed, on appeal, notwithstanding being absent from the lower court order.

Financial Freedom v Standard

Also time permitting we will revisit the Cashmere Valley Bank case recently discussed on Neil’s Show. The Cashmere case describes fairly clearly the way in which securitization is intended to work in theory.

The Cashmere case must be read in the context of knowledge that (1) the written instruments used in securitization of residential mortgages did not follow the theory and that (2) the actual practices and actions undertaken by the banks did not follow either the theory behind securitization nor the documents or what the documents implied. If the banks had followed the theory, which was perfectly legal and of sound business sense, there would have been modifications and workouts rather than foreclosures and there would have been good loans that didn’t bite people in the arse after they signed.

Cashmere-v-Dept-of-Revenue

Note from Neil: AND BEAR IN MIND: Lending does not occur in a caveat emptor world (Let the buyer beware). Federal law says just the opposite. It is the lender who must beware. Lots (most) people treat the borrowers as though they were the culprits, their eyes were too big, their judgment too poor. Federal law Truth in Lending Act) puts the burden of affordability and viability squarely on the back of the lender, who knows far more about the loan the the context of the loan than the borrower or anyone else.

I would like to see more people asserting assumption of risk or something like that in a court of equity in which the foreclosure is pending. This is not a case where nobody knew the market was going to collapse. All the banks knew it and bet on it.

Assumption of risk is a doctrine that is ordinarily applied in tort actions. But the concept of it is applicable to these loans. The banks knew perfectly well that most of the loans would fail in some respect and frankly didn’t care because they were not lending any money. Yet they were the ones underwriting the loans.

Those facts should have been disclosed and in the latter case are clearly required disclosures to prevent the loan from being dubbed a predatory table funded loan.

The fact that some actions under the statute for monetary relief are barred by applicable statute of limitations should not prevent the borrower from raising these gross violations as defenses in a court of equity where the claimant has unclean hands. Had these malevolent actions not taken place neither the borrower nor the investors would have suffered the catastrophic injuries that overcame everyone except the banks.

2 Responses

  1. IMHO- what the Illinois Supreme Court is saying is that if a “person” (either real of legal fiction) has an interest in the real subject property, they may have a right under TILA to dispose of the agreement by way of a TILA rescission if they had not been served the appropriate TILA/RESPA loan and mortgage related documents at the time of signing by a “person” taking our a consumer credit agreement (whether or not exclusively authorized on behalf of all interested parties), to give these other person a legal “heads up” that their interest in the real property may become subject to a lien of the alleged loan originator in such an agreement…

Leave a Reply

%d bloggers like this: