Finally a Judge Asks the right Questions about TILA Rescission and Invites Briefs

The time may now be coming where the court systems and Federal and State legislatures must come to terms with two inescapable legal facts:

(1) That borrowers who sent TILA rescission notices — and particularly those who sent them within 3 years of consummation of the mortgage — still own the land that was deemed “lost” in foreclosure.

(2) That such borrowers possess valid claims to recover title. possession and money damages. 

It was bound to happen and now it has. In one case, a judge is asking the following questions and inviting briefs on the following subjects:

  1. What is the effect of the failure to return consideration upon an attempt to exercise the right of TILA Rescission?  
  2. What is the effect on rescission if the borrower continues to pay? 
  3. Does TILA pertain to refinancing?

See HOW TO FRAME TILA RESCISSION IN YOUR PLEADINGS

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The Tila Rescission Statute 15 USC §1635 requires, as a condition precedent to demanding payment of the borrower’s debt, that the parties who received money from the borrower arising out of the loan agreement return all such money to the borrower first before anyone can make a claim for repayment. This is why bank lawyers have long advised their arrogant bank clients that failure to follow the rules set forth in the TILA Rescission statute could not only result in loss of enforcement of the mortgage which is automatic, but also loss of the right to enforce the debt.
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The investment houses, who were the real parties in interest behind the origination or acquisition of residential loans, have long been bullying their way through the TILA Rescission statute since it undermines the value of the derivative infrastructure built and sold over every loan. Thus far they have succeeded in getting virtually all courts. except the Supreme Court of the United States, to go along with the bank narrative regarding 15 USC §1635. In plain terms they got what they wanted: judges ignored TILA rescission and entered orders as though it didn’t exist. But it did exist by operation of law and the US SUpreme Court said so.
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Failure to return consideration bars collection of the debt. And there are two other things that the “lenders” are required to do as conditions precedent (return cancelled original note, which we all know they don’t have, and file a satisfaction and release of the mortgage in the county records so that the world will know that rescission has occurred. This is the replacement for cancellation of the loan agreement. The new “agreement” is set forth by the statute.
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The judge doesn’t ask “effect on what?” The mortgage in all events is void, by operation of law. Neither the borrower nor the  creditor can effectively take any out of court action that changes that.
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There is no unilateral or bilateral action that can be taken by either or both parties to change something that is effective “by operation of law.” The only exception MIGHT be (and probably WILL be) that rescissions sent outside the 3 year period of expiration could conceivably be ignored, but if they are recorded in county records only a party with legal standing could have the rescission notice removed from the chain of title with a court order.
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And the problem for the banks is that they have no party who could be defined as a creditor — a party who had paid value for the debt and owns the debt, to wit: a party to whom the debt is currently owed. Another way of saying it, if you were listening to to the forensic auditor seminar last Friday, is that only a party who was carrying the borrower’s debt as an asset on its balance sheet as a loan receivable could claim the status of owner of the debt i.e., creditor.
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The genius of the way securitization has been practiced with respect to residential loans, is that there is nobody who takes a loss from nonpayment of any debt. Nobody is entitled to actually receives the borrower’s payments or the proceeds from a foreclosure or other sale. The money that is received therefore, is revenue upon which they pay no tax because they report it as repayment of debt rather than income. This explains why you can’t get a straight answer on “who owns my debt.” The answer is nobody. But that answer is counter intuitive which is another way of saying nobody wants to actually believe that.
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The issue is whether the borrower’s should forfeit their homes on a scheme that was based upon receipt of revenue rather than repayment of debt?
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TILA Rescission highlights this problem because it cuts down the veil or curtain behind which the banks hide. There is no more loan agreement and there is no more note or mortgage from which all sorts of legal presumptions can arise. While I would have thought this day would come sooner we finally have our first judge asking the right questions. Thus the hard “talk” begins.
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  • What is worrisome is the Judge’s use of the word “attempt.” He phrases the questions in the context of an “attempt at rescission” rather than the event of rescission. Either the rescission was sent or it wasn’t. In Jesinoski v Countrywide that is the end of the issue. If it was sent then TILA rescission is effective by operation of law. There is no attempt which insinuates that TILA rescission is a claim rather than an action with legal consequence. There is no attempt and there is no claim.
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Paying on the mortgage is only to protect the borrower’s credit rating and prevent action to foreclose on the mortgage that does not exist but will obviously be treated as existing in the current judicial climate. It does nothing to effect what has already occurred by operation of law. The loan agreement is cancelled and with it the note and mortgage became void. The only consequence, rather than effect, is such payments increase the amount of money due back from the parties to whom the money was given or from  parties who originated the loan agreement under TILA or unjust enrichment. No person, whether borrower or lender, can “waive” a legal event that occurred by operation of law any more than they can ignore a court order without being in contempt of court.
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TILA does pertain to refinancing. I don’t know what is meant by instant “circumstances.” Many “modifications” are actually refinancing. The creditor has changed and remains concealed. The entire purpose of the banks in modification is to validate what is otherwise a void or unenforceable loan agreement using undue duress or even extortion to get the borrower to sign away rights.

13 Responses

  1. Some here may want to check this out, if you haven’t already…”fraudulent concealment doctrine”

  2. ANON is right folks. Go back to the very beginning, it is very telling. Define each word in your deed and note, look at the transfers, substitutions, etc…check everything on the documents. And for sure, “do not believe” everything you see, verify and confirm. Daunting, but necessary. Personally, I have found nothing in my documents that is consistent. Lies, lies and more lies…breaches of representations, fraud, perjury, conversion (ties to the sale of your notes to the trust), …theft by deception, in a nutshell. They do not have legal title to your home, no rights to enforce anything and sell your property, for “alleged” defaults. Non-judicial folks, it starts with the magistrate…the state courts have no jurisdiction over the designated REMIC Trust.

