RESCISSION: Reviewing Wells Fargo v Frazee, NJ App.

At what point does a final decision of SCOTUS actually mean anything? When confronted with TILA rescission, virtually all lower courts, state and federal, have taken up legislating from the bench, essentially over-ruling the Supreme Court of the United States (literally legally impossible).

Agree or disagree — everyone has that right. But to obey or not obey a SCOTUS decision attacks the foundation of our democratic and judicial institutions and makes the U.S. Constitution into a optional guide to the universe of disputes, delegating the real power to lower courts and removing the power and finality of SCOTUS as delineated in our Constitution.

Opinions like the one reviewed in this article are thus both irrelevant and irreverent — unless we amend or abandon our Constitution as the highest law of the land.

see Wells Fargo v Frazee

This case is just another example of a judicial tantrum defying the ultimate authority of SCOTUS. Unless the Supreme Court itself reverses the Jesinoski decision, it is quite obvious what the next SCOTUS decision is likely to be on the issue of TILA (Truth in Lending Act) rescission 15 USC §1635. Here is what I expect and hope for:

  1. Any court entering a decision or opinion after a notice of notice of TILA Rescission has been delivered must vacate such orders and must dismiss any pending foreclosure.
  2. Failure to dismiss the foreclosure is acting ultra vires — outside their authority.
  3. Dismissal of foreclosure is mandatory inasmuch as notice of TILA rescission removes the operative documents — note and mortgage — from consideration, rendering them void, by operation of law.
  4. As to all prior decisions, judgments and orders that ignored TILA rescission, all such decisions are void, the title consequences of which are left to state legislatures to decide, so long as the Federal Statute is obeyed and the law does not nullify the effect of delivery of a notice of TILA rescission.
  5. Any claims to vacate the effect of the TILA Rescission must be brought within one year from date of delivery.
  6. Neither tender nor a lawsuit is required for TILA rescission to become effective. An Aggrieved party with standing has adequate remedies at law to vacate a notice of TILA rescission, that must be raised as a new claim for relief from TILA rescission  based upon the pleading that the homeowner was wrong in sending the notice.
  7. TILA Rescission is an event, not a claim that a trial or appellate court can grant or deny. The legislature (Congress) has already granted the remedy. As stated in the Jesinoski SCOTUS decision, the statute is clear and unambiguous on its face, thus barring interpretation by a court. That is the difference between the rule of law vs. the rule of man.
  8. The Courts may neither overrule legislative action nor overrule a decision from the U.S. Supreme Court. Legislative action may not be overruled by a court unless there are clear violations of constitutional provisions and restrictions.

It’s possible that we will see the above menu in more than one decision from SCOTUS. The essential focus is going to be this: The rule, as stated repeatedly over decades by SCOTUS in admonishments to lower trial and appellate courts is that if it isn’t broken you can’t “fix” it to suit your personal views. 

Now we turn to the unlawful, ultra vires decision of the Superior Court of New Jersey, appellate division in Frazee (See link above).

The Court starts its analysis on page 6.

The opinion of the court is that Wells Fargo had standing because of its possession of the note and mortgage. But the note and mortgage are and were void at the time of this decision. So there is no standing to enforce except by the actual creditor, i.e., the owner of the debt.

This court recognized a potential “issue” (invented by the court, in opposition to the final decision that no court has any authority to interpret the TILA rescission statute). So it creates its own quagmire and falls deeper and deeper into trouble.

The panel obviously recognized that there could be no standing for Wells Fargo unless the TILA rescission could somehow be ignored without a claim to vacate the rescission from a party who owned the debt where the claim was that the rescission was unwarranted because all necessary disclosures had been made.

Diving right in this appellate court immediately misquotes and totally ignores the 2015 Jesinoski decision. It is only by mangling both the statute and the SCOTUS decision that this court can arrive at its predetermined destination. It intentionally misstates the law and effect of Jesinoski. If TILA Rescission was not effective without tender, there would be no TILA rescission.

The whole purpose and methodology of the statutory procedure was to first void the loan contract, second void the encumbrance by operation of law, third void the note, thus allowing the borrower to obtain refinancing from another institution. The key points of the Truth in Lending Act were (1) make certain the borrower knew who he/she was dealing with and (2) make certain the borrower had a fighting chance of understanding the enormously complex loan products being sold, dating back to the 1960’s when TILA was first passed.

