TILA Rescission Revived Without Tender

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Editor’s Note: Most of what we have seen reported indicates that although TILA is clear in is legislative expression that NO TENDER is required for the rescission remedy under TILA, Judges don’t like it. It seems they feel that Big Bad Borrowers are taking advantage of Bambi Banks. Yet here is a case where the Judge DID apply the law as written.

TILA was written with teeth, but Judges are reluctant to apply it. Yet on its face TILA possesses the strongest remedy against predatory loan practices in existence. It allows the borrower to declare a rescission which requires the alleged lender to (a) step forward (which they don’t want to do) (b) file a satisfaction of mortgage and (c) negotiate return of the money, less of course any claims for damages that the borrower has claimed and can prove.

This comes back to the issue of the real creditor, the pretender lender etc. In the current environment, there is nobody around who actually has the authority to satisfy a mortgage. But TILA addresses that too. It says that by operation of law the security instrument is void not voidable. Thus the mortgage or deed of trust no longer applies because it is void even if it was properly recorded. In turn, this means the debt, if any, has been converted from secured to unsecured.

The bargaining power of the borrower cannot be overstated if this provision of TILA is applied. By eliminating the secured aspect of the mortgage, the loan is easily stripped down to fair market value less damages, attorneys fees, interest paid, etc. We can only hope that we see more application of law as written and less hip-shooting from the bench creating uncertainty and complexity where the law could not be more clear.

Defendant U.S. Bank, N.A., as Trustee for the LXS2007-4N Trust (“U.S. Bank”), seeks dismissal under Federal Rule of Civil Procedure 12(b)(6) of a complaint filed by plaintiff
homeowner Henry Botelho. Specifically, U.S. Bank claims that Botelho cannot state a claim for rescission of his mortgage loan under the Truth in Lending Act, 15 U.S.C. § 1601 et seq., unless he alleges a present ability to tender the loan proceeds. As discussed in
further detail in the Order, such an allegation is not necessary for Botelho’s case to survive the pleading stage.
Accordingly, U.S. Bank’s motion is denied.
Hat tip to Boot Camp Grad Carmen Dellutri http://www.ca11.uscourts.gov/opinions/ops/

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