Rescission enforcement actions are the next really big thing

For more information on rescission, our rescission package or any other topic, please call 954-495-9867 nor 520-405-1688.
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Rescission enforcement actions are the next really big thing. Its effect is to immediately unencumber the property from any claims of lien or mortgage and any claim on the note which is void and must be returned marked “cancelled”. If the parties collecting or enforcing the loans really have a right to do so they may demonstrate that in court by filing a lawsuit to set aside the rescission based upon any factual grounds they wish to raise, applying the rules of the TILA statutory scheme for rescission. But if they don’t do that within 20 days they waive their defenses. AND if they don’t comply with TILA by returning the canceled note, filing a satisfaction of mortgage and returning all money paid by borrower, then they are barred from making even an unsecured claim for “damages.”
The action to enforce rescission would essentially consist of an allegation that the notice was sent, it has been more than 20 days since the notice was sent, and therefore the parties claiming to be creditors owe (1) return of canceled note, (2) filing a satisfaction of mortgage and (3) return of all money paid by borrower since the inception of the alleged loan contract. We will refuse to get into an argument about whether the rescission should have been sent. THAT is something that the parties would have had to allege in a lawsuit against the borrower(s) to set the rescission aside.

According to TILA, Reg Z and the US Supreme Court (Jesinowski decision) the rescission IS effective (by operation of law) the moment it is put in US Mail. The borrower does not have to be right to send it. THAT issue is left to the banks and servicers to allege in a lawsuit to vacate the rescission. And they must do so within 20 days. All issues that are confusing everyone — statute of limitations, purchase money first mortgage, etc. are questions of fact that need to be raised by the other side. They cannot do so after 20 days. We would move to strike those defenses when raised in our lawsuit to enforce rescission.

There are dozens of lawyers across the country that agree with my interpretation of the TILA rescission statutes and who are filing these rescission enforcement actions. In some cases, Ocwen has agreed that the rescission is effective and even agreed that the original payee was not the lender. That is an interesting juxtaposition of theories. Because if there was no funding by the payee on the note (“lender”) then there is no loan contract. If there is no loan contract, there is nothing to rescind. But the rescission under TILA might still apply as to the note and mortgage and the right to obtain disgorgement of money paid by borrower might be partially blocked by the standard statute of limitations governing contract disputes or the statute regarding tort actions.

It sounds weird, I know. But the fact is that Congress specifically decided that the act of the borrower in sending a notice of rescission cancels the loan and Reg Z (Federal Reserve) says that by operation of law that means the note and mortgage become void as of the date of mailing of the notice of rescission. Void means void, not voidable. It means that the the note and mortgage no longer exist and that is final. So even if the “lender” tries to bring a lawsuit to set aside the rescission they would need to establish standing presumably without the note and mortgage which can no longer be used because they are void. Standing could only be established by alleging that the pleading party is suffering actual damages — which is not really possible if they never paid anything for the loan and even if they did, is also not possible since they still could bring a claim against the borrower (unsecured) for the money that is due as the balance of the loan.

Congress specifically provided this method so that the old “lender” could not block the ability of the borrower to get another loan from a different (and presumably real) lender which would have first priority and would enable the borrower to either pay the old lender or not (if the old lender had not complied with TILA as to its duties in the event of rescission).

It was the specific intent to prevent the old “lender” from stonewalling and thus trap the borrower into a deal he or she didn’t want. And THAT is why the rule is that the note and mortgage are VOID by operation of law regardless of whether or not the “lender” returns the cancels note, satisfies the mortgage or pays the money to disgorge all funds paid by borrower starting with the origination fees, cost of closing and all interest and principal paid up to the date of the rescission.

NOTE: THE RESCISSION IS PROBABLY VOID IF THERE IS NO LOAN CONTRACT LEFT IN EXISTENCE WHEN THE NOTICE IS SENT. IF THERE IS NO CONTRACT THEN THERE IS NOTHING TO RESCIND. THUS I CONCLUDE THAT IF THE SALE HAS OCCURRED, THE NOTE AND MORTGAGE DON’T EXIST ANYMORE AND RESCISSION MIGHT NOT BE POSSIBLE. IF JUDGMENT HAS BEEN ENTERED, THE ISSUE IS LESS CLEAR BECAUSE THE RIGHT TO REDEEM STILL EXISTS.

NOTE: THIS IS NOT A LEGAL OPINION ON ANY SPECIFIC CASE. READERS SHOULD CONSULT WITH A QUALIFIED ATTORNEY WHO IS LICENSED IN THEIR JURISDICTION.