In order to be certain these two disclosures were made, Congress had a choice. They could either greatly enlarge an existing agency to enforce these goals, laws and rules, or they could create a new administrative agency. Neither of those choices were remotely acceptable by most legislators. So they agreed on a plan that would force the banks to comply with TILA with consequences so horrendous that no bank in their right mind would transgress.

Enter TILA Rescission. By putting enormous power in the hands of borrowers that shifted the entire burden of pleading and proof to the banks it was thought that banks would comply. The statute provides for an order of things (a statutory scheme not unlike nonjudicial foreclosure) after notice of rescission is delivered. Like nonjudicial foreclosures it is a form of extrajudicial relief for homeowners who believe they were not protected at closing.

Within 20 days they must either comply or seek relief from a court of competent jurisdiction. The statute was designed to completely bar stonewalling. But like any law, if nobody enforces it, the statute does not enforce compliance with the two main goals of disclosure requirements — the identity of the lender and the breakdown of the main characteristics of the proposed loan.

Failing to seek relief puts them in violation of the statute, and enables a borrower to sue to enforce the three statutory duties under TILA rescission: return of the cancelled note, release of encumbrance and return of moneys paid by the borrower. If the borrower does not bring such suit within 1 year he/she loses the right to enforce compliance with those three duties.

THIS DOES NOT CHANGE THE EFFECT OF RESCISSION. THE MORTGAGE AND NOTE ARE STILL VOID BY OPERATION OF LAW.

If the bank does not comply with the three statutory TILA duties the bank has no right to demand tender or any relief. If the banks fails to comply within the same one year, they lose the right to demand the money under any scenario. The court goes off the tracks when it states

“nothing in the Supreme Court’s opinion . . .would override TILA’s tender requirement”. Jesinoski v. Countrywide Home Loans, Inc., 196 F. Supp. 3d 956, 962 (D. Minn. 2016), aff’d, Jesinoski v. Countrywide Home Loans, Inc., No. 16- 3385, 2018 U.S. App. LEXIS 4974 (8th Cir. Feb. 28, 2018).

 

That statement on its face is true. But ignores the content of TILA’s tender requirement. It only arises AFTER the “lender” fulfills the three statutory duties.

That is what Congress wrote. That is what they meant. And that was the substitute for an unwieldy bureaucracy.

The court confirms the content of the statute but repeats the tender “error” when it says

With regard to an alleged TILA violation, it is not enough to seek rescission and stop paying the mortgage to gain ownership of the home outright. Defendants argue they own the home outright because Wells Fargo failed to respond to the rescission notice within twenty days. Although failure to respond to a rescission notice within twenty days would constitute another TILA violation, TILA also explicitly states that if a “creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his [or her] part to pay for it.” 15 U.S.C. § 1635(b) (emphasis added).

The problem here is the term “own the home outright.” That’s another way of repeating the myth about the “free house.” More importantly it is contradicting the express wording and purpose of the statute — to force banks to comply with TILA disclosure requirements. The ultra vires interpretation of this court, like so many others, gives the banks a way out without ever being penalized for their lack of proper disclosure.

NOTE: THIS DOES NOT CREATE A FREE HOUSE. If the parties seeking foreclosures were not creditors, the actual creditor can still bring an action for legal and equitable relief. But in order to do so, they would need to show that the parties seeking relief were not in any way authorized to do so by the real creditor.

But the court nevertheless faults the homeowner for not tendering even though tender was not due.

 

The erroneous nature of the court’s decision becomes crystal clear when it says

Additionally, Jesinoski did not overturn Third Circuit precedent that “a notice of rescission is not effective if the obligor lacks either the intention or the ability to perform, i.e., repay the loan.” Sherzer v. Homestar Mortg. Servs., 707

F.3d 255, 265 n.7 (3d Cir. 2013). Jesinoski also did not take away a court’s discretion to modify the rescission procedures. See 15 U.S.C. § 1635(b) (stating that the rescission “procedures prescribed by this subsection shall apply except when otherwise ordered by a court”) (emphasis added); see also 12 C.F.R. 226.23(d)(4) (stating that the rescission “procedures outlined in paragraphs (d)(2) and (3) of [§ 226.23] may be modified by court order”) (emphasis added).