  3. OH — and have multiple qualifying refinance commitments over many years to pay — that does not matter to court — they don’t care. Multiple times DENIED due solely to “TILE ISSUES.” Despite qualification to refi. TILE ISSUES — are you kidding me??

    Somebody answer – why is trustee NEVER represented???

    Neil???

  4. Look – my judge would not even allow TILA rescission claim – and we were timely – – and I am not in default. Not in foreclosure. Not ever.in default. NOT in bankruptcy , not delinquent, not in default, — and have all proof. And timely for rescission — judge simply said NO — will not allow it. He just doesn’t “see it.” Ok — so keep paying – until the judge “sees it.” He will never “see it.” Because the government won’t allow the judge to “see it.”

    People – you have go back to PRIOR transactions. You don’t do that — will get nowhere. GO BACK. I just do not see this going on here. No one goes back. No one. Mind boggling why this is not done. You cannot rely upon last transaction – not for rescission – not for anything. You don’t go BACK – you will get nowhere. I think Neil knows this – and can do it.

    Thanks.

  5. UCC 609 does basically the same – you can request Adequate Assurance at any time – and have your contract repudiated if banks do not respond

    § 2-609. Right to Adequate Assurance of Performance.

    (1) A contract for sale imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.

    (4) After receipt of a justified demand failure to provide within a reasonable time not exceeding thirty days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.

    § 2-608. Revocation of Acceptance in Whole or in Part. up

    § 2-610. Anticipatory Repudiation.

  6. This what my modification agreement looks like:

    Modification Language: BY EXECUTING THIS MODIFICATION, YOU FOREVER IRREVOCABLY WAIVE AND RELINQUISH ANY CLAIMS, ACTIONS OR CAUSES OF ACTION, STATUTE OF LIMITATIONS OR OTHER DEFENSES, COUNTERCLAIMS OR SET-OFF’S OF ANY KIND WHICH EXIST AS OF THE DATE OF THIS MODIFICATION, WHETHER KNOWN OR UNKNOWN, WHICH YOU MAY NOW OR HEREINAFTER ASSERT IN CONNECTION WITH THE MAKING, CLOSING, ADMINISTRATION, COLLECTION OF THE ENFORCEMENT BY OCWEN OF THE LOAN DOCUMENTS, THIS MODIFICATION OR ANY OTHER RELATED AGREEMENTS.

    BY EXECUTING THIS MODIFICATION, YOU IRREVOCABLY WAIVE ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OF OR RELATING TO THIS MODIFICATION AND ANY RELATED AGREEMENTS OR DOCUMENTS OR TRANSACTIONS CONTEMPLATED IN THIS MODIFICATION.

    Unconscionable….

  7. I filed a TILA on a proposed modification agreement, new debt…in my opinion. The judge threw it out. I am going back at it, it was noticed
    1 & 1/2 years after the alleged modification and I think it will fly this time.

  8. Absolutely correct Neil — Quote — “it was written was to give a clear opportunity to the borrower to seek another lender and another loan to pay off the old one without having the old one encumbering his home.” But the OLD loan is also the PRIOR loan — not just by rescission, but BEFORE the last transaction, and before RESCISSION. Layered debt.

    Breach of Contract provides rescission too– and believe in most states, and federal court, there is sufficient tolling after discovery of fraud.

    If you don’t know the “funder” – you don’t know if anything was funded. It was likely NOT funded except for cash out.

    Does anyone really think that the security (underwriter) investors were stupid enough to fund anything? They just restructured “debt.” And then sold the “package” to the beneficial security investors who did not read the Prospectus. Where did the security underwriter get the debt from? From GSEs – who they serviced for. Then they sold the top tranches BACK to the GSEs.

    This is the true reason the whole scheme collapsed. Too complex for judges. Government bailed out — and let the people hold the bag.

  9. You can rail all you want about the the policy behind the TILA Rescission statute but you can’t change it by opinion. If you really did the research you would find that the whole point of the way it was written was to give a clear opportunity to the borrower to seek another lender and another loan to pay off the old one without having the old one encumbering his home. The cancellation of the note is there because it removes the note from the credit history. Hence the parties are restored to their position before the deal was done. In short, you are wrong — even the perception of failure to disclose is sufficient for rescission to be effective by operation of law. Tell your friends at the banks that comments like yours are having diminished effect.

  10. Total nonsense!

    Anyone legally literate knows, he equitable goal of rescission under TILA is to restore the parties to the “status quo ante.” A TILA DISCLOSURE VIOLATION BY ITSELF DOES NOT ENTITLE A BORROWER TO RESCISSION. To obtain rescission, the borrower must show he/she will be able to tender the borrowed funds back to the lender should the court order rescission.

    Seeking relief based on nothing more than a ipse dixit allegation that one unilaterally rescinded the subject refinancing transaction pursuant to TILA. This puts the cart before the horse and evidences a fundamental misunderstanding of the operative statutes and the interrelation thereof. In essence, the right to simply walk away with a windfall of [the outstanding balance of the loan] without any further obligation. This construction not only offends traditional notions of equity, but misinterprets the procedural requirements of § 1635(b).

  11. Neil, you mention Tila a lot, even some ten years after the mortgage meltdown. That’s great for those did file TILA Rescission within the three years SOL. Speak as though we can still file a Tila Rescission after the three year SOL window has past.

    Can you elaborate on that? Can we file a Tila Rescission, say, today on a LBM/Wamu loan that is ripe with unconscionable fraud.

    Best

  12. What judge? What court? When?

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