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TILA Loan Rescission

hofj.org | April 20, 2015

The unanimous Jan 15, 2015 Supreme Court Decision regarding TILA Home Loan Rescission is changing Foreclosure Defense (PDF)

Most important overviews:

On Jan 15, 2015, the United States Supreme Court unanimously decided in favor of the homeowner borrowers in Jesinoski v Countrywide regarding Jesinoski's Truth in Lending Act (TILA) home loan rescission.  

For any loans covered by the Truth in Lending Act, borrowers may rescind their loan by mailing a Rescission Letter to the lender, forcing the lender/creditor to oppose that rescission with a lawsuit within 20 days or lose all opposition rights.  The note and mortgage/deed of trust is canceled upon the mailing of the Rescission Letter to the lender.  Period.  
 
If the lender files a lawsuit after the 20 days claiming the borrower still owes them money, the lender must first comply with TILA provisions regarding lender compliance (see the next paragraph), then prove the debt is owed without using the note (loan) or the mortgage/deed of trust, because both of those were canceled "by operation of law" (as if ordered canceled by a judge) the day the Rescission Letter was mailed by the borrower to the lender.  It is expected that every borrower rescinding a loan will need to file a lawsuit to force lender compliance with the loan rescission.

"TILA lender compliance" means the lender must return to the borrower the canceled note, reconvey (satisfy/release) the mortgage/deed of trust by removing that lien from the property, and return to the borrower all payments made to the lender.  

On its face, the TILA statute of limitations is 3 years.  However, please review the opinions regarding Equitable Tolling (2015-0302) and No Lender Identified (2015-0306) listed below.  In any case, TILA firmly gives lenders only 20 days to file a legal opposition to a TILA loan rescission.  After that, lender rescission opposition of any type and for any reason is moot.  TILA lender compliance requirements kick in, and any remaining debt can be argued by the lender AFTER lender compliance is completed, but any remaining debt is now unsecured (not secured by a property lien of mortgage or deed of trust) and must be proven in court by the lender, of course without using the note and/or mortgage/deed of trust as those have been rescinded.  

(This is referred to as the bank "losing the loan" in some of the overviews below.  And this is what Congress had in mind when they passed TILA. Congress was trying to get banks to comply with Truth in Lending by making their failure to do that so onerous the banks would comply and be truthful with the borrowers...) 

Here is Neil's key blogtalkradio link (4/09/15): 2015/04/09/neil-garfield-show-on-foreclosure-defense. For more information, please listen to Neil's other blogtalkradio shows back to 1/15/2015. 

Read more.

 

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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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