TILA Rescission in a Nutshell

For more information please call 954-495-9867 or 520-405-1688

NOTE: There are strategic nuances here on when to do what. That is included in our rescission package. Some things are better left unsaid in a public forum. This is not an opinion of law upon which you should rely. You should find an attorney who has studied this issue carefully and then rely on their advice.

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On the one hand you have a bunch of lawyers and judges who have studied the remedy of TILA rescission and all of them have come up with a unanimous conclusion: the deal is canceled when a notice of rescission is put in the mail.
On the other hand you have a bunch of judges and lawyers who have not studied the situation and who have arrived at the mistaken conclusion that they may reinterpret the TILA rescission anyway they want and that the rules of common law rescission will be applied.
Who is right? Answer: group #1. How do I know? Because the Supreme Court in the Jesinoski decision has already ruled and there is no higher place to go. The ruling from the US Supreme Court was unanimous which in our highly polarized world is as unusual as the TILA rescission remedy which they affirmed. The Supreme Court is not always right, but it is always final — their ruling is the law of the land. People can differ on whether they were right or wrong in Jesinoski — but either way there is nothing anyone can do about it. Only Congress can change the law.

TILA Rescission is a strategy that should considered in virtually all consumer loan cases. This might involve an enforcement action in Federal Court or State Court. The sooner you send the rescission the sooner the 20 days will expire. It is ONLY after the 20 days that you can take the position that they are in violation of statute and that they have waived any objection to the rescission — unless they file a lawsuit against you seeking to vacate the rescission, which IS effective by operation of law, the moment you drop it in the mailbox.

There are three TILA RESCISSION duties that arise for every lender and one remedy to get out of it. The three duties are (a) return of canceled note (b) filing any papers necessary to remove the mortgage encumbrance from the homeowner’s chain of title and (c) return of all money ever paid by the borrower or to anyone in relation to the loan whether it be for fees, interest, principal or other compensation. If they want to stop these duties from being applied against any of the people in the chain that made allegations of ownership, balance, servicing or default, they must file suit, as a creditor, within 20 days from the date of the notice and get an order within that time that vacates the rescission.

The creditor has 20 days in which to comply. If they don’t comply ( or sue and get a court order) there are the following consequences: (a) they are in violation of statute, subject to an enforcement suit on their duties under rescission (b) they have waived any objection to the rescission that should have been brought as their own lawsuit within the 20 days and (c) if they continue to stonewall their obligations for one year, the creditor (if there is one) waives any right to demand any payment on the rescinded loan — the debt is extinguished along with the previously extinguished note and mortgage. Standing for the lawsuit can only be by way of allegations that they are the true creditor and cannot be based upon the void note and void mortgage because you can’t use a void instrument as the basis for any claim.

Note that the suit to enforce the rescission is NOT a suit to make the rescission effective by operation of law. The cancellation of the note and mortgage has already happened as the Jesinoski decision made abundantly clear. The note and mortgage are void as of the date of mailing of the notice of rescission.

This is a very unusual remedy for borrowers that both judges and lawyers have been misinterpreting for years. The idea that a borrower, on their own, could end a loan involving hundreds of thousands of dollars with a simple letter is NOT what the Judges or lawyers think is the right approach. It doesn’t matter what they think. Congress passed this law and it was signed into law by the President 50 years ago.

The Courts cannot reinterpret it to mean something else without violation of separation of powers between the judiciary and the legislative branches of government.What matters is that It was not until the Jesinoski decision that thousands of Judges and tens of thousands of lawyers were told that they were wrong for the last 15 years. The loan is cancelled by the mailing of the notice of rescission.

TILA Rescission is a specific statutory scheme that is different from common law rescission. What the Judges and lawyers failed to perceive when they started messing around with the interpretation of a perfectly clear statute is that if their approach was upheld, the entire system of nonjudicial foreclosure would be subject to the same reinterpretation. And for those of you who recall in nonjudicial states, the challenges to nonjudicial foreclosures were met by the banks arguing that the courts have no business interpreting a specific statutory scheme that is very clear on its face and can only be overturned if it is deemed unconstitutional on its face or in its application. The banks won, which means borrowers win on the issue of rescission.