It is quoting yet another court who has put blinders on and is disregarding the intentionally punitive aspect of TILA rescission. In most cases the homeowner cannot perform unless the “lender” gives up the note and mortgage and returns money paid under the canceled loan contract. The homeowner can ONLY perform if the deck is cleared for them to get a new loan from a new lender and to apply the proceeds of disgorgement required by the statute.

And to add insult to injury the court is putting yet another constraint on the borrower that TILA does not mention, to wit: the intention of the borrower to perform (tender). Forget the logistics of “intention” which is ridiculous — any such requirement places TILA rescission in the position of a claim instead of the event that the statute says has occurred by operation of law at the moment of delivery of the note of rescission. In direct contradiction to the TILA rescission statute (and SCOTUS in Jesinoski), this requires the borrower to submit to a trial before the rescission is effective.

The bottom line is that it appears that all courts are only interested in treating rescission under common law in which the rescission would only be effective upon a court order after a trial. The fact that the TILA Rescission statute clearly and unquivocably says otherwise won’t stop them, because they have prejudged the case as presenting a choice to the courts that can only be made by the legislature — who pays the price for violation of disclosure requirements under the Truth in Lending Act.

 

Rescission Redo: 9th Circuit AGAIN Rules that Tender is Not Necessary

Judicial Arrogance and Intolerance Keeps leading back to the same point — that TILA Rescission is not common law rescission. Yet Judges continue to rule on TILA rescission as though it were common law rescission. Here again the 9th Circuit confirms what the Supreme Court of the United States has already said — neither tender nor lawsuit is required for rescission to be effective. Any other holding is directly contrary tot eh wording of the statute, which as a matter of law is clear and NOT subject to interpretation.

The second important part of this decision is that the Court may not lay down conditions or advice concerning the filing of an amended complaint. The corollary is that the fact that an amended complaint was filed without the rescission count does not prevent the homeowner from preserving the issue on appeal — if the lower court said don’t file it unless you plead and prove tender of money.

And the third implied issue is what Congress intended when they passed TILA and the rescission statute, to wit: The whole notion of “tender” is ridiculous in the face of the legal conclusion that the note and mortgage no longer exist (void) and the factual basis that the whole issue of identification fo the creditor may not subverted. Hence the question “Tender to whom?”

Lastly the issue of whether a Trustee is a debt collector appears to be answered in the affirmative. Yes they are and not just because of the reasons set forth in the decision (see concurring opinion). Creditors are not normally regarded as debt collectors. But there is a growing awareness that the REMIC trusts are empty; hence the trustee of the REMIC Trust cannot be anything but a debt a collector unless they can prove that they are indeed the creditor — i.e., the party to whom the debt is owed. Likewise the Trustee on a Deed of Trust MUST be a debt collector because by definition it is an intermediary seeking to collect money.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-

Hat tip to stopforeclosurefraud.com, whose article is republished in part.

The ruling upholds the ability to rescind despite ability to repay- Split court ruling of FDCPA applying to Trustee- dissenting judge vigorously argues that the FDCPA should apply to Trustee’s for all the right reasons. See below……

http://stopforeclosurefraud.com/2016/11/03/vien-phuong-ho-v-recontrust-company-n-a-et-a-9th-cir-holds-foreclosure-trustee-not-fdcpa-debt-collector/ 

Vien-Phuong Ho v. ReconTrust Company, N.A., et a | 9th Cir. Holds Foreclosure Trustee Not FDCPA ‘Debt Collector’

stopforeclosurefraud.com

Seeking damages under the FDCPA, the plaintiff alleged that the trustee of the deed of trust on her property sent her a notice of default and a notice of sale

I

The district court twice dismissed Ho’s TILA rescission claim without prejudice, and Ho didn’t replead it in her third complaint. We have held that claims dismissed without prejudice and not repleaded are not preserved for appeal; they are instead considered “voluntarily dismissed.” See Lacey v. Maricopa Cty., 693 F.3d 896, 928 (9th Cir. 2012). Here, however, the district court didn’t give Ho a free choice in whether to keep repleading the TILA rescission claim.

Rather, the court said that if Ho wished to replead the claim she “would be required to allege that she is prepared and able to pay back the amount of her purchase price less any downpayment

she contributed and any payments made since the time of her purchase.” The judge concluded that if Ho “is not able to make that allegation in good faith, she should not continue to maintain a TILA rescission claim.” It’s unclear whether the judge meant this as benevolent advice or a stern

command. But a reasonable litigant, particularly one proceeding pro se, could have construed this as a strict condition, one that might have precipitated the judge’s ire or even invited a sanction if disobeyed. Ho could not or would not commit to pay back the loan, and dropped the claim in her third complaint.

