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LAWYERS AND JUDGES TAKE NOTE: “Section 1635(a) nowhere suggests a distinction between disputed and undisputed rescissions, much less that a lawsuit would be required for the latter.” Justice Scalia, Jesinoski v Countrywide. [EDITOR’S NOTE: The only possible meaning to this is that the homeowner can use a letter and then, if it is disputed, it must BE BROUGHT to A COURT OF COMPETENT JURISDICTION to vacate the rescission. An order that denies a motion to dismiss for lack of jurisdiction based upon the fact that the rescission was sent does nothing to change the fact that the rescission was effective as of the date it was mailed and still is effective by operation of law. The only way it can be removed is with another operation of law that is properly brought by the real party in interest. An order vacating the rescission without any pleading requesting that relief does absolutely nothing except assure that the judge’s order will be reversed. And if the rescission is recorded before the foreclosure judgment (judicial states) or sale (nonjudicial states) the judgment and sale are void respectively.]
- Since the rescission is effective upon mailing, the loan contract, note, and mortgage are void (not voidable). This means in states whose recording statutes are either “notice” or “hybrid”, anything that transpired after that in which the note or mortgage were used for collection, enforcement or foreclosure are also void. Title would then stay with the homeowner if the homeowner does not know that he/she still has title. Any deed issued in foreclosure would accordingly be a wild deed.
- If the state recording statutes are purely “race” then if the notice of rescission was not recorded before the foreclosure, the foreclosure sale and deed might well be binding even if it was “fraudulent” or otherwise wrong or illegal.
- State statutes of limitation might effect (limit) the ability to collect damages for trespass or wrongful foreclosure, breach of contract or other common law or statutory remedies. The FDCPA might help depending upon how long it has been since the notice of rescission was sent.
- If the notice of rescission is sent and recorded before the foreclosure judgment in judicial states or before the sale in nonjudicial states, then in all states it would appear that the the loan contract, note and mortgage were rendered void at the moment of mailing, by operation of law, which is the same thing as a judge’s order declaring the note and mortgage void.
- There is no provision in the TILA rescission statutes that allows any lender, creditor or servicer to contest the rescission with a letter. That power is only given to the borrower. Their subsequent action in proceeding to foreclosure “judgment” should be subject to being vacated because they were obtaining relief based upon a void instrument — the mortgage (and the note).
- In a strictly “notice” state, as long as they knew about the rescission the foreclosure is automatically wrongful and actionable, in my opinion. “Notice” might need to include a third party purchaser, who often does know of the existence of the borrower’s defenses and does know about the rescission. The issue here is that at the time of the rescission it was widely and wrongly believed that a lawsuit was necessary to make the rescission effective (i.e., the borrower had to plead and prove a case for rescission under common law rules). TILA rescission is exactly the opposite. So everyone, including appellate courts (other than the Supreme Court of the United States) was proceeding under the wrong assumption.
- The action following rescission should not be to establish the effectiveness of the rescission. That is already complete by operation of law.
- The action could be enforcement of the rescission if filed within one year of the date of mailing of the rescission. At the end of that period, the borrower is barred from filing an enforcement action and the “lender” assuming they have done nothing, is barred from claiming the debt.
- After the expiration of one year from date of mailing of the notice of rescission, the action would be simply for quiet title and perhaps trespass (see above). This action could be brought during the one year period either in lieu of enforcement or with enforcement. An action for injunction preventing the banks, servicers or trustees from attempting to use the void note and mortgage might also be advisable.
- If an action for enforcement is brought during the one year period it is important not to plead as though the rescission might not be effective. it is a fact. See Jesinoski. The relief sought is NOT to have a declaration from the court that the rescission was valid. The pleading must assume that it is already legally binding as per 15 USC 1635 et seq and that the only issues remaining are the duties of the “lender” who should not be described as a lender but only someone who has asserted the rights of a lender, holder, mortgagee, beneficiary or servicer or trustee.
- An attack on standing is appropriate at every step when the “servicer” or Lender” seeks to challenge the rescission without filing an actual lawsuit or pleading. The banking side of the equation has NOT been granted the power to contest with anything other than some other recognized “operation of law.” The only such exercise would be a lawsuit seeking to vacate the rescission on the grounds that it was wrongful or deficient in some way.
- STANDING: This is where most cases will be won or lost. Since the note and mortgage were rendered VOID as of the date of mailing, the party seeking to vacate the rescission would need to plead that they are injured by the rescission, to wit: they are going to lose the ability to enforce a legally binding debt. And they would need to establish standing WITHOUT the note and mortgage, which are void (see above).
- Thus the pleader would need to establish themselves as a party who either funded the loan and is still the creditor, or who has purchased the loan from someone who owned the loan because they funded it. This we believe is going to be impossible for the lenders because their money trail leads straight to investors whose money was used improperly and whose money was never paid to the trust that issued the mortgage backed securities. The investors were left out in the cold without a mortgage backed security issued by any entity that had mortgages, without a note and without a mortgage. That leaves them with empty promises from the “Servicer” and no enforcement mechanism to collect from either the borrower or the investment bank. None of that is the fault of the borrower.
The Florida Statute below shows the intent of recording such notices. Using the form that is already approved by statute makes recording a lot easier:
712.05 Effect of filing notice.—(1) A person claiming an interest in land or a homeowners’ association desiring to preserve a covenant or restriction may preserve and protect the same from extinguishment by the operation of this act by filing for record, during the 30-year period immediately following the effective date of the root of title, a written notice in accordance with this chapter. Such notice preserves such claim of right or such covenant or restriction or portion of such covenant or restriction for up to 30 years after filing the notice unless the notice is filed again as required in this chapter. A person’s disability or lack of knowledge of any kind may not delay the commencement of or suspend the running of the 30-year period. Such notice may be filed for record by the claimant or by any other person acting on behalf of a claimant who is:(a) Under a disability;(b) Unable to assert a claim on his or her behalf; or(c) One of a class, but whose identity cannot be established or is uncertain at the time of filing such notice of claim for record.
Such notice may be filed by a homeowners’ association only if the preservation of such covenant or restriction or portion of such covenant or restriction is approved by at least two-thirds of the members of the board of directors of an incorporated homeowners’ association at a meeting for which a notice, stating the meeting’s time and place and containing the statement of marketable title action described in s. 712.06(1)(b), was mailed or hand delivered to members of the homeowners’ association at least 7 days before such meeting. The homeowners’ association or clerk of the circuit court is not required to provide additional notice pursuant to s. 712.06(3). The preceding sentence is intended to clarify existing law.(2) It shall not be necessary for the owner of the marketable record title, as herein defined, to file a notice to protect his or her marketable record title.History.—s. 5, ch. 63-133; s. 798, ch. 97-102; s. 3, ch. 97-202; s. 1, ch. 2003-79; s. 7, ch. 2014-133.