THE NEIL GARFIELD SHOW: HOW LATE CAN A BORROWER RESCIND OR CANCEL A LOAN? JESINOSKI REVISITED

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The parties were invited to attend a meeting at which the borrowers signed the papers. The originator is usually not in attendance. The closing agent, usually a title agent, takes the signed documents into escrow. At some later time the alleged loan is “funded” by a wire transfer from an unknown source. The borrower believes that the originator is loaning him the money. In truth it was a “table-funded” loan in which the name of the actual lender was actively concealed from the borrower and the actual “loan” was not funded until some time after the meeting. Later the mortgage is recorded and the note is released from escrow and sent to someone whom the closing agent assumes to be authorized to receive it. When was consummation?

Later the successors to the loan documents will allege that the loan closing was “consummated” at the time of signing, but that is not right. If there was a consummation of the loan at all it didn’t occur until hours, days, weeks or months or even years after the meeting. It is a question of fact as to when the alleged loan was consummated. And if there was a table-funded loan there might have been no consummation at all. Instead whoever the real lender is might have some claim for quantum meruit or unjust enrichment to get their money back but if they raise that claim they cannot do it using the note and mortgage. So when does the three day period commence for rescission? When does the three year period begin for rescission? Is there a time when the borrower is prohibited by statute from sending the notice of rescission? And what happens if some company steps up and complies and then asks for the money? They don’t have to object to rescission — they can agree. If rescission is effective when mailed, who can vacate it?

11 Responses

  1. Except…the pretender lenders brokers gave me the orders but my clients (the party who hired me and paid me) the title companies told me my job was to make their clients happy.

    So I knew by looking at your closing docs was behind the scenes and would soon become the servicers.

    But it was the lying ass brokers who played bait and switch and it was the title companies lawyers who wanted the back dated docs….the majority used DocX. ..and while Mrs snotty nose Brown whom I had prior dealings was used as a distraction…..the big boys hid behind LPS and LSI… The ABA s. Buddies.

  2. Lauren. … Very Nice! Very True! That’s exactly what they did…..
    I admit tube money was enticing but I am an Old Fashion Gal!

    Take this job and Shove It.. I ain’t a working for you No More.

    Imagine how I felt as a CWALT investor.

    I was being screwed by both ends of the stick and was being ask to violate the law..or…they would (take their business elsewhere).

    Bye…

  3. Non-exempt transactions under TILA and or Regulation Z are void by operation of law, the instant that the borrower places his or her written notice of intent to rescind such transactions, in the mail.

    Non-exempt transactions are transactions other than the following:

    15 USC §1635(e) Exempt transactions;

    This section does not apply to:

    (1) a residential mortgage transaction as defined in section 1602(w)* of this title;

    (2) a transaction which constitutes a refinancing or consolidation (with no new advances) of the principal balance then due and any accrued and unpaid finance charges of an existing extension of credit by the same creditor secured by an interest in the same property;

    (3) a transaction in which an agency of a State is the creditor; or

    (4) advances under a preexisting open end credit plan if a security interest has already been retained or acquired and such advances are in accordance with a previously established credit limit for such plan.

    12 CFR §1026.23(f) Exempt transactions;

    The right to rescind does not apply to the following:

    (1) A residential mortgage transaction.

    (2) A refinancing or consolidation by the same creditor of an extension of credit already secured by the consumer’s principal dwelling. The right of rescission shall apply, however, to the extent the new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the costs of the refinancing or consolidation.

    (3) A transaction in which a state agency is a creditor.

    (4) An advance, other than an initial advance, in a series of advances or in a series of single-payment obligations that is treated as a single transaction under § 1026.17(c)(6)**, if the notice required by paragraph (b) of this section and all material disclosures have been given to the consumer.

    (5) A renewal of optional insurance premiums that is not considered a refinancing under§1026.20(a)(5)***.

    *15 USC §1602(w)

    The term “residential mortgage transaction” means a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained against the consumer’s dwelling to finance the acquisition or initial construction of such dwelling.

    **12CFR §1026.17(c)(6)

    (i) A series of advances under an agreement to extend credit up to a certain amount may be considered as one transaction.

    (ii) When a multiple-advance loan to finance the construction of a dwelling may be permanently financed by the same creditor, the construction phase and the permanent phase may be treated as either one transaction or more than one transaction.

    ***12CFR §1026.20(a)(5)

    The renewal of optional insurance purchased by the consumer and added to an existing transaction, if disclosures relating to the initial purchase were provided as required by this subpart.