The January ruling from a unanimous Supreme Court was unusual unto itself. The opinion written by Justice Scalia was terse and caustic — showing the court’s irritation at having to remind judges and lawyers that there is a basic rule of law that says that the court may not “interpret” a statute that is unambiguous. This statute is clear as it could be. So even if a Judge doesn’t like it or doesn’t believe it should be the law, or doesn’t like the result, the Judge has no choice but to follow the rule of law set forth in TILA, in Reg Z and in the Supreme Court decision issued in January. The only way this can change is if Congress passes a new law.

The key to your rescission strategy is going to be the answer to this question: under what circumstances is the effective date of the rescission delayed or contingent? The answer is none. That answer follows from the fact that the rescission IS effective on the date of mailing BY OPERATION OF LAW. So the issue has already been decided by Congress, the Federal Reserve (reg Z) and the US Supreme Court. Like any order or act that is effective by operation of law, rescission may be vacated — but not ignored. And like other orders or actions that are effective by operation of law, there are limits on the ability to sue for temporary or permanent injunction.
And THE bank or alleged servicer writing a letter to YOU saying that you have no right to rescind means nothing except that they received the notice — just like when you write a letter to them asking them to please not foreclose because you have in fact made all your payments. The banks and servicers ignore those letters and get foreclosure judgments and sale of the property no matter how many letters you write. If you don’t challenge them IN COURT it means nothing.

Once the 20 days has expired you need to consider whether to hire counsel to prosecute the enforcement of the rescission. Those allegations consist of reference to the note and mortgage, the fact that you did rescind the transaction and that the loan contract is canceled and then the fact that the creditors are in default of their obligations under TILA. The upside is that it should result in cancelling the foreclosure case because the mortgage and note will then be void by operation of law. The Court lacks jurisdiction to enter a judgment of foreclosure on a mortgage that is void at the time the court hears the case. The downside is that if you win the enforcement action it is going to result, if they comply, in them sending the canceled note, filing the satisfaction of mortgage and giving you the money that was paid. But THEN the creditor may, for the first time, demand payment on the old loan. [see our rescission package on further details and strategies on this]

36 Responses

  1. I am trying to help someone find their Pooling and Servicing Agreement. The information is below:

    M ERS #: 100091805003039211 SIS #: 1-888-679-6377
    Date of Assignment: March 6th, 2012
    Assignor: MORTGAGE ELECTRONIC REGISTRAT ION SYSTEMS . INC., AS NOMINEE FOR RESOURCE MORTGAGE BANKING, LIMITED, ITS SUCCESSORS AND ASSIGNS at BOX 2026 FLINT Ml 48501 , 1901 E VOORHEES ST STE C., DANVILLE. IL 61834
    Assignee : US BANK NATIONAL ASSOCIAT ION, AS TRUSTEE FOR ADJUSTABLE RATE MORTGAGE TRUST 2005-2 , ADJUSTAB LE RATE MORTGAGE-BACKED PASS-THROUGH CERTIFICATES, SERIES 2005-2 al 4801 FREDER ICA STREET, OWENSBORO , KY 42301

    · Executed By: HUSBAND AND WIFE AS TENANTS BY THE ENTIRETY To : MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR RESOURCE MORTGAGE BANKING, LTD., ITS SUCCESSORS AND ASSIGNS
    Date of Mortgage: 12/10/2004 Recorded: 12/20/2004 as Instrument No.: 2004-255773 In the County of Honolulu, State of Hawaii.

    Property Address : 82-6291 MANIN! BEACH ROAD, KEALAKEKUA, HI 96750

    James Smith: jsmith5915@msn.com or 443 677 2799. Thanks

  2. Elexquistor, Are you forgetting who we’re dealing with here? You fight fire with fire, arrogance with arrogance, and above all, never give up. If you want to tuck your tail and hide, have at it, not me.

  3. What if within 20 calendar days after receipt of a valid notice of rescission;

    a. the creditor fails to return any money or property that has been given to anyone in connection with the transaction,

    b. the creditor fails to take any action necessary to reflect the termination of the security interest,

    c. and the consumer chooses not to file suit to enforce such actions.

