livinglies.wordpress.com | July 17, 2015
By Neil Garfield
The question is what do you do after you have sent the notice of rescission? And that extends to rescissions that were sent years ago. There are many nuances here caused by State and Federal law. But one thing cannot denied: the rescission is effective by operation of law when it is mailed and nothing except another operation of law can change that.
Practice Note for Lawyers: Lawyers for the banks and servicers are attempting to use fear and intimidation — trying to grab back the narrative. They can only do that if you let them. When they ask you for tender of payment, the answer is that AFTER they have returned the cancelled note, and AFTER they have filed a release and satisfaction of the mortgage or deed of trust and AFTER they have paid the borrower ALL the money that is due under the statute (all borrower payments plus all compensation paid to anyone) THEN they might be able to demand payment (without the security of a mortgage or deed of trust). BUT — they can’t ask for the money if more than one year has expired since the notice of rescission (assuming they have not complied with the TILA rescission requirements).
It is really much simpler than what is being discussed in the cyber-sphere. There is nothing to interpret — that is a direct instruction from the US Supreme Court. Follow the steps in the TILA statutes and remember at each step that the rescission is effective upon mailing; and remember what that means — that the loan contract is canceled, the mortgage is void, and so is the note. Only the borrower is given statutory authority to cancel the loan non judicially in the form of a letter.
There is no provision in the statute for lenders, creditors, or investors or trustees to challenge the rescission — but we know by black letter law that in the absence of a specific statutory provision, there can be no meaningful non judicial action (i.e., a letter) by those who would claim the right to collect or foreclose even if the State is a nonjudicial foreclosure state. They MIGHT have a right to sue to vacate the rescission. They might have a damage action based upon “wrongful rescission.” And they have probably waived their “defenses” to the rescission if they have not filed the suit within 20 days of receipt of the rescission. And they may have waived the debt if more than one year has passed since the receipt of the notice of rescission.
But in all cases (1) they must act by taking the matter to court (which means pleadings filed with allegations of jurisdiction (standing), cause of action and a short plain statement of ultimate facts upon which relief could be granted and (2) they cannot use the note and mortgage to establish standing (they are “holders” of a void instrument arising out of a cancelled loan deal). They must allege facts that show they were financially injured by the rescission.
And note well that the real parties in interest in most of these foreclosures are neither the Trust (who never owned the loan) nor the investors (who are getting paid through servicer advances, thus nullifying the allegation of default). The servicer needs to push the case to foreclosure, not modification or settlement, because foreclosure is the only way the “servicer” might recover its volunteer payments to the investors who are the the only parties to whom money is owed — albeit by quantum meruit and not by contract or legal instrument.
Rescission threatens those claims for servicer advances — many of which have been securitized themselves!
THAT is why modifications are treated as a game (to satisfy regulators that they are trying to modify loans) — servicers cannot admit that they are really looking to get paid in their own right and not to collect on behalf of the investors, who will lose more money in a foreclosure than they would in a workout of the loan.
All that and more tonight on the Neil Garfield show.
Nancy Duffy McCarron, CBN 164780
Attorney, Real Estate Broker, BBB Arbitrator, CA Notary Public
Certified Forensic Loan Auditor, Property Manager
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