Why the Big Guns Are Coming Out on Rescission

For further information please call 954-495-9867 or 520-405-1688
NOTE: The rescission package we offer provides information on the specific loan of the borrower, whether rescission is an option, to whom the rescission letter should be addressed, whether your prior letter of rescission is effective, and how to prepare for further litigation regarding the effective date of rescission and the consequence of having rescinded. If you are unconvinced that this package will do you any good then don’t do it. We won’t try to convince you. We don’t offer guarantees or warranties. But we do believe in what we are doing. And note that this article (or anything else on this blog) is no substitute for advice from an attorney who is licensed in the jurisdiction in which your property is located.
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Confusion still reigns on the issue of TILA rescission. You go to a lawyer about it and he says no, the loan is too old (statute of limitations) or you don’t qualify (purchase money mortgage) or some other reason. And then the discussion turns to equitable tolling and whether the loan was really a purchase money mortgage and so the seeds of doubt are planted and take root without the banks lifting a finger. That is what they want.
The lawyers and judges and pundits were all wrong on TILA rescission. Before now, they were all saying that the rescission couldn’t be effective without the borrower filing a lawsuit and/or without tendering money or property. It all comes down to the same thing: when is rescission effective? And the answer is plainly stated by the TILA statutes, by the Federal Reserve in Reg Z and reaffirmed by a unanimous Supreme Court in Jesinowski. Rescission is effective upon mailing of the notice of cancellation of the loan deal. There is nothing that is contingent about that. You don’t need to file a lawsuit (in fact that is not the statutory procedure), you don’t need to tender anything (it is the banks and servicers who must pay borrowers for every penny they paid under the deal), and it is still effective in all events without any contingency regardless of whether the statute of limitations has run or the loan was a purchase money mortgage or anything else.
For corroboration of this, simply refer to the many arguments that banks and servicers offered when non-judicial foreclosure was invoked in those states that allow it. There, it was the banks who argued that the specific statutory scheme for starting a loan and foreclosing on it must be followed. The brief window (as short a 3 weeks in some states) for the borrower to stop a foreclosure sale has been allowed and confirmed in every case. The 20 day window for the banks to set aside a rescission that by operation of law is effective the date it was mailed is no different.
ANYTHING that might be used as an attack on rescission must be done by way of a lawsuit by the banks or servicers against the borrower and they must do it within 20 days of the effective date of the rescission. Right or wrong the rescission is effective upon mailing. If they file the action within 20 days, then the rescission for a brief window in time becomes voidable but never void. That is what Justice Scalia was telling all of us. So why won’t Judges, lawyers and borrowers believe it? The reason is simple — they are all intimidated by the power of TILA rescission and they all think that no borrower could level of the playing field by the stroke of a pen. AND they are confused by their understanding of common law rescission based upon fraud. But as Justice Scalia showed us, the rules governing common law rescission do not apply to an unambiguous statutory scheme in TILA. Courts have no right or discretion to interpret a statute that is unambiguous.

So what can a borrower expect if they have sent or is ending a notice of rescission? Be aware you are on their radar. We have emerged from the muck and ooze of primeval environment. That is why they bringing out the big guns. Holland and Knight is NOT a foreclosure mill and never will be. They want to do battle because they know the issue of rescission is a nuclear option that could blow up the entire “securitization” scheme of the banks.

What they are going to try to do is say that the rescission should not be considered effective because of the statute of limitations or because of something else like that it was a purchase money mortgage. They will say they could bring that up at any time because the rescission was void when sent. In other words they are seeking ways to make the rescission contingent upon being valid based upon some particular fact pattern they wish to represent.

That would mean that the rescission is NOT effective until there is a judicial determination that it is valid. AND THAT runs against the express wording of the statute, the express wording of the Federal Reserve’s Reg Z, and the express wording of Jesinowski. The rescission may be VOIDABLE if they file a lawsuit challenging the cancellation of the loan deal, but it isn’t VOID.

But the banks are not filing those lawsuits. They seek to raise “defenses” to affirmative allegations of rescission long after the 20 day window has expired. The Banks MUST attack rescission in this way. They can’t file the lawsuit within 20 days because of the problems with standing. If they don’t attack and try to weaken the “effective” (i.e., the day that by operation of law the deal was canceled) rescission they are admitting that their so-called mortgage backed securities are worthless junk — which is exactly what they are. Even in the current market, and even if they were doing it right, investors would need to be told  that there is a risk that one or all of the mortgage loans in the pool are susceptible to being rescinded; and, here is the kicker: they would need to disclose that any attempt to challenge such rescissions would require a proof of standing which is at the very least “difficult.” [It is difficult because standing would need to be established WITHOUT THE NOTE AND MORTGAGE, WHICH ARE VOID].

Effective means effective. It means the deal is canceled unless the banks get it set aside. But they can’t get it set aside without some action at law. A letter telling you that you are outside the statute of limitations or that your loan was a purchase money mortgage does NOTHING — except provide proof that they received the notice. And here is another kicker: those people who sent their notice of rescission years ago but were “foreclosed” anyway have a claim that every action taken after they sent their notice of rescission was VOID by operation of law. And any title company that issued a title policy without exempting transactions involved in securitized loans is probably liable for the damages. But they probably can’t get out of the cloud of liabilities created by securitization if it was a notice of rescission that was sent — because that applies regardless of securitization.

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