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THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
Hat tip to Jim Macklin
As if things were not confused enough, A California court came on board with something I suggested in 2007 — that if the loan terms were unconscionable, then there was no right to foreclose. Spencer Scheer wrote the following notice that sums up the decision. I would add that if the loan was “predatory per se” as defined in Regulation Z, then the same logic applies. The parties seeking foreclosure are coming in with “unclean hands.” Whether they have some other remedy like an action at law for money damages remains to be seen. But in most states foreclosure is an equitable remedy which has always meant until the recent era of the mortgage meltdown, that the court ways all factors to achieve a fair result.
But this court went further. It said that if the transaction is unconscionable then the “borrower” can equitably rescind. This may be different from both common law rescission and it is different from TILA rescission in which the notice of rescission alone (upon mailing) immediately cancels the loan contract, and voids the note and mortgage — even if the rescission is disputed on grounds of the 3 year limitations etc.
As Justice Scalia said, “the statute makes no distinction between disputed and undisputed rescission.” Thus the rescission is effective even if it APPEARS As though the right to rescind under TILA may not have existed on the date the notice of rescission was mailed.
NOTE TO LAWYERS: ANY OTHER INTERPRETATION WOULD REQUIRE THE “BORROWER” TO FILE SUIT TO MAKE THE RESCISSION EFFECTIVE WHICH IS THE OPPOSITE OF THE TILA RESCISSION STATUTE, REGULATION Z AND THE UNANIMOUS DECISION OF THE US SUPREME COURT IN JESINOSKI. THE STATUTE PUTS THE RESPONSIBILITY FOR PUTTING THE EFFECTIVENESS OF THE TILA RESCISSION IN ISSUE SQUARELY ON THE PARTIES PURPORTING TO BE THE LENDER AND THEY ONLY HAVE 20 DAYS FROM RECEIPT TO FILE A LAWSUIT SEEKING TO HAVE THE RESCISSION VACATED.
Here is the notice sent to me by several readers:
Date: March 1, 2016
To All SLG Clients and Affiliates.
From: Spencer ScheerSubject: Client Alert: From the Scheer Law Group: Foreclosure Appellate Decisions Heating up. The Orcilla v. Big Sur, Inc., Case is of Extreme Concern.In Orcilla v. Big Sur, Inc., No. H040021, 2016 WL 542922 (Cal. Ct. App. Feb. 11, 2016), The Court allowed the borrower/appellants to assert an action to equitably rescind a foreclosure sale and held that: If the facts and circumstances surrounding the origination of the loan are unconscionable it can lead to a challenge to the enforcement of the loan including rescinding a foreclosure sale to a BFP. The greater the degree of unconscionability the greater the scrutiny into the right to enforce the loan. This case has far-ranging implications on the finality of foreclosure sales and BFP rights.Consider what this means: The particular facts of this case drove the result (non-English speaking borrowers with little education, signing loan documents in English with relatively bad terms). However, the rationale for the case “tramples” other areas of law and imposes quasi-fiduciary duties on a lender to ensure that the borrower is not misled or taken advantage of. In essence, under the ruling of this case, If a judge finds your loan terms are not fair, he or she can allow a borrower to challenge any default/collection actions you take, including challenging a completed foreclosure sale.To make sure that you really can’t’ sleep at night, the court went even further and found that the rights to challenge a loan that is unfair extends to “trump” a foreclosure sale where there is a BFP who purchases at the sale. While the Court in this case allowed the BFP to evict the borrower because it had obtained a UD judgment, it found that the rights allowed to a BFP do not supersede the borrower’s rights to challenge the foreclosure. This will add further uncertainty to foreclosure sale and the willingness of title companies to insure, if the case is not overturned or ignored in jurisdictions outside of the one issuing the opinion.This case has ramifications that are just as far-ranging and disruptive as the recent California Supreme Court holding in the Yvanova v. New Century Mortgage Corp, et al., Docket No. S218973 (CA Supreme Court February 18, 2016).Please call me if you would like to discuss