  4. Background
    ABC Mortgage Institution (ABC) enters into fixed, adjustable, and floating derivative loan
    commitments to originate mortgage loans that it intends to sell. The institution accounts for the
    commitments as derivative financial instruments as required under FAS 133.
    ABC enters into best efforts contracts with a mortgage investor under which it commits to
    deliver certain loans that it expects to originate under derivative loan commitments (i.e., the
    pipeline)
    and loans that it has already originated and currently holds for sale (i.e., warehouse
    loans).
    ABC and the mortgage investor agree on the price that the investor will pay ABC for an
    individual loan with a specified principal amount prior to the loan being funded.
    Once the price
    that the mortgage investor will pay ABC for an individual loan and the notional amount of the
    loan are specified, and ABC is obligated to deliver the loan to the investor if the loan closes,
    the
    contract represents a forward loan sales commitment. Under FAS 133, ABC accounts for these
    forward loan sales commitments as derivative financial instruments.
    david belanger (@revolutionnow1), on June 28, 2015 at 10:57 am said:
    all should read this doc.
    OCC 2005-18
    Attachment
    Date: May 3, 2005 Page 1
    Office of the Comptroller of the Currency
    Board of Governors of the Federal Reserve System
    Federal Deposit Insurance Corporation
    National Credit Union Administration
    Office of Thrift Supervision
    INTERAGENCY ADVISORY ON ACCOUNTING AND REPORTING FOR
    COMMITMENTS TO ORIGINATE AND SELL MORTGAGE LOANS
    • Originate mortgage loans that will be held for resale, and
    • Sell mortgage loans under mandatory delivery and best efforts contracts.
    Commitments to originate mortgage loans that will be held for resale are derivatives and must be
    accounted for at fair value on the balance sheet by the issuer. All loan sales agreements,
    including both mandatory delivery and best efforts contracts, must be evaluated to determine
    whether the agreements meet the definition of a derivative under Statement of Financial
    Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as
    amended by Statement of Financial Accounting Standards No. 149, Amendment of Statement 133
    on Derivative Instruments and Hedging Activities (collectively, FAS 133). Institutions should
    also account for loan sales agreements that meet the definition of a derivative at fair value on the
    balance sheet.
    The advisory discusses the characteristics that should be considered in determining whether
    mandatory delivery and best efforts contracts are derivatives and the accounting and regulatory
    reporting treatment for both commitments to originate mortgage loans that will be held for resale
    and those loan sales agreements that meet the definition of a derivative. The advisory also
    addresses the guidance that should be considered in determining the fair value of derivatives. A
    simplified example is included to provide general guidance on one approach that may be used to
    value commitments to originate mortgage loans that will be held for resale.
    The Agencies1
    believe the accounting guidance in this advisory is consistent with generally
    accepted accounting principles (GAAP). Institutions are expected to apply the guidance in this
    advisory when preparing their regulatory reports.
    1
    The Agencies are the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal
    Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union
    Administration (NCUA), and the Office of Thrift Supervision (OTS).
    The OCC now supervises federal savings associations (FSA). References to regulatory citations,
    reporting requirements, or other guidance for FSAs contained in this document may have changed.
    Please see http://www.occ.gov/about/who-we-are/occ-for-you/bankers/ots-integration.html for the
    latest information on rule, reporting and guidance changes.
    OCC 2005-18
    Attachment
    Background
    The Agencies previously issued instructional clarifications that summarized the reporting
    requirements for derivatives, including mortgage loan commitments, to assist institutions in
    properly applying the requirements of FAS 133 when preparing their regulatory reports. Based
    on the Agencies’ review of regulatory reports, it is evident that some institutions are not
    following the appropriate accounting and reporting for commitments to originate mortgage loans
    that will be held for resale and agreements to sell mortgage loans. Some commonly noted issues
    are:
    • Including the value of mortgage servicing rights in the value of loan commitments that
    meet the definition of a derivative;
    • Reporting the value of loan sales agreements that meet the definition of a derivative as
    assets when in fact they were liabilities and vice versa; and
    • Failing to report these derivatives and changes in the fair values of the derivatives within
    their balance sheets and income statements.
    Accordingly, this advisory provides additional guidance on the application of FAS 133. In
    addition, the Agencies expect all institutions, including those that are not required to file reports
    with the Securities and Exchange Commission (SEC), to follow the guidance in SEC Staff
    Accounting Bulletin No. 105, Application of Accounting Principles to Loan Commitments
    (SAB 105).
    Definitions
    Derivative loan commitment
    For the purpose of this advisory, the term “derivative loan commitment” refers to a lender’s
    commitment to originate a mortgage loan that will be held for resale. Notwithstanding the
    characteristics of a derivative set forth in FAS 133, these commitments to originate mortgage
    loans must be accounted for as derivatives by the issuer under FAS 133 and include, but are not
    limited to, those commonly referred to as “interest rate lock commitments.”
    In a derivative loan commitment, the lender agrees to extend credit to a borrower under certain
    specified terms and conditions in which the interest rate and the maximum amount of the loan2
    are set prior to or at funding. Under the agreement, the lender commits to lend funds to a
    potential borrower (subject to the lender’s approval of the loan) on a fixed or adjustable rate
    basis, regardless of whether interest rates change in the market, or on a floating rate basis. In a
    typical derivative loan commitment, the borrower can choose to:

