Rescission and Subject Matter Jurisdiction

rescission-600x400-600x330
I was recently requested to review a 6th Circuit Opinion in which the court stated that the rescission was barred by res judicata — i.e. that the matter had already been litigated and that the homeowner was therefore barred from bringing it up again.
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The Court never considered that it was wrong in the first place and that the decisions that ignored the rescission were themselves void for lack of subject matter jurisdiction. The Court started with the premise that the bank must win on this rather than from the point of view that the law should be applied, not personal preferences. Thus such decisions come down to “because I said so” rather than through any legal analysis.
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I think the court has missed the point completely. A deed has no statute of limitations. Even a mortgage deed or deed of trust has no statute of limitations. It only expires after the contractual terms end. A rescission, especially if it is recorded, has no expiration. All of these things can ONLY be removed by (a) a proper pleading (b) proof that the offending document should be canceled and removed from the chain of title and (c) filed within the time limit prescribed by statute.
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The court has turned this on its head. There is no lawsuit required to make rescission effective. There is no tender. There are no conditions whatsoever — see Jesinoski v Countrywide (SCOTUS). It is effective as a matter of law and if recorded remains a permanent impediment to any subsequent instrument claiming clear title (as though the rescission did not exist) in any instrument executed or recorded after the rescission was sent and/or recorded.
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The borrower is obligated to do nothing. The borrower can do nothing because even if it was the borrower that wanted to remove the rescission it would need to be done through court procedure. Otherwise, any person properly relying upon what appears in the title chain in the county records might act based upon their proper belief that the rescission exist would then find themselves having spent or lent money to a homeowner who in fact either had no title to the home or was already encumbered by the very instruments that were rendered void by operation of law. I can already see how foreign investors and lenders could get stuck by that having read the Federal, State and local laws and thinking themselves perfectly protected, and ending up with nothing.
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The time limit is set on the bank, not the borrower. It is set by the statute as 20 days from receipt of the rescission to (1) comply or (2) file suit to vacate or cancel the rescission. This is a burden on the bank, not the borrower. To construe the statute any other way would be to violate the terms of the statute and to violate the specific explicit instructions from the US Supreme Court. Any decision or ruling that the bank or creditor could contest after 20 days would mean that the rescission is not effective when mailed as set forth by the Statute and Jesinoski. Such a ruling would mean that the rescission is not effective by operation of law; it would mean that the rescission is effective ONLY if and when the bank files suit to vacate or cancel the rescission and loses. How one would logically say that the rescission is not effective until there is a lawsuit is incomprehensible.
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Rescission therefore is a fact and not a claim, pleading or defense. It may be raised as a defense merely to show that the court lacks subject matter jurisdiction, to wit: that the note and mortgage were rendered VOID by operation of law and as specifically stated in Reg Z which carries the full force of law. It follows that nobody can make a claim based upon void instruments. It also follows that the void instrument (i.e., the mortgage or deed of trust) must be removed from the chain of title as a void instrument. Hence quiet title is appropriate.
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Rescission is an event and the recording of it preserves the rights and benefits of rescission against the whole world. What courts and lawyers have failed to comprehend is that the rescission may not be ignored or even canceled or vacated or waived by the homeowner who sent it and recorded it. With a deed you can file a corrective deed but all parties to it must join in the correction. Otherwise it remains. The converse is also true. if as a matter of law the mortgage or deed of trust has been rendered void by operation of law, then it is void for all purposes and against all claims to the contrary from all claimants of every kind, especially if it is recorded.
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The court here has essentially adopted the strategy of the banks. By creating multiple layers of transmission, assignment, delivery and endorsement it gradually appears that the end successor indeed owns the debt, loan, note and mortgage. But if you start at the base of the chain and come to realize that the originator was not the lender and that the first transferee was merely a conduit who paid no money either for the origination nor the acquisition of the loan, one can easily see how the borrower’s rights have been egregiously violated.
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This court has done the same thing. It is taking the original ruling that the erroneous ruling (without subject matter jurisdiction) ignoring but not removing the rescission somehow was valid because the court later said that the claims as precluded by having been previously litigated,a decision later affirmed by appellate court. They can say it but it is erroneous, false and void for lack of subject matter jurisdiction. This is the rule of men rather than the rule of law. If the trial court had ignored the deed, mortgage or deed of trust without proper pleading and proof of a claim upon which such relief could be granted, the same result would apply.
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This is not some technicality. Allowing parties who have no interest or injury to apply for relief that properly belongs to other parties opens up floodgates of malicious practices in the marketplace in which the courts will face in full circle the absurdity of their own prior rulings when they believed that the banks must be right even if what they did was wrong.
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That the previous decisions considered the arguments of the homeowner and rejected them is irrelevant as long as the issue is lack of subject matter jurisdiction. If there was no such jurisdiction then none of the decisions are effective as a matter of law.

