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So, if you are behind in your payments, in foreclosure or in bankruptcy send the lender the RIGHT TO CANCEL NOTICE immediately and if the lender does not file a lawsuit within 20 days you have voided the mortgage and the note. Note: TILA is effective for Refinance or HELOC.
Jesinoski v. Countrywide Home Loans, Inc., 574 U.S. ___ (2015), is a United States Supreme Court case in which the Court held that the Truth in Lending Act does not require borrowers to file a lawsuit to rescind loans and that sending written notice is sufficient to effectuate rescission. Some analysts have described Jesinoski as a "landmark case" in Truth in Lending Act.
Truth in Lending Act Rescission Requirements.
In 1968, Congress passed the Truth in Lending Act to help consumers "avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing." The Act gives borrowers the unconditional right to rescind loans within three days of consummation of the loan, after which they may rescind only if the lender failed to satisfy the Act’s disclosure requirements. However, even if lenders never provide the required disclosures, borrowers only retain the right to rescind loans up to three years after the loan's consummation.
A borrower must exercise the right of rescission within (1) three business days of signing the loan papers, (2) receiving all the loan disclosures, (3) and getting a copy of the NOTICE OF RIGHT TO CANCEL the right of rescission. Usually, all three of those requirements are met on the same day; if they aren’t, the clock starts ticking only after all three conditions have been satisfied.
“The language[of TILA] leaves no doubt that rescission is effected when the borrower notifies the creditor of his intention to rescind.
To stop rescission the Bank must file a suit within 20 days and argue that rescission is improper. Therefore you can rescind the mortgage even when past the three year right of rescission. See Jesinoski v. Countrywide Home Loans, Inc. Held: "A borrower exercising his right to rescind under the Act need only provide written notice to his lender within the three-year period, does not have to file suit within that period. Section 1635(a)’s unequivocal terms—a borrower “shall have the right to rescind by notifying the creditor of his intention to do so”
This ruling leaves no doubt that rescission is effected when the borrower notifies the creditor of his intention to rescind. This conclusion is not altered by §1635(f), which states when the right to rescind must be exercised, but says nothing about how that right is exercised. Therefore the TILA's (The Truth in Lending Act's) three year right of rescission never tolled.
Why? Because the true lender was never disclosed.
Why? Because the loan was never "consummated."
In the Ramsey v. Vista Mortgage Corp, 176 BR 183 (TILA RESCISSION IN BANKRUPTCY CHAPTER 13) case the court laid down the test of when the three year right to rescind begins to run and specifically tackles the concept of when a loan is “consummated.” Several internal citations also help clarify this point. Here is what the Ramsey Court said:
“When Ramsey signed the loan documents on September 13, 1989, he knew who was going to provide the financing. Courts recognize the date of signing a binding loan contract as the date of consummation when the lender is identifiable.” The Court also cited to the Jackson v. Grant, 890 F.2d case (9th Circuit 1989), a NON-BANKRUPTCY CASE, and said:
“under California law a loan contract was not consummated when the borrower signed the promissory note and deed of trust because the actual lender was not known at that time. Under these circumstances, the loan is not “consummated” until the actual lender is identified, because until that point there is no legally enforceable contract.”
If you have no contract, there is nothing to rescind, but I guess you could say that it’s merely a discovery point and the rescission is conditionally effective until discovery is complete as to what actually occurred and can be put together by the court from the evidence (Then maybe a TILA rescission will be effective, maybe not; if not because there is no contract, what does the homeowner care? You will get the same result, plus he gets to sue for fraud and other damages suffered.), but what’s a homeowner to do when past three year right of rescission when arguing TILA?