    Except when otherwise ordered by a court;

    d. Wouldn’t after the 20 day time period has expired, the creditor forever forfeit the triggering of the consumers’ statutory obligation to tender?

    And as a consequence of such inaction,

    e. Wouldn’t the consumer have the right retain possession of any property the creditor has delivered to him, indefinitely or possibly discharge liability for such property thru bankruptcy?

  4. Did your bankster file a proof of claim or retain one after you properly rescinded, in which case what you owe them may be limited to an unsecured amt (tender) if THEY perform 1st?

    “The filing of a false proof of claim in a bankruptcy case is
    a crime under 18 U.S.C. § 152(4).
    Although a crime, Congress did not create any private right
    of action for violation of § 152(4). E.g.,Clayton v. Raleigh
    Federal Savings Bank, No. 96-1696, 1997 U.S. App. LEXIS 3503
    (4th Cir. Feb. 27, 1997) (“We agree with the magistrate judge
    that neither statute cited in the amended complaint
    [including 18 U.S.C. § 152(4)] gives rise to a private cause
    of action.”); see also Heavrin v. Boeing Capital Corp., 246 F.
    Supp.2d 728, 731 (W.D. Ky 2003) (same), aff’d, 384 F.3d 199
    (6th Cir. 2004).

    Although the federal criminal statute prohibiting the falsifying
    of a proof of claim does not provide a party with a civil right
    of action, a bankruptcy court is empowered by 11 U.S.C. § 105(a)
    to “issue any order, process, or judgment that is necessary or
    appropriate to carry out the provisions of this title.” The
    statute specifically allows a bankruptcy court to take “any
    action . . . necessary or appropriate . . . to prevent an abuse
    of process Id.; see also Marrama v. Citizens Bank of Mass
    549 U.S. 365, 375 (2007) (noting that bankruptcy courts have
    “broad authority” under § 105(a)).
    As stated by the Court of Appeals for the First Circuit in
    Bessette v. Avco Fin. Servs., 230 F.3d 439, 444-45 (1 Cir. 2000),
    Ҥ st 105 does not itself create a private right of action, but
    a court may invoke § 105(a) ‘if the equitable remedy utilized is
    demonstrably necessary to preserve a right elsewhere provided
    in the Code,’ so long as the court acts consistent with the Code
    and does not alter the Code’s distribution or other substantive
    rights.

    When a creditor files a false or fraudulent proof of claim, that
    filing contravenes the purpose of a specific bankruptcy statute
    and rule. Namely, under 11 U.S.C. § 501, a creditor is allowed
    to file a proof of claim, and under § 502(a), the mere filing of
    a proof of claim means that it is deemed allowed. Under Fed. R.
    Bankr. P. 3001(f), a proof of claim filed in accordance with the
    Bankruptcy Rules constitutes prima facie evidence of the validity
    and amount of the claim. When a creditor files a false or fraudulent
    proof of claim, which is deemed allowed by § 502(a), and entitled
    to prima facie presumption of validity and amount by Rule 3001(f),
    the creditor is abusing the bankruptcy process.
    E.g., Campbell v. Countrywide Home Loans, Inc., 545 F.3d 348, 356
    n.1 (5th Cir. 2008) (noting that a bankruptcy court may use § 105
    to impose sanctions on parties that abuse the procedural mechanism
    related to the filing of a proof of claim); B-Real, LLC v.
    Chaussee (In re Chaussee), 399 B.R. 225, 241 (B.A.P. 9th Cir. 2008)
    (“[I]f a purported creditor abuses the claims process, we are
    confident that § 105(a) provides an effective mechanism for
    addressing that misconduct.”); Rojas v. Citi Corp Trust Bank FSB
    (In re Rojas), No. 09-7003, 2009 Bankr. LEXIS 2220 at *27 (Bankr.
    S.D. Tex. Aug 12, 2009) (holding that § 105(a) may be used in
    support of § 502 and Rule 3001 to hold a creditor in contempt for
    filing a false proof of claim); In re Varona, 388 B.R. 705, 717
    (Bankr. E.D. Va. 2008) (“[Section] 105 may be used to sanction the
    filing of a proof of claim violative of the Bankruptcy Code . . . .
    The filing of a false or fraudulent claim would unquestionably
    constitute an abuse of the claims process as well as an attempted
    fraud upon the court.”)…………….

