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This article is NOT a legal opinion that can be used for any one case. It is for general information only. Decisions and actions should be taken ONLY after consultation with an attorney licensed in the jurisdiction in which the property is located and who has studied the TILA Rescission procedures.
We all know the problems. So what are the REAL solutions? This article addresses both.
People keep asking me about equitable tolling and other restrictions stated in the TILA Rescission statutes 15 U.S.C. §1635 et seq. They are skipping the procedures, which is what the TILA Rescission statutes are all about and going directly to the substance of the possible claim by an adversary who claims that the rescission was wrongful.
TILA RESCISSION is a very specific statutory remedy that sets forth a procedure in which the “borrower” sets everything in motion by sending a Notice of Rescission (“I here by cancel the above-referenced loan number”). THEN the parties on the other side have a choice — perform the statutory duties or within 20 days bring suit to vacate the rescission, which IS LAW until some other operation of law vacates it.
The issue everyone seems to be skipping over is both that there is a specific procedure set forth in the statute and that the adversary must have jurisdictional standing to ask for the court to vacate the rescission. Instead the adversaries are sliding by without asking for or getting an order vacating the rescission. What they are doing is simply trying to negate or ignore the rescission because it is contested — but they are not directly contesting it by filing a pleading in which they have standing seeking to vacate the rescission.
Remember that Justice Scalia said in Jesinoski that the statute makes no distinction between disputed and undisputed rescissions. It plainly allows “borrowers” to send the notice, even if they turn out to be wrong about whether they could have done so. And the notice is effective by operation of law when sent. SO the moment the homeowner drops the Notice of Rescission in the mail, it is effective by operation of law and that means, by express terms, that the loan contract, the note and the mortgage no longer exist. They are void. So standing cannot be predicated upon the loan contract, the note or the mortgage. It makes no difference whether they were claiming holder status or even holder in due course status (which they never do).
What the adversaries are doing is taking the standing they managed to get validated in the foreclosure and having the Court presume standing for a separate action to vacate the rescission. They can’t have it both ways. If their sole claim is based upon holding or possessing the note and mortgage, they cannot then assert that the Rescission should simply be ignored based upon their assertions that are made with respect to the note and mortgage which are now void. One cannot claim relief based upon a void instrument.
Thus the adversaries are effectively asking the Court to violate the law, which is that no lawsuit is necessary for the Rescission to be effective by operation of law. By ignoring the rescission instead of setting it aside or vacating it they are proceeding on the premise that the rescission is somehow NOT effective by operation of law until a judge rules on it. That is opposite to TILA Rescission and opposite to Jesinoski and opposite to the rules and regulations published by the Federal Reserve and now the CFPB. An order granting the motion of the adversaries saying that the rescission was ineffective because the statute has provisions that might have been violated is an order ruling on when and if the rescission was effective by operation of law.
Such Courts lack jurisdiction to consider the claims of the adversaries UNLESS they file an action within 20 days of receipt of the notice of rescission. AND THAT is because the in order to rule on the rescission they must first accept the premise that the rescission was effective by operation of law and as specifically stated in Jesinoski. It’s done.
Therefore a claim basing standing on the note and mortgage is misplaced because those are void instruments. If a party alleges standing in such a claim and does so properly THEN the court has jurisdiction to hear it. But no court has jurisdiction to ignore or grant relief based upon the idea or inference that the rescission was not effective by operation of law. “Motions” that simply argue law are intentionally avoiding the one point the adversaries can escape from. Once the rescission is sent it is effective by operation of law. Once that happens the statute is ticking away the time for either compliance or filing a simple lawsuit to vacate the rescission. So why have no such lawsuits been filed?
The reason they are taking this tack is that they don’t have a creditor. If they did, they would have all claimed the status of Holder in Due Course. Being unable to make that claim they have relied upon the skill of lawyers to plead “holder” but get treated as though they were holders in due course. This is through no fault of the homeowner. The Wall Street banks essentially stole the money from investors, stole the money from the Trusts and then committed the money to fees that never should have been paid, trading profits that were fictitious trades, and to cover their tracks to loans that the investors never would have approved if asked. And of course this was contrary to the Prospectus and PSA.
When confronted with a memo or motion from the adversary, the foreclosure defense lawyer should immediately attack the pleading, probably moving to strike it for lack of the court’s jurisdiction to hear the action unless they file one with standing and then ask the court to vacate the rescission. The Court should be reminded that the Rescission IS effective by operation of law, and that there is action pending wherein the adversary is pleading standing because they lack standing, to wit: they lack any position in which they can allege that they paid for the funding or acquisition of the loan. Thus there can be no foreclosure and since the 20 days have expired, there can never be a foreclosure.
When the investment banks took money from the pension funds they failed to fund the trust that issued the certificates that were “Sold” to investors. They then took the money and engaged in various transactions never contemplated nor acceptable to the investors. The originator on the note was not the lender and the originator was not in privity with the actual source of funds. The real party is the group of investors but all investors from all trusts had their money dumped into the same slush funds.
It is IMPOSSIBLE to determine which investors have an interest in any particular loan and impossible to determine what size their interest is. In that fact pattern there is no “creditor” (legally speaking) although the investors clearly got screwed. They have a claim against the investment banks,and if they found a credible way to estimate their interests in loans and locate those particular loans they could assert unjust enrichment or some similar equitable theory. Any such claim would be unsecured unless equitable mortgages were suddenly allowed again which would screw up title records even more thy already are corrupted.
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