Update and Review of TILA Rescission 15 U.S.C. §1635 Beach v Great Western (FLA) and Beach v Ocwen Federal

Having received numerous inquiries regarding Rescission under the Federal Truth in Lending Act, I’ve decided to provide a short guide. in this article I will not examine types of loans that are subject to rescission. The purpose of the article is to explain how and when TILA rescission can be used.


  1. Under 15 U.S.C. § 1635 certain Borrowers have a right to cancel the loan transaction, rescind the note, the mortgage, and all payments made under the loan contract. Upon sending the notice of rescission, the rescission becomes effective by operation of law. That means that title has changed and nobody can reverse it except by a new agreement between the parties or a court order resulting from a timely action brought by the Creditor who no longer relies on the void note and the void mortgage to assert standing, and who contests the underlying assumption that the disclosures at the loan closing were inadequate.

  2. To my knowledge no such action has ever been brought for one simple reason, to wit: a creditor who files such an action would need to allege that “Plaintiff/Petitioner is the owner of the debt and has paid value for the debt.” And “Plaintiff/Petitioner has suffered financial injury through nonpayment of the debt by the borrower.” Based upon my investigations and analysis, no such creditor exists and no such action could ever have been filed which is why no such action has ever been filed.

  3. In the Jesinoski v Countrywide case the unanimous Supreme Court of the United States declared that the rescission was effective upon mailing. The effect is cancellation of loan contract and rescission of the note, mortgage (or deed of  Trust) and like all rescissions, return of all monies paid by the borrower.

  4. The statute replaces the loan contract with statutory obligations.

  5. The borrower is still required to repay the debt. But the Creditor has three statutory duties that must be satisfied before the Creditor can make a claim for the debt. The claim to the debt arises under the Federal Truth in Lending Statute. But it is barred by the statute of limitations in which a claim for damages arising out of the Truth in Lending Act must be brought within one year.

  6. The borrower is similarly barred from pressing a claim for statutory damages after 1 year. If the borrower has sent a notice of rescission and then fails to file suit for return of all payments made within the statutory period, then that claim is barred by the statute of limitations. However, the effect of the rescission remains, to wit: the mortgage and note are canceled by operation of law. This means that the borrower now has both fee simple absolute title to his property without the encumbrance and is not subject to the terms and conditions of the promissory note.

  7. An action by the homeowner for damages or injunctive relief based upon a valid notice of rescission having been sent within the three-year period of expiration set forth in the statute is not barred by the TILA statute of limitations because it does not arise from any claim set forth in the statue.

    It is a relatively simple claim based upon fee simple title which has been slandered by a party who is asserting rights pursuant to a note and mortgage that no longer exist. The statute of limitations on such claims are based on state statutes. but there is no statute of limitations on ownership of property. Since the rescission was effective, title changed by operation of law. therefore there are no limitations on fee simple ownership and the right to peaceful enjoyment of the premises.

    A petition to cancel instruments like the mortgage and note would be based not on rights under TILA but from arising from state statutes and common law — an event occurred in which the mortgage was cancelled and rendered void; it is still technically in the title record even though it is now void. Thus the court should cancel and perhaps even expunge the the instrument from the title record.

  8. The only possible exception to this could be the statute of limitations on adverse possession. If any party has taken over possession of part or all of the property and held it for the statutory period while claiming title then after the expiration of the adverse possession limitation statute, that party might indeed have a claim to title. But without physical adverse possession that has all the elements, adverse possession does not arise.

  9. In addition, the right to statutory damages set forth in the rescission statute may still be pursued in an affirmative defense or counterclaim for recoupment. recoupment is not considered to be a claim so much as an offset. (See Beach case). It is limited to the amount demanded by the party claiming the right to foreclosure.

  10. But invocation of the claim in recoupment might be inconsistent with a defense arising from a homeowners fee simple title. Assuming that the Creditor has not taken any action to comply with the three statutory duties, and that more than one year has expired since the sending of the notice of rescission, the Creditor no longer has a claim for the debt  — at least not one that isn’t barred by the TILA statute of limitations. alternative pleading might allow both.

  11. The two controlling cases from the Supreme Court of the United States are Jesinoski and Beach.

Note that in the Beach case the claimant was switched. This is another indication of how the banks shift around the claim to be sure that they get maximum benefit from foreclosure or minimize the effect of a negative decision. It is emblematic of the fact that there is no creditor who owns the debt by reason of having paid for it.


9 Responses

  1. Finally

  2. Brian Tracey – great article. And, I have friend involved with Suntrust — a nightmare.

  3. UNRELATED , but a good article..


  4. I filled a Notice of Rescission after reading your Post in 2015. I was not entitled but they wanted a year to foreclosure. I’m still fighting to get home back was in Court Friday. Looked up Jesinoski and the Opinion said there were changes after the ruling made by the CFPB. NO OPERATION OF LAW APPEARED. PLEASE CHECK THIS OUT AND REPLY IN A POST VERY IMPORTANT.

  5. Don’t overlook this one either inthe context of a credit card debt
    Barrett v. JP Morgan Chase Bank N.A., 445 F.3d 874, 876 (6th Cir. 2006, Rehearing and Rehearing en Banc Denied)

  6. Ian… So, all of us that lost our homes, (and a lot more) have a legal path to justice?
    Please do tell. All of the statutes of limitations, and my understanding , says fraud pays.
    There are 35 million foreclosures and those associated with those losses would love a class action suit or other path that would make them whole again…. And THAT would bankrupt the fraudsters.
    It has appeared to me that banks/wall street can steal and there are no consequences. Have you experienced other?

  7. Sunman- there is no statute of limitations for fraud. None.

  8. Thanks for this article Neil!

  9. And if past the stated right to rescind?
    If so, how does that eliminate or exact justice for the fraud perpetrated on U.S.?

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