...if it turns out that consummation did not occur because the broker willingly withheld the table funded partners identity, or alternatively was acting as STRAWMAN for undisclosed investors, and was using their money directly instead of funneling through the REMIC to purchase the home loan (therefore it really was not a buy-sell transaction, it was a disguised buy using duped investors money who expected a legitimate buy-sell to occur, but the REMIC was not properly funded), then what angle do you think is best for TILA? Leave consummation out of the initial argument, and hang your hat on equitable tolling if past three year mark, or keep it in and argue both points”
This raises an interesting question. If the lender was not disclosed at closing, then is a TILA rescission effective? My first answer is that if the rescission notice is sent, then the mortgage and note are nullified by operation of law unless the “lender” files a lawsuit within 20 days contesting the notice of rescission. So whether you were right or wrong, it would be my opinion that if the “lender” does not respond, the matter is closed and that is the end of the note and mortgage. And if there is no note and mortgage then anything that happens afterwards is void because the lender cannot foreclose on a mortgage that legally does not exist, even if a copy of the mortgage is sitting in county records.
A sale would also be void (a wrongful foreclosure).
The answer is found in the court system is that if the lender is not disclosed there can be no consummation because there is no loan contract unless you have at least two identified parties. If there is no loan contract there is nothing to rescind. But an admission from the “lender” or a finding by the court that TILA rescission is not available because the loan contract was never consummated or did not exist leads to one conclusion: the borrower still wins. The borrower can then sue to nullify the note, mortgage, debt, foreclosure and foreclosure sale on the basis that they are void by operation of law because there was no deal. And the borrower could then, in my opinion, sue to have the banks and servicers return the monthly payments and other payments they collected on the nonexistent contract for all the money they collected. This too is supported by some case decisions where Bank of America and others have been required to disgorge money they received when they had no right to collect it in the first place.
So while there is a specific legal theory on how to deal with this issue there is also a hidden issue that probably puts the pretender lenders in the corner. In order to challenge the rescission the bank must file a lawsuit within 20 days asking for declaratory relief that the rescission is not effective. If their grounds are that TILA rescission is not available because there was no contract, then they are essentially arguing that the borrower can’t rescind because there was no contract. Either way they lose the deal, the mortgage, the note; everything.
But that is not the only problem for pretender lenders. In order to establish standing to challenge the rescission they must allege that they or their predecessors were the real lenders (not pretender lender mortgage brokers) and were the actual source of funding. Those allegations puts the burden of proof on the pretender lenders. They must prove the original loan and the acquisition of the loan not just by paperwork that says it happened by showing that money exchanged hands both at origination and acquisition of the loan.
In plaintiffs' action under the Truth in Lending Act against defendant for refusing to refund a $500 deposit plaintiffs' demanded after they attempted to exercise their right to rescind prior to closing on a loan to refinance their house, summary judgment for defendant is affirmed as a consumer cannot exercise the right to rescind created by 15 U.S.C. section 1635(a) until after consummation of a consumer credit transaction. See: Weintraub v. Quicken Loans, Inc., No. 08-2373
The Process Of Rescission
(one point of view that deserves consideration)
The procedural question of whether a notice of rescission can be challenged outside the 20 day period provided in the Truth in Lending Act is something that lawyers need to consider before they tell a client they cannot rescind. If there is an arguable basis for sending the notice on the belief that it is proper, then the defenses to the rescission can only be raised by operation of a legal proceeding — in a court room.
The receipt of the rescission notice means there is no more mortgage and there is no more note until a court says otherwise. And the court can’t say otherwise unless the “lender” brings a lawsuit to challenge the rescission within 20 days of receipt. Since there have been no such lawsuits filed to my knowledge it therefore appears to me that all notices of rescission that were ignored or “rejected by letter” had the effect of making the mortgage and note permanently void by operation of law without any lawsuit needed to enforce that presumption. (see US Supreme Court decision (Jesinoski v. Countrywide Home Loans, Inc.) written by Justice Scalia).
The Truth and Lending Act was passed by Congress to punish banks who screwed with the system so they would essentially police themselves. Obviously that premise didn’t work until now. It is national public policy not a gimmick. They (Congress) gave the “lenders” a very short window to undo the damage if they thought the borrower was wrong but if we read the plain words of the statute and the plain words of the Supreme Court, if they don’t do it within the 20 day window, they have lost the loan. They might still theoretically be able to collect on the loan but only if they can prove they loaned the money or paid for the debt. Their action would essentially be for unjust enrichment. And it would be unsecured.