    Rule 9011, however, like is counterpart, Fed. R. Civ. P. 11, has
    never been an exclusive remedy for an aggrieved party; rather,
    nothing precludes a party from pursuing other causes of action
    aimed at remedying the same wrong, such as seeking sanctions under
    28 U.S.C. § 1927 (imposing sanctions for unreasonably and vexatiously
    multiplying proceedings), or relying on the inherent power of the
    court to impose sanctions for bad faith conduct. E.g., 2 Moore’s
    Federal Practice – Civil § 11.41[1] (2010) (“The inherent power of
    federal courts to impose sanctions for bad-faith conduct in the
    course of litigation is not displaced by the sanctioning provision
    of Section 1927 or Rule 11. Moreover, the district court is not
    required to apply other sanctions provisions first.”).

    Consequently, this court does not believe that the availability of
    Rule 9011 sanctions to a party to address an allegedly false or
    fraudulent proof of claim is an exclusive remedy.

    Accordingly, like Varona, 388 B.R. at 717, this court recognizes
    a cause of action for contempt under 11 U.S.C. § 105(a) when a
    creditor allegedly seeks to abuse the provisions of the
    Bankruptcy Code – namely §§ 501 and 502 and Rule 3001 – by
    filing a purportedly false or fraudulent proof of claim. Holding
    a creditor in contempt under § 105 is an appropriate remedy to
    prevent an abuse of the proof of claim process and safeguards the
    integrity of the proof of claim process.”

    As I recall (only), in order to prosecution under rule 9011, one must give the bums 21 day notice during which they can and should withdraw the offending whatever. I don’t think that applies to 105.
    Ask a seasoned bk lawyer.

  5. Apologies to Neil. The post was not pulled. My eyes are getting really tired reading all the small print.

  6. @beauduke – If you’re not represented you’re already frowned upon by the court. Presenting an invalid legal point loses whatever shred of respect they feel they owe you. Why waste their time and yours? There may be homeowners who actually have a case whose trial is delayed for your antics.

  7. Interesting about the single link limitation on LivingLies. I posted a comment with 2 links to the Jesinoski and Beach cases. I now see it has been pulled.

    It was quite contradictory with respect to Garfield’s commentary. Beach was a case where rescission was unsuccessfully attempted after the 3-year limitation as an affirmative defense. Comments by the judges indicated it can be used as affirmative defense if presented within the 3 years.

  8. Aww …yes that 3 years is the deadline – unless – tolling can be shown to never have commenced hmmm
    Not a lawyer dont rely on my posts research the heck out of it

  9. SEE
    http://www.ca6.uscourts.gov/opinions.pdf/14a0745n-06.pdf
    Take this away “. Lesson: If BOA suddenly dismisses the action it can only be the result of their knowledge that they had no right to foreclose in the first place”

  10. It’s actually been 10 years since the re-fi (loan in question) so yeah, this is really just rolling the dice since it looks like an imminent foreclosure action (non-judicial) so why not. If they do challenge it on a timely basis, I guess I better find some equitable tolling issues???

  11. Here from the case see :
    stated in JESINOSKI ET UX. v. COUNTRYWIDE HOME LOANS, INC., ET AL.

    “The Jesinoskis mailed respondents written notice of their intention to rescind within three years of their loan’s consummation. Because this is all that a borrower must do in order to exercise his right to rescind under the Act, the court below erred in dismissing the complaint. Accordingly, we reverse the judgment of the Eighth Circuit and remand the case for further proceedings consistent with this opinion.”

    And that is that.

  12. Beauduke –
    But you must be ready and able for the day, that If challenged, you will need to show that the lender failed to satisfy the Act’s disclosure requirements until three years after the date of consummation of the transaction or upon the sale of the property, whichever came first.

  13. Deborah, thanks for the reply. So I need to send the rescission letter to my worthless excuse for a servicer (referencing the original “lender” I presume) and I am covered?