The district court based its condition on Yamamoto v. Bank of N.Y., which gave courts equitable discretion to “impose conditions on rescission that assure that the borrower meets her obligations once the creditor has performed its obligations.” 329 F.3d 1167, 1173 (9th Cir. 2003). But, after

the district court dismissed Ho’s claims, we held that a mortgagor need not allege the ability to repay the loan in order to state a rescission claim under TILA that can survive a motion to dismiss. Merritt v. Countrywide Fin. Corp., 759 F.3d 1023, 1032–33 (9th Cir. 2014). Ho argues that her rescission claims were properly preserved for appeal and should be reinstated.

Where, as here, the district court dismisses a claim and instructs the plaintiff not to refile the claim unless he includes certain additional allegations that the plaintiff is unable or unwilling to make, the dismissed claim is preserved for appeal even if not repleaded. A plaintiff is the master of his claim and shouldn’t have to choose between defying the district court and making allegations that he is unable or unwilling to bring into court.

This rule is a natural extension of our holding in Lacey. The Lacey rule—which displaced our circuit’s longstanding and notably harsh rule that all claims not repleaded in an amended complaint were considered waived—was motivated by two principal concerns: judicial economy and fairness to the parties. 693 F.3d at 925–28. Those concerns apply here. We see no point in forcing a plaintiff into a drawn-out contest of wills with the district court when, for whatever reason, the plaintiff chooses not to comply with a court-imposed condition for repleading. We remand to the district court for consideration of Ho’s TILA rescission claim in light of Merritt v. Countrywide Fin. Corp., 759 F.3d at 1032–33.

AFFIRMED in part, VACATED and REMANDED in

part. No costs.

KORMAN, District Judge, dissenting in part and concurring

in part:

The majority opinion opens with the principal question presented by this case: “[W]hether the trustee of a California deed of trust is a ‘debt collector’ under the Fair Debt Collection Practices Act (FDCPA).” Maj. Op. at 6. After a discussion of the issue, the majority concludes by observing that the phrase “debt collector” is “notoriously ambiguous” and that, given this ambiguity, we should refuse to construe it in a manner that interferes with California’s arrangements for conducting nonjudicial foreclosures. Maj. Op. at 18–19. My reading of the Fair Debt Collection Practices Act (“FDCPA”), consistent with the manner in which it has been construed by every other circuit that has addressed whether foreclosure procedures are debt collection subject to the FDCPA, suggests that the only reasonable reading is that a trustee pursuing a nonjudicial foreclosure proceeding is a debt collector. See Kaymark v. Bank of Am., N.A., 783 F.3d 168, 179 (3d Cir. 2015), cert. denied, 136 S.Ct. 794 (2016); Glazer v. Chase Home Fin. LLC, 704 F.3 453, 461–63 (6th Cir. 2013); Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373, 376–77 (4th Cir. 2006); see also Alaska Tr., LLC v. Ambridge, 372 P.3d 207, 213–216 (Alaska 2016); Shapiro & Meinhold v. Zartman, 823 P.2d 120, 123–24 (Colo. 1992) (en banc). The same is true of a judicial foreclosure proceeding—an alternative available in California. See Coker v. JPMorgan Chase Bank, N.A., 364 P.3d 176, 178 (Cal. 2016). Both are intended to obtain money by forcing the sale of the property being foreclosed upon.

False Claims by False Claimants

The “tender” discussion in or out of bankruptcy court is a non sequitur. Why would you “tender” money to a party whose claim is obviously false?

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
—————-
I recently had occasion to respond to an email regarding, as it turned out, understanding the way securitization actually worked, as opposed to what is shown on paper. The topic was “tender.” This is what I wrote:
Why would you “tender” money to a party whose claim is obviously false? This would be adding insult to injury. Your debt arose when you received the money or the benefit of someone paying money on your behalf. If you then execute a note to the party who gave you that money, directly or to a disclosed authorized agent, the debt is merged into the note, as it should be. That prevents double liability — one liability fro the debt and one liability arising from the note.

But if you executed a note in favor of a party who was NOT the source of funds and NOT authorized by the source of funds, then the execution of the note would be the creation of two liabilities — one on the debt, owed to the source of funds, and one on the note which if released, could end up being a negotiable instrument that, if paid for, would indeed create the second liability. (Even without being purchased we have seen millions of cases where the assertion of “holder” is mistakenly used to grant HDC status).