7 Responses

  1. neil, others

    what is the difference in a banks claiming rescission of all the crap they bought, and found out that no trust is real,no mortgages were transferred to any trust

    and the homeowners stating the same. ?

    https://www.orrick.com/Events-and-Publications/Documents/3606.pdf

    COMPLAINT FOR RESCISSION AND
    DAMAGES AND DEMAND FOR JURY
    TRIAL

    SUFFOLK, SS. SUPERIOR COURT DEPARTMENT
    FEDERAL HOME LOAN BANK OF
    BOSTON,
    Plaintiff,
    v.
    ALLY FINANCIAL, INC. F/ICJA GMAC
    LLC; BANC OF AMERICA FUNDING
    CORPORATION; BANK OF AMERICA
    CORPORATION; BANK OF AMERICA,
    NATIONAL ASSOCIATION; BARCLAYS
    CAPITAL INC.; BARRY J. O’BRIEN;
    BCAP LLC; BEAR STEARNS ASSET
    BACKED SECURITIES I LLC; CAPITAL
    ONE FINANCIAL CORPORATION;
    CAPITAL ONE, NATIONAL
    ASSOCIATION; CI-MVY CHASE
    FUNDING LLC; CHRISTOPHER M.
    O’MEARA; CITICORP MORTGAGE
    SECURITIES, INC.; CITIGROUP
    FINANCIAL PRODUCTS, INC.;
    CITIGROUP GLOBAL MARKETS INC.;
    CITIGROUP GLOBAL MARKETS
    REALTY CORP.; CITIGROUP INC.;
    CITIGROUP MORTGAGE LOAN TRUST
    INC.; CITIMORTGAGE, INC.;
    COUNTRYWIDE FINANCIAL
    CORPORATION; COUNTRYWIDE HOME
    LOANS, INC.; COUNTRYWIDE
    SECURITIES CORP.; CREDIT SUISSE
    (USA), INC.; CREDIT SUISSE FIRST
    BOSTON MORTGAGE SECURITIES
    CORP.; CREDIT SUISSE HOLDINGS
    (USA), INC.; CREDIT SUISSE
    SECURITIES (USA) LLC; CWALT, INC.;
    CW/VIBS, INC.; DB STRUCTURED
    PRODUCTS, INC.; DB U.S. FINANCIAL
    MARKET HOLDING CORPORATION;
    DEUTSCHE ALT-A SECURITIES, INC.;
    Civil Action No.: 11 – 1533
    COMPLAINT FOR RESCISSION AND
    DAMAGES AND DEMAND FOR JURY
    TRIAL

  2. On January 17, 2002, the State of Delaware enacted the Asset-Backed Securities Facilitation Act, 6 Del. C. § 2703A (the “ABSFA”). The ABSFA effectively creates a safe harbour under Delaware state law for determining what constitutes a true sale in securitisation transactions. – See more at: http://corporate.findlaw.com/corporate-governance/delaware-the-jurisdiction-of-choice-in-securitisation.html#sthash.K6LvgvEE.dpuf

    The ABSFA first provides that “[a]ny property, assets or rights purported to be transferred, in whole or in part, in the securitization transaction shall be deemed to no longer be the property, assets or rights of the transferor.”[1] Given the foregoing provision, to the extent Delaware law applies, the traditional legal criteria used in determining what constitutes a true sale in the context of a securitisation is intended to be irrelevant.The ABSFA further states that “[a] transferor in the securitization transaction … to the extent the issue is governed by Delaware law, shall have no rights, legal or equitable, whatsoever to reacquire, reclaim, recover, repudiate, disaffirm, redeem or recharacterize as property of the transferor any property, assets or rights purported to be transferred, in whole or in part, by the transferor.”[2] The ABSFA also provides that “[i]n the event of a bankruptcy, receivership or other insolvency proceeding with respect to the transferor or the transferor’s property, to the extent the issue is governed by Delaware law, such property, assets and rights shall not be deemed part of the transferor’s property, assets, rights or estate.”[3] The foregoing provisions facilitate reaching the conclusion that a true sale exists in the context of a securitisation transaction where Delaware law applies.A number of issues exist that may preclude the ABSFA’s application to a particular securitisation transaction, including whether federal law will preempt the ABSFA in making a true sale determination and whether Delaware law generally, and the ABSFA in particular, will apply to a transfer in a securitisation transaction. Although not yet judicially tested, the ABSFA is nevertheless a reason to seriously consider whether the parties to a securitisation transaction should choose for Delaware law to apply to their contractual relations – See more at: http://corporate.findlaw.com/corporate-governance/delaware-the-jurisdiction-of-choice-in-securitisation.html#sthash.K6LvgvEE.dpuf

    The UCC Opinion

    Because perfection of a secured interest in fixtures, etc., is obtained by filing a financing statement in the domicile of the LLC or DST, an opinion as to the enforceability of the financing statement is often requested and given. This opinion requires review of the UCC Financing Statement and application of the Delaware Uniform Commercial Code — Secured Transactions, 6 Del. C. §§ 9-101 et seq.

    EXAMPLE:

    Insofar as Article 9 of the Uniform Commercial Code as in effect in the State of Delaware on the date hereof (the “Delaware UCC’) is applicable (without regard to conflict of laws principles), upon the filing of each Financing Statement with the Division, the Lender will have a perfected security interest in each Borrower’s rights in that portion of the collateral (as defined in the applicable Deed of Trust, Security Agreement and Fixture Filing, hereinafter the “Agreement’) described in the Financing Statement that may be perfected by the filing of a UCC financing statement with the Division (the “Filing Collateral’) and