  14. DW – LL only allows one link per comment. So do two!

  15. And lastly then ill shut up
    I saw a notice whilst getting my car serviced today it said
    Do what is the right thing to do rather than wanting to be right
    Isnt that it – Holding on to the ” right thing”

  16. I posted several links but it went to ” moderation” which i get. Thank you.

  17. You send to creditor via servicer who service the loan
    ( my bet is you dont know who the creditir actually really is because theres no record other than the pretender lender on the land records and the loan was sold despite no record yiu have acess to as in mers recird and MERS holds as ” beneficiary” as bare legal title ” holder” ( remember no interest in tne debt) yes) – rescission to one who service the loan ( and for the love of god better know who the real party in interest is that needs to know you rescinded) that is rescission to all , drop it in the mail with tracking/ priority or return receipt as proof of mailing. This is my understanding and this is what i did i am not giving legal advice merely sharing so check with council or get council to do this for you preferably, im not a lawyer, please check with one who understands the importance of the jesinoski decision, heres the case again. Good luck.

    The plaintiff …. mailed to creditor written notice of her intention to rescind within three years of the loan’s consummation. Because this is all that a borrower must do in order to exercise his right to rescind under the Act, the panel erred in its Memorandum

    further it is stated in JESINOSKI ET UX. v. COUNTRYWIDE HOME LOANS, INC., ET AL. as under:

    “Congress passed the Truth in Lending Act, 82 Stat. 146, as amended, to help consumers “avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing.” 15 U. S. C. §1601(a). To this end, the Act grants borrowers the right to rescind a loan “until midnight of the third business day following the consummation of the transaction or the delivery of the [disclosures required by the Act], whichever is later, by notifying the creditor, in accordance with regulations of the [Federal Reserve] Board, of his intention to do so.” §1635(a) (2006 ed.).* This regime grants borrowers an unconditional right to rescind for three days, after which they may rescind only if the lender failed to satisfy the Act’s disclosure requirements. But this conditional right to rescind does not last forever. Even if a lender never makes the required disclosures, the “right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever comes first.” §1635(f).”

    So i had a right to rescind if the lender failed to satisfy the Act’s disclosure requirements until three years after the date of consummation of the transaction or upon the sale of the property, whichever came first.

  18. A couple of elementary questions. 1) Who do you have the rescission delivered to? The entity listed on the note / mortgage as the “lender”? What if they are no longer in business? Does it need to be sent to anyone else (trust, servicer, etc) to be legally delivered? 2) does anyone have a template of the actual letter that is sent?

  19. I’m non judicial
    I rescinded properly and timely and i filed an action before they foreclosed and filed lis pendens citing my timely rescission – lus was wrongfully exponged the judge was WRONG. They sold my home to another who had no right to possession because i was never served and lots more to that issue in state court being separate issue innseparate suit, however and im still fighting and that rescission has teeth, in both my cases….the key here is keep fighting find a way round any problem – theres always a remedy. Im in the life saving business so i got good at that.

  20. TILA runs from the time you receive Lawful Disclosures.
    Tolling…..
    And if the bankster broker does not like that…tough shit!

    I prefer to Enforce the contract myself.
    Its so much more fun seeing the scumbag squirm.

    My Bad!

  21. Elex: “In Beach, the answer is yes, if the conditions precedent, including the 3-year limitation, are met, you can exercise rescission as an affirmative defense.”
    Certain info online suggests rescission may be exercised as a defense (or even counter-claim) at any time, even beyond the three years. Many allegations otherwise defeated by the st of limitations may be called upon as defenses or counter-claims. The only question is: is TILA “stuff” one of them? One blogger says yeah in judicial foreclosure and nay in non-j foreclosure, the apparent reasoning being that non-j is often not seen as an “action”. Me: bs!

  22. From a 9non-GSE) Prospectus:

    “RISK FACTORS:

    VIOLATION OF VARIOUS FEDERAL AND STATE LAWS MAY RESULT IN LOSSES ON THE MORTGAGE LOANS

    Applicable state laws generally regulate interest rates and
    other charges, require certain disclosure, and require licensing
    of the Originator.
    In addition, other state laws, public policy and general principles
    of equity relating to the protection of consumers, unfair and
    deceptive practices and debt collection practices may apply to the
    origination, servicing and collection of the Mortgage Loans.

