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TILA Rescission Notice Does NOT Require Justification

Posted by Neil Garfield | January 31, 2018

Again we return to the issue of rescission under TILA. And again I am correcting the mistaken view that the grounds for sending the notice of rescission must somehow be established before sending it, which is another way of saying that the rescission can be ignored if the proper disclosures were made. That is not the case even though many courts are adopting that erroneous view.

SCOTUS will once again issue a corrective opinion telling all the courts in the land that the TILA rescission statute is (a) plain on its face, (b) must be followed exactly as written and (c) there is no difference between contested and uncontested rescissions. Once notice is given TILA rescission is effective no matter what defense could be raised. If a defense exists it must be brought.

TILA rescission is counterintuitive to most people who think of lending and enforcement as the guys with the real power (Banks and servicers) against the homeowner who is seeking a technicality to get out of the deal.

It is simple incomprehensible for such people to think that Congress leveled the playing field by setting forth a procedure where the entire burden of persuasion and burden of proof is thrown onto a real creditor to plead and prove that the rescission was not justified. In Jesinoski SCOTUS nailed down the point — there is no difference between contested and uncontested notices of rescission — they are BOTH effective upon mailing.

There is no justification needed for sending a notice of rescission. If it is unjustified, someone needs to attack it. Otherwise the statute and SCOTUS say it is and remains effective.

The lawsuit by the borrower for enforcement is limited to one year, as you say. But that lawsuit would ONLY be for enforcement of the three duties imposed upon creditors upon receipt of the notice of rescission. You are mistaken if you believe that without the lawsuit the rescission is dissolved.

Under the statute and the SCOTUS decision in Jesinoski that is an “interpretation” that (a) is impermissible and (b) wrong. If the Jesinoski decision stands for anything it is that when a statute is clear and unambiguous no interpretation is allowed by the judiciary or anyone else. In other words, we must all follow the wording and content of the statute exactly as it is written.

Put to that test, anyone who attempts to denigrate the content of the statute must or should fail in the courts. Of course it is a matter that could be taken up by Congress who is the only one that could change the wording of the statute to what you think it should say.

No court has the power or authority to “deny a borrower’s otherwise justified rescission.” To the naysayers — you may feel comforted that you are apparently right because courts are doing what you are saying. But they are just as wrong now as they were before Jesinoski.

If they — or you — don’t like the outcome of the statute then the statute must be changed by the legislative body that enacted it. It is because of naysayers who can’t or won’t believe that so much power could be given to a borrower that rescission has not hit the SCOTUS docket repeatedly. But it will hit again and when it does it will likely be too late for many people. And I guess that is the point — run out the clock so that the homeowners run out of resources to pursue it.

With millions of foreclosures to do, TILA rescission is a viable tool that can be used effectively if the homeowner has the staying power to stay “in the game” after a court erroneously dismisses the relevance of the TILA rescission.

 

 

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