No Consummation, No Tolling of TILA Three Year Rescission Right
“In regards to getting TILA rescission attempts past the three year mark of when loan was supposedly “consummated"; I came across the following case of Weintraub v. Quicken Loans, Inc., No. 08-2373 in 4th circuit saying, “No consummation, No TILA rescission.”
“the Ninth Circuit held that under California law; a loan contract was not consummated when the borrower signed the promissory note and deed of trust because the actual lender was not known at that time. Under these circumstances, the loan is not “consummated” until the actual lender is identified, because until that point there is no legally enforceable contract.”
Right Of Rescission Lets You Back Out Of Some Loans By Holden Lewis • Bankrate.com
Federal law gives you a cooling-off period when you get a home equity loan or line of credit, or when you refinance with another lender.
It is called the right of rescission. It allows you to rescind, or cancel, some types of home loans and walk away without losing money.
The right of rescission provides a three-day period when you can back out of the loan before you get the borrowed money, no questions asked. Within 20 days, the lender must give up its claim to your property as collateral and must refund any fees you paid.
A law called the Truth in Lending Act, which is designed to shield borrowers from unscrupulous lenders, grants the right of rescission. The law is intended to thwart smooth-talking loan officers who try to fleece elderly or unsophisticated borrowers out of their money and even their homes.
The law also protects consumers from themselves. The homeowner who takes out a home equity line of credit to buy a car, then thinks it over for a couple of days and decides that such financing would be a bad move, can rescind the loan. Likewise for the homeowner who takes out a home equity loan, then finds a better deal a day or two later. The homeowner can rescind the first deal within three business days and take the second.
Bankrate, Inc. is the Web's leading aggregator of financial rate information, offering an unparalleled depth and breadth of rate data and financial content.
NOTICE OF RIGHT TO CANCEL Does not apply to all loans.
The right of rescission is not available for all mortgages. Most importantly, there is no right of rescission for a mortgage made to build a house. Borrowers and lenders can get tangled up in whether a mortgage is a purchase loan. Take, for example, the way financing is set up for many built-to-order houses. You get a short-term construction loan while the house is being built; then, after the house is finished, you pay off the construction loan with a permanent mortgage. The permanant loan is considered a refinance; not a money purchase.
The right of rescission also is not available when you refinance your loan with the same lender, when the house in question is not your primary residence (in other words, if it’s your vacation home or an investment property), if you borrow the money for your business, or if you’re borrowing from a state agency.
That leaves a lot of situations where you do have the right of rescission: when you refinance your mortgage with another lender and when you take out a home equity loan or line of credit (unless it’s part of a “piggyback loan” designed to avoid paying mortgage insurance).
Cash-Out Refinance Rules
Things get complicated if you do a “cash-out refi” — refinancing for more than you owe on your current mortgage, and taking the difference in cash. If you do a cash-out refi with the same lender, you have the right to rescind only the cash-out portion; if you do a cash-out refi with a different lender, the entire amount can be rescinded.
It doesn’t matter what kind of home you have: if it’s a single-family house, a condominium, a floating home or a manufactured home permanently anchored to land you own, you have the right of rescission.
When The Clock Starts Ticking...
That clock ticks only on business days. Much has been written by federal regulators about what counts as a business day. In general, every day is a business day except Sundays and federal holidays. Saturday counts as a business day, even if the lender’s office is closed on Saturdays. The right of rescission expires at midnight concluding the third full business day after the papers are signed and all other conditions are met. So, for example, if you close a home equity loan on Thursday, the clock starts ticking Friday, continues to tick on Saturday, stops on Sunday and resumes on Monday. The right of rescission ends Monday at midnight.
To exercise your right of rescission, you must inform the lender in writing — a phone call won’t do. The letter doesn’t have to be postmarked by the deadline — you merely have to drop it in a mailbox by the deadline. That means that if your right of rescission ends at midnight Saturday night, and you mail the letter just before the deadline, and Monday is a federal holiday so the letter isn’t postmarked until Tuesday, you still have rescinded the loan.
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