    The Mortgage Loans are also subject to federal laws, including:

    * the Federal Truth-in-Lending Act and Regulation Z promulgated
    thereunder, which require certain disclosures to the borrowers
    regarding the terms of the Mortgage Loans;

    * the Equal Credit Opportunity Act and Regulation B promulgated
    thereunder, which prohibit discrimination on the basis of age, race,
    color, sex, religion, marital status, national origin, receipt of
    public assistance or the exercise of any right under the Consumer
    Credit Protection Act, in the extension of credit;

    * the Fair Credit Reporting Act, which regulates the use and reporting
    of information related to the borrower’s credit experience;

    * the Depository Institutions Deregulation and Monetary Control Act of
    1980, which preempts certain state usury laws; and

    * the Alternative Mortgage Transaction Parity Act of 1982, which
    preempts certain state lending laws which regulate alternative
    mortgage transactions.

    Violations of certain provisions of these federal and state laws may
    limit the ability of the Master Servicer to collect all or part of the principal of or interest on the Mortgage Loans and in addition could subject the trust to damages and administrative enforcement.

    **In particular, the Originator’s failure to comply with certain requirements of the Federal Truth-in-Lending Act, as
    implemented by Regulation Z, could subject the trust to monetary penalties, and result in the borrowers’ rescinding the Mortgage Loans against the trust. **

    In addition to federal law, some states have enacted, or may enact, laws or regulations that prohibit inclusion of some provisions in Mortgage Loans that have interest rates or origination costs in excess of prescribed levels, and require that borrowers be given certain disclosures prior to the consummation of the Mortgage Loans …..
    The Originator’s failure to comply with these laws could subject the trust to significant monetary penalties, could result

    in the borrowers rescinding the Mortgage Loans against
    the trust

    and/or limit the ….ability to foreclose upon the related mortgaged property in the event of a mortgagor’s default. See “Legal
    Aspects of Mortgage Assets–Anti-Deficiency Legislation and Other Limitations on Lenders” in the prospectus.

  23. Rescission. …

  24. I would rather be a nit wit than be in your shoes.

    Let me ask you this…doodoo head……
    If I can’t get good title by paying off the debt…..
    How do you expect to get one with recession?

  25. @Shadowcat –
    The ramblings of a nit
    That totally lack wit

    Begone! Forthwith! Nitwit!

  26. The banksters by denying a valid recession is a bluff tactic.

    Pay those taxes folks!

  27. And Beach answered a question asked earlier – can you exercise rescission after foreclosure notice. In Beach, the answer is yes, if the conditions precedent, including the 3-year limitation, are met, you can exercise rescission as an affirmative defense.

    IANAL, but I do have a command of the English language.

  28. MK…google it.
    Bringing down the Central Bankers is the same thing as bringing down the Federal Reserve.

    How do you convert $13 trillion in mortgages into $680 trillion on the 2ndary market? There is not that much money on the face of the earth combined. Zero hedge futures market.

    Derivatives ….. My checks went Proof!

  29. @ Shadowcat,
    And for the record, I don’t feel the collapse of the “petro-dollar” is a bad thing, provided it drags the central bankers down with it.

  30. @ Shadowcat,

    Alright, I’ll bite: “What foreign troops”?

  31. Its a sad day when Veterans are the #1 on the terrorist list.
    Sighs

    Make New Friends but Keep the Old…..
    One is Silver and the other is Gold.

    KC

  32. ” The Collapse of the U.S dollar as the World Reserve Currency”
    The Petro dollar is toast.
    Our government sold us out…..foreign troops on American Soil.
    “Marshall Law” for those who don’t comply with the NWO.
    Veterans 1st on the list …….

  33. @ Shadowcat,

    You never did give me your analysis of “Jade Helm”. I admit I am curious. Please expound.

  34. Unclaimed assets escheat…
    State Your Claim!

    I will give them a domestic partner alright…hahaha
    35 years worth……

  35. No Trust……
    Assets revert back to the Granter/Settlor.
    With bad titles….30 years is a long time to wait.

    They counted on till Death do you part…..
    Or you defaulting….to cover the theft.

    Hit the Road Jack….and don’t come back!
    Every MERSbody is going to court!

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