  5. 31. Upon information and belief Plaintiff alleges that at the closing of Plaintiff’s loan on 9-7-2007 Countrywide was not the true ‘lender.’ Countrywide did not advance funds to __________ with any of its own assets. In Anheuser-Busch Brewing Company v. Emma Mason, 44 Minn. 318, 46 N.W. 558 (1890), No lawful consideration tendered by Original Lender and/or Subsequent Mortgage and/or Servicing Company to support the alleged debt. “A lawful consideration must exist and be tendered to support the Note” and demand under TILA full disclosure of any such consideration. IN RE Ramsey v. Vista Mortgage Corp., 176 BR 183 Chptr 13 bnkrptcy, the Ramsey court tackled the concept of when a loan is consummated and opined: “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 Jackson v. Grant, 890 F.2d case (9th circuit 1989), a non-bankruptcy case, and stated: “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.” Thus, BAC has no legally enforceable contract.

    229. No funds were “borrowed” from Countrywide as it was neither the lender of funds nor the creditor as it has purported in the contract between ___________ and Countrywide. Countrywide acted in the capacity of an intermediary middleman/broker which loaned none of its own funds. The Investors of the CWALT Trust were the true and rightful “Lender” of funds of Plaintiff’s loan which upon information and belief, were pre-funded by way of an MBS prospectus with TBA (“to be announced”) funds according to the Federal Reserve Bank of New York Staff Reports “TBA Trading and Liquidity in the Agency MBS Market” by James Vickery Joshua Wright Staff Report No. 468-August 2010:
    “A less widely recognized feature is the existence of a liquid forward market for trading agency MBS, out to a horizon of several months.3 The liquidity of this market raises MBS prices and improves market functioning. It also helps mortgage lenders manage risk, since it allows them to “lock in” sale prices for new loans as or even before those mortgages are originated. The vast majority of agency MBS trading occurs in this forward market, which is known as the TBA market (TBA stands for “to be announced”). In a TBA trade, the seller of MBS agrees on a sale price, but does not specify which particular securities will be delivered to the buyer on settlement day. Instead, only a few basic characteristics of the securities are agreed upon, such as the coupon rate and the face value of the bonds to be delivered. In a forward contract, the security and cash payment for that security are not exchanged until after the date on which the terms of the trade are contractually agreed upon. The date the trade is agreed upon is called the “trade” date. The date the cash and securities change hands is called the “settlement” date.”
    230. Once the funds were secured from the MBS investors, they remained in a Trust awaiting a loan application which specified the borrower and property’s data which was then matched with the underlying criteria as set forth in a MBS Prospectus. When a match occurred, funds were directed to purchase that loan. And if a match did not occur, as in the case at bar, employees at the Conspirator banks were offered incentives in the form of bonus’s to “falsify” the loan data so that the loan fit the criteria. If money was not an effective enticement for the employees to violate the law, the employees were threatened with losing their jobs according to the testimony of confidential witnesses in the shareholders derivative complaint – In re: Countrywide Fin. Corp. Deriv. Litig., Lead Case No. 07-CV-06293 (C.D. Cal. 2007).

  6. javagold… I agree. Just because one is unaware of the fraud does not mean they were not defrauded. Theft is theft.

  7. javagold… I agree. Just because one is unaware of the fraud does not mean thet were not defrauded. Theft is theft.

  8. Reblogged this on littlefolksblog and commented:
    “Disclosure from the start has been misleading — unknown to the borrower.”
    “No court action may be undertaken on an instrument that does not exist. No transaction can ignore the fact that the note and mortgage were canceled and under Reg Z are void.”

  9. This case from Feb. 5, 2013 addresses some of the same issues being discussed today, although pre-Jesinowski it gives an inside look http://www2.ca3.uscourts.gov/opinarch/114254p.pdf
    Daniel R. Sherzer v. Homestar Mortgage Services

  10. There should be NO time limit when it comes to fraud.

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