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The Truth in Lending Act and Rescission: Lessons Learned by Lenders from Jesinoski v. Countrywide

natlawreview.com | April 1, 2015

The Supreme Court just made mortgage rescission a little bit easier for borrowers and scarier for lenders in Jesinoski v. Countrywide Home Loans. Under the Truth in Lending Act, 15 U.S.C. §1601-1677 (“TILA”), mortgage lenders are required to disclose the rights of obligors and other material disclosures to borrowers. Borrowers have a right of rescission for three days from the transaction or until the disclosures are made, up to three years after the transaction. The borrower must give notice to the lender of his or her exercise of the right to rescind within those time periods.

In Jesinoski, Countrywide failed to make the necessary disclosures to the Jesinoskis as lenders. Three years to the day after the completion of the mortgage transaction, the Jesinoskis sent written notice of their intent to rescind the mortgage to Countrywide. A year and a day later, they filed suit. The question before the Supreme Court then became whether written notice was sufficient under the Truth in Lending Act as the Third and Fourth Circuits held (and the Consumer Financial Protection Bureau agreed), or whether the borrower must also file suit, as the Eighth, Ninth and Tenth Circuits held. The Court decided that the language of the statute makes clear that written notice alone is sufficient to fulfill the terms of the statute. The Court rejected Countrywide’s argument that there was a legitimate dispute over the adequacy of the disclosures that required the borrower to file suit to settle.

This case should give all lenders pause when making disclosures – all material disclosures should be (a) as thorough as necessary under TILA, and (b) timely enough to keep the rescission window to three days. The borrower’s right to rescind will expire at the three day mark if the mortgage lender makes all necessary disclosures at the closing table, but make sure the disclosures are complete and meet all TILA requirements. Inadequate disclosure could leave the borrower up to three years to rescind the loan, a lesson lenders just learned from the Supreme Court.

 

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Nancy Duffy McCarron, CBN 164780
Attorney, Real Estate Broker, BBB Arbitrator, CA Notary Public
Certified Forensic Loan Auditor, Property Manager

 

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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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