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TILA Rescission Time Limits

by Neil Garfield | August 6, 2018

If you slow down and logically go through the statute and the Jesinoski decision it is easy to analyze the situation and come to a correct conclusion. This is not argument of law, it is the application of logic. SCOTUS and the statute state unequivocally that the rescission is effective WHEN it is mailed, by operation of law. Everything else happens afterwards.

The “three year” limitation is an affirmative defense that only arises AFTER rescission is effective by operation of law. It is only an affirmative act resulting in a court order that can revoke or vacate a TIILA rescission. To state it more bluntly, merely raising a dispute does not mean (a) you have the standing to do so nor (b) that the matter is at issue. The error here is that the parties are usually already in court.

As soon as the court is apprised of the rescission having been sent (whether 10 minutes ago or 10 years ago) the case changes, to wit: any action based upon the note and mortgage must be struck or dismissed.

  • Any party who was pursuing a claim based upon the note and mortgage is out — they no longer have legal standing and the Court no longer has subject matter jurisdiction over their claims or defenses.
  • Any party who is the actual creditor could, within 20 days from notice of rescission, either comply with the statute or file a lawsuit invoking and standing or any other basis upon which they dispute that the rescission was properly sent.
  • Any party failing to invoke the remedy of repayment or the duty of compliance within one year from date of mailing is barred from pursuing any statutory claim.
  • Title stays unchanged as of the date of mailing, to wit: fee simple absolute with no encumbrance of mortgage or deed of trust.

Once the statutory scheme is invoked, everything changes. The statutory scheme replaces the loan agreement just as the statutory scheme for nonjudicial foreclosure replaces the constitutional requirement of due process PROVIDED that the homeowner may still invoke the right to due process. If not, the statutory nonjudicial scheme is all that remains. The same analysis applies when looking at the nonjudicial cancelation of the loan agreement. If the “lender” fails to object with a lawsuit to vacate or revoke the rescission, then the statutory nonjudicial scheme is all that remains.

Once TILA rescission is sent, the note and mortgage no longer exist, by operation of law. The courts may not simply apply a note (new or old), much less an encumbrance (new or old) on land by fiat as this deprives the homeowner of his right to due process before his clear title can be taken away from him. Such an act must be preceded by formal application to a court by a party who has legal standing, and a trial occurs producing the court order. That application must be filed within 20 days of notice of rescission.

People are pointing to the reference in Jesinoski to the three year limitation. That is dicta — i.e., there is no ruling or opinion on when or whether that defense can be invoked. That defense does not arise by operation of law like the effectiveness of the rescission notice. But we do know by definition that such defenses can only arise after notice of rescission is sent. The argument that SCOTUS said that a notice sent outside the three year period is void is wrong. There is no place in the opinion where the court says that. And it isn’t likely they they will issue such an opinion.

The reason is that if SCOTUS were to say that rescission is NOT effective upon mailing if it was mailed beyond the three year limitation, then an added condition is being inserted into the statute. The option stands for exactly the opposite conclusion. No conditions may be added. Period. Any interpretation or ruling that adds a condition means that the rescission is not effective upon mailing by operation of law. Such a ruling inserts “unless….” into the wording of the statute and the ruling of SCOTUS.

Lastly, within the context of 15 USC §1635 and Jesinoski, the rescission and simultaneous destruction of the note and mortgage does NOT start a clock on any statute of limitations any more than a Deed starts a clock on a statute of limitations as to the title. But for the same reason it is true that SCOTUS is unlikely to say both a 2008 and 2017 rescission were effective. Once the first rescission was sent (and assuming there is no doubt about that) the loan agreement was canceled; hence, there was nothing to rescind in 2017.

 

 

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