The claimants in your case can collect from you if their claim derives from a transaction in which money was delivered to you by the payee on the note or if the payee on the note was acting in a representative capacity for the source of funding.

But we already know that the payee was not acting in a representative capacity for the the actual source of funding — a group of investors whose identification is withheld from the Petitioner.

We know this because the investors bought certificates issued by a trust. The proceeds of sale of the trust-issued certificates were to have been paid to the issuing trust. If that had happened, then the trust would have paid for the acquisition (not the origination) of loans. And if that was what actually happened then the Trust would be a holder in due course not subject to the petitioner’s defenses.

None of the claimants assert status as holders in due course. Hence one of the elements of HDC status is missing since the only reasonable thing for the trust to have done would have been to assert HDC status and merely prove the purchase of the loans. The missing element is obviously the purchase for value since good faith is presumed and knowledge of borrower’s defenses is difficult to imagine, let alone prove.

Since HDC status is not asserted, the only logical conclusion is that the trust never did the only thing the trust was created to do — purchase loans. And the only reason that can be reasonably applied is that the Trust never made the purchase because it never received the money from the sale of the certificates. And that means that the trust never purchased existing loans as  per the requirements of the trust prospectus and PSA. That takes the Trust out of the mix entirely.

That leaves us with the investors money being used to originate mortgages without their consent or knowledge and contrary to the terms of the documents under which they agreed to fund the purchase of the trust certificates.

There is a complete absence of any paper trail linking the investors to the loans that were originated. All documentation was prepared and executed as if the Payee had loaned money to the Petitioner.

There are only two possibilities. Either the intermediaries who sold the trust issued certificates kept all the money or they kept part of it.

Given the fact that none of the assignments or endorsements were supported by any consideration, the only reasonable assumption is that there was no consideration because none was due — i.e., the transferor had no rights to the debt and the note and mortgage were NOT evidence of the debt.

It follows logically that there is no evidence of the debt other than the events that occurred at the falsely dubbed “loan closing.”

Those events give rise to a debt owed by Petitioner that is NOT the subject of the note and mortgage that were executed. Those instruments refer to a transaction that never existed. Petitioner was given money once, not twice.

The chain of paper offered by the claimants provides the rest of the answer to these highly complex obscure fictitious transactions. Ultimately the paper chain relied upon by the claimants leads up to a trust or party acting as though it were in the position of a REMIC trust.

It does not lead to the investors because we know that the investors’ money never went into the trust and that therefore the trust is a sham entity created solely on paper, without any physical existence or trust administrator in the form of a live person. In fact, upon inquiry, it is obvious that the Trust never had a bank account and never engaged in any business activity at all. The investors therefore have interests in an empty trust — which is all the documentation they have or could claim.

All of the claimants are in fact intermediaries posing as real parties in interest. When confronted they pivot from being servicers, or agents, or attorneys in fact or “holders.” It is a moving target until the question is posed: whose money was used in the origination or acquisition of the debt? Are those parties on any of the documentation? It was the investors’ money that was used. And no, the investors are not directly or indirectly on the paperwork relied upon by the claimants. And the claimants are not directly or indirectly representing the investors. The claimants are intermediaries whose only claim is that they represent the trust and perhaps the trust beneficiaries as it relates to the business of the trust, which is nothing.

Hence tender to the claimants for any reason would be to guarantee two liabilities for one transaction. Tender would pay the baseless claim of the claimants while allowing the real debt to go unpaid under circumstances where the investors, to whom the money is owed, did not give actual or apparent authority to these claimants. All current court events are being carried on without the knowledge of the investors, much less their intention to give authority to these claimants who were part of a larger fraudulent scheme.

UNANIMOUS SCOTUS: TILA Rescission Effective on Notice: No Borrower Lawsuit Required

For further information please call 954-495-9867 or 520-405-1688

=============================

TENDER IS NOT REQUIRED FOR RESCISSION TO BE EFFECTIVE

SCOTUS DECISION CONVERTS RESCINDED SECURED DEBT TO UNSECURED

EFFECT ON OLD BANKRUPTCY CASES UNKNOWN

see TILA Rescission

The decision is merely a statement of the obvious. Scalia, writing for a UNANIMOUS court said that the statute means what it says. All the decisions in all the states requiring the borrower to file suit to enforce rescission are wrong. The court says the rescission is effected upon notice to the “lender.” What that means to me is that the subsequent foreclosure, non-judicial or judicial is void because there is no mortgage. TILA says that unless the “lender” files suit within a specified period of time the rescission is effective as of the date of notice. It goes on to say that the “lender” just send back all payments and a satisfaction of mortgage and canceled note.

