Livinglies's Weblog

Lavis v. Reverse Mortg. Sols., No. 18-2180, at *6 (4th Cir. July 14, 2022)  the trial court “stated that “[a] finding that RMS is entitled to tender, despite its disregard of its obligations over a period of years and its failure to take any measures to preserve its rights under the statute, would incentivize lending institutions to follow RMS’ poor example.” J.A. 2835. ”)

This decision is a perfect example of chutzpah, delusion, and legislation from the bench. The trial court was 100% correct, and the Appellate panel was 100% wrong.

Lavis v. Reverse Mortg. Sols., No. 18-2180, at *2 (4th Cir. July 14, 2022) (“We begin with an overview of TILA. Congress passed TILA “to help consumers ‘avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing.'” Jesinoski v. Countrywide Home Loans, Inc., 574 U.S. 259, 261 (2015) (quoting 15 U.S.C. § 1601(a)). In furtherance of this goal, TILA requires lenders to make certain disclosures to consumer borrowers. 15 U.S.C. § 1601(a); see also Gilbert v. Residential Funding LLC, 678 F.3d 271, 276 (4th Cir. 2012). One of the required disclosures is the borrower’s right to rescind a consumer credit transaction. 15 U.S.C. § 1635(a).”)

I agree that is the purpose, the intent, and the policy established by Congress, and signed into law by the President of the United States in the 1960s.  The question of whether or not a homeowner was required to do anything other than give notice of their intent to rescind has been litigated up to and including SCOTUS. To be even more specific, the question of whether or not the homeowner was required to tender any money to any claimant before TILA rescission was effective has also been litigated up to and including SCOTUS.  In all such cases, the decision was that both the intent of the statute and its content established the nullification of the note and mortgage “by operation of law.”

Judge Scalia penned the Jesinoski decision, and he was clearly bristling against the point that any other “interpretation” was even allowed, much less warranted.

Like many pro-business decisions, this decision is based on a policy argument that has already been resolved by the legislative branch.  No court has the right to interpret a statute out of existence. But that is exactly what the Fourth Circuit has done in this case.

Congress made a choice between establishing a gigantic new federal agency to monitor the details of every mortgage loan transaction or putting teeth in the statute requiring disclosures such that the penalty for violation would be so great that no actor in the lending marketplace would cross the line.  Congress decided on the second choice. This decision from the fourth circuit expressly overrules the statute and various decisions made by various courts, including the United States Supreme Court.

Yet the decision from the Fourth Circuit should come as no surprise. State and federal courts have been ignoring the obvious intent and the obvious, unambiguous provisions of the statute.  The courts routinely ignored and avoided the arguments of any homeowner who made the allegation that they had rescinded within the three-year time period set forth in the statute. The statute said there was no lien and no note. The statute said that the mortgage and note were replaced by the statutory scheme for repayment.

Hundreds of thousands of foreclosures have been conducted using nonexistent mortgages and notes as the foundation of the claim. The statute says that both the mortgages and the notes were eliminated by operation of law or merely upon the sending of the homeowner’s notice of the intent to rescind the transaction. Without that, there is no mechanism for enforcement of the disclosure requirements contained in the truth in lending act.

Boiling this down to the essentials: The Federal Statute says that the mortgage lien does not exist. The state statute says that foreclosure is the enforcement of existing mortgage liens. The foreclosure of a mortgage lien that has been rendered void by operation of law is logically and legally void.  This is not a question of clouded title. There is no question because there is no title. All such foreclosures are void according to both state and federal law.

Legally, the people who owned those properties possess the right to eject (evict) anyone from using those properties without their permission.  This strategy has been successfully used multiple times. The officers of recording offices in the counties in which deeds and mortgages are recorded are all aware of the problem — many of whom have stated openly that there is no clear title anymore.

And many if not most consumers know it. This accounts for much of the distrust of government and government institutions. Recording offices are intended to provide certainty in the marketplace. They can’t do that when courts refuse to comply with clear, unambiguous law.

Without allowing the statute to be given effect in courts, the disclosure requirements of the TILA statutes and the rescission enforcement mechanism for compliance were rendered not just moot but nonexistent. And once again, Congress, led by so-called conservatives, is doing nothing to reassert its authority over the matter. And so, despite the law being on the books for over 60 years, it will not be applied, thus clearing the way for thieves and grifters to dominate the lending marketplace.

The 4th Circuit says we cannot do things that way because the penalty is too great. They are wrong on many levels.

First, they don’t know if there is actually a penalty — i.e., loss to anyone. They had nothing in front of them that corroborated the assumption (or presumption) that RMS had suffered a loss. If there was no loss, then there was no penalty. Since virtually all transactions that are labeled as “loans” are actually paid in full several times over by the creation, issuance, sale, and trading of unregulated securities, the existence of an unpaid loan account receivable that is maintained on the books of a creditor as the creditor’s asset is at best questionable. Since no such creditor in any foreclosure action has ever shown that it maintained such a loan account, we can safely assume that they don’t have it, they don’t own it, and therefore could not have suffered any loss in that account.

Second, even if there was a penalty suffered by violators of the statute, that was the point. It was either that or establish a grandiose nitpicking federal agency that would check every detail of every mortgage loan transaction. It was one or the other. If there was no enforcement mechanism at all, which is what the courts seem to be saying, then there was no point in passing the Federal Truth in Lending Act or any of its complementary successors.

But the court was correct in that the rescission statute does not automatically void the underlying obligation. It merely replaces the contractual mechanism for collection with a statutory mechanism.  However, the homeowner was nonetheless correct that the obligation no longer existed. That is because the right of the claimant to collect on the underlying obligation is barred by the statute of limitations on TILA claims. Since the claimant neither complied with the statute nor applied for relief from rescission, their claim for recovery of the underlying obligation under the provisions of the statute expired.

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Neil F Garfield, MBA, JD, 75, is a Florida licensed trial and appellate attorney since 1977. He has received multiple academic and achievement awards in business, accounting and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. THE COMMENTS ON THIS BLOG AND ELSEWHERE ARE BASED ON THE ABILITY OF A HOMEOWNER TO WIN THE CASE NOT MERELY SETTLE IT. OTHER LAWYERS HAVE STRATEGIES DIRECTED AT SETTLEMENT OR MODIFICATION. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.

But challenging the “servicers” and other claimants before they seek enforcement can delay action by them for as much as 12 years or more. In addition, although currently rare, it can also result in your homestead being free and clear of any mortgage lien that you contested. (No Guarantee).

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