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see Jonathen Foxx article on TILA Rescission BEFORE the Supreme Court decision http://nationalmortgageprofessional.com/news/42119/tila-versus-tila-rescission-notice-or-lawsuit
In my continuing research into the mechanics of rescission I keep bumping into articles like the Foxx article in the link shown above. While he concedes that no lawsuit is required to “effect” rescission, he seems concerned that the mechanics (procedure) are such that the impact on banks would be onerous and impossible to fulfill.
My answer to that is simple and seems to be borne out by the unanimous Supreme Court decision penned by Justice Scalia. The answer is that it isn’t supposed to be nice to the banks. It was decided by the highest legislative authority in the country (Congress, and now the highest court in the land) that rescission is effective as of the date of mailing and that all the duties and obligations of the creditor commence as of the date of rescission, and that they have 20 days to do it all. If they fail to comply then they are responsible for their own “injury’ (if that have one) in potentially waiving or suspending any right they have to recover the net debt due from the borrower whose obligation they purport to own, manage or service.
Foxx is right when he says that getting an actual final decision from any court during the 20 day period puts an impossible burden on the creditor who believes that the the rescission was improper or otherwise barred by some set of facts, rules or laws. But that is exactly what Congress did after very careful consideration of the competing ideas and claims from both the consumer side and the banking side.
The simple truth is that if the bank was the actual lender and they had all their proof of their disclosures etc., they would easily get a court order to set aside the rescission. Presumably their failure to comply with TILA would then be excused. And speaking of presumptions TILA says that if the borrower signs an acknowledgement that the disclosures were made, there is a presumption that the disclosures were in compliance with statute.
So IF the creditor proves they are a creditor on the basis of proper pleading the burden shifts back to the borrower to justify the rescission notice. BUT that is only true if the creditor files a lawsuit within 20 days of the notice contesting the the rescission. And yet, there is no evidence that any 20 day lawsuit has been filed by any creditor or servicer who received a rescission notice. Instead they have cooked themselves in their own stew.
Instead of complying with statute by giving back the note, mortgage satisfaction and the money AND/OR filing the action to contest the rescission, the banks instead either ignored the notice or sent back a notice of rejection of the rescission which completely cures the borrower’s problem about delivery of the notice.
Actually in most cases the Banks had no choice. If they had filed suit the way the TILA statute demands, then they would be admitting that the loan was not necessarily secured (and that the note was not necessarily a negotiable instrument) and in fact that the alleged debt was at that moment unsecured by operation of law. Sales and resales, of mortgage backed securities, guarantees, insurance, credit default swaps and other hedge products would have come to a screeching halt. So the banking industry took the position that there was at least an arguable basis for rejecting the rescission. By kicking the can down the road they enlarged the time that they could sell more bogus mortgage backed securities and enlarged the negative impact on the country.
PRACTICE SUGGESTION: Consider the fact that the current interpretation of TILA allows for rescission and might allow for equitable tolling (this is still in doubt), the defined elements of negotiable paper might not be present until all possibilities of rescission were obliterated. Hence being a holder or even a holder in due course of the paper would not give rise to any presumptions in favor of the bank, “lender,” or servicer as holder or anything else. It would be a simple lawsuit based upon alleging and proving up the debt and alleging and proving the mortgage as collateral for the debt — something the banks don’t seem to be able to do because they misused the investor money in the first place and if they proved or even alleged what they really did with the investor money they would be admitting to potentially criminal and certainly civil fraud.
Here are some quotes form the Foxx article that I found interesting:
Thursday, September 4, 2014 – 12:54