The three year statute of limitations applies to notice — not a lawsuit filed by borrower. The burden is on the lender to contest the rescission and failing to do so within the 20 days (the time varies depending upon when you sent your notice of rescission) the deal is over.

What you have left is an unsecured debt that can be discharged in bankruptcy because TILA says the mortgage is gone. What effect this will have on the thousands of cases in which borrowers sent notices of rescission and were foreclosed remains to be seen, but it sure will be interesting to see what the courts do.

http://www.supremecourt.gov/opinions/14pdf/13-684_ba7d.pdf

“Held: A borrower exercising his right to rescind under the Act need only provide written notice to his lender within the 3-year period, not file suit within that period. Section 1635(a)’s unequivocal terms—a borrower “shall have the right to rescind . . . by notifying the creditor . . . of his intention to do so” (emphasis added)—leave no doubt that rescission is effected when the borrower notifies the creditor of his intention to rescind. This conclusion is not altered by §1635(f), which states when the right to rescind must be exercised, but says nothing about how that right is exercised. Nor does §1635(g)—which states that “in addition to rescission the court may award relief . . . not relating to the right to rescind”—support respondents’ view that rescission is necessarily a consequence of judicial action. And the fact that the Act modified the common-law condition precedent to rescission at law, see §1635(b), hardly implies that the Act thereby codified rescission in equity. Pp. 2–5.”

729 F. 3d 1092, reversed and remanded.

SCALIA, J., delivered the opinion for a unanimous Court.

While there are certain parts of this statute that are not completely clear, I have always felt that this law would eventually be the downfall of the entire foreclosure mess.

As for the statute of limitations it is not yet determined when the “transaction” has been “Consummated.” But one thing is clear — the three year period and the more narrow three day period for rescission is not “fixed.” The framers of this law understood that there might be defective disclosures that would and should defeat the claim of the “lender” that the transaction was consummated on the date that the documents were signed. If the disclosures were incomplete or just plain wrong, it appears that the framers did not want the time limit running on borrowers until the disclosures were correct and proper.

If the disclosures had the wrong numbers (more than $35 deviation from true numbers) then delivery of the disclosures has not yet occurred. And the statute is very specific in stating that the “closing” is not complete until those disclosures have been made to the borrower and accepted by the borrower.

There remains many questions that will need to be answered in the Courts. Probably the biggest one is what happens in cases where the borrower properly gave notice of rescission, and where some entity initiated foreclosure after the notice of rescission. Since TILA says that the mortgage no longer exists, the foreclosure would logically be void. Any sales of the property pursuant to the foreclosure of a nonexistent mortgage would also be void.

And any claim for quiet title directed against the parties who claim interests in the recorded mortgage would appear to be a slam dunk in cases where the notice of rescission is effective. The right to receive a satisfaction of mortgage, which TILA calls for, means that the mortgage should not be in the chain of title of the owner of the property.

But that doesn’t clear up the question of what to do about events that have long since passed. There is no statute of limitations (except perhaps adverse possession) on title defects. If the title defect exists, it is there, by law, for all time. People who have purchased property that was involved in foreclosure and where the former owner canceled the mortgage by giving notice of rescission have a built in title defect. None of the sales of such property either through forced sale in foreclosure or third party sales would be anything more than a wild deed.

For more free information about TILA Rescission use the search engine on this blog going back to 2007-2008. The Supreme Court has unanimously confirmed what I wrote back when I was the sole voice in the wilderness. Opinions ranging from scathing orders from trial judges to lofty opinions from appellate courts in the state court and federal system unanimously stated that I was wrong. Now the U.S. Supreme Court — the final stop in any dispute — has also been unanimous, stating that all those orders, opinions and judgments were wrong on this issue. As a result millions of homes were subject to foreclosure actions on mortgages that no longer existed. And millions more, hearing advice from attorneys, failed to send the notice of rescission to take advantage of this important remedy.

RESCISSION REVIVED BY 9TH CIRCUIT COURT OF APPEALS

Hat tip to Ken McLeod and to Ron Ryan who argued endlessly that the former ruling was wrong in Arizona. Ron Ryan is a good lawyer and Ken McLeod is a good investigator. Both have years of experience investigating, analyzing and fighting illegal foreclosures.

Courts are catching on and as I have predicted, the ultimate determination of the merits of foreclosure cases are largely going to turn on the application of the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). Previously this same court held that tender of the money was required to rescind a transaction — the exact opposite of what the Federal statutes and regulations required. Now, correcting its prior error, the court says that a cause of action and defense exists by pleading rescission. Any document indicating the intent to rescind is sufficient.

The purpose of the TILA provision was to put the burden on the lender to prove that they had complied with all aspects of TILA in providing adequate disclosure and otherwise performing those acts required for a valid closing. If the defense is that the loan contract was not completed because of lack of consideration or other violations of TILA or RESPA, then the appropriate action is to send a rescission letter. It then falls on the “lender” to file an action within 20 days to object to the rescission or return all money paid by the borrower and to file a satisfaction of mortgage along with returning the canceled note. And since the allegation of no consideration leaves nothing to be tendered “back”, there is no impediment to going forward with discovery.

This forces “lenders” to essentially file a judicial foreclosure suit and prove they made the loan, they have the right paperwork and made the right disclosures. Table funded loans are going to give them a problem since Reg Z says that any pattern of conduct with table-funded loans is “predatory per se,” it is hard to imagine that this decision won’t stop the “lenders” dead in their tracks.

The requirement of tender assumed that the “lender” had actually made the loan and was the source of funds. Now the Courts are starting to realize that there was a switch at closing with the borrower and very likely a switch at closing with the real lenders — the investors who thought they were buying valuable mortgage bonds. With the borrowers the closing agent took money from an undisclosed party and then had the borrower sign documents in favor of another party. With the investors, the investment bank took money from the investors and instead of funding the trust, used the money and the documents from closing as though it were their own.

Hence the need to fabricate endorsements, assignments etc. If the “securitization” of the loan had taken place there would be a chain of monetary transactions leading up to the ultimate transfer to the trust who would have issued payment for the loan. There would have been no need to fabricate, forge, or robosign documents and certainly no loss of loans due to destruction or misplacement, because the documents would have been forwarded to the named Depository.

The result was that the burden was placed on borrowers with the least access to the real information on the loan and an easy path of defense to the party with the most access to the real facts of the loans and alleged transfers of the loan. TILA was meant to level the playing field. If the borrower invoked rescission without right, then there were consequences. This law was passed to prevent predatory lenders escaping the consequences of illegal actions simply because they had greater resources, sophistication and factual knowledge.

Be careful here. There are several types of rescission — 3 Day, 3 Year and common law. Consult with an attorney who is licensed to practice in the jurisdiction in which your property is located.

For more information call 954-495-9867 or 520-405-1688

—————————————————–

Merritt v. Countrywide Financial Corp.

9th circuit opinion Issued July 16, 2014

Summary: Plaintiffs filed suit against Countrywide and others involved in their residential mortgage, alleging violations of numerous federal statutes. The district court dismissed the claims with prejudice and plaintiffs appealed. The court held that plaintiffs can state a claim for rescission under the Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq., without pleading that they have tendered, or that they have the ability to tender, the value of their loan; only at the summary judgment stage may a court order the statutory sequence altered and require tender before rescission – and then only on a case-by-case basis; and, therefore, the court reversed the district court’s dismissal of plaintiffs’ rescission claim and remanded for further proceedings. The court held that, although the limitations period in the Real Estate Settlement Practices Act (RESPA), 12 U.S.C. 2614, ordinarily runs from the date of the alleged RESPA violation, the doctrine of equitable tolling may, in the appropriate circumstances, suspend the limitations period until the borrower discovers or had reasonable opportunity to discover the violation; just as for TILA claims, district courts may evaluate RESPA claims case-by-case; and, therefore, in this case, the court vacated the dismissal of plaintiffs’ Section 8 of RESPA claims on limitations grounds and remanded for reconsideration.

Merritt v Countryside 9th circuit 09-17678-2014-07-16

 

TILA Rescission Revived Without Tender

Max Gardner’s Protoge Achieved This result as Reported Max’s Current Newsletter:

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/
200814991.pdf

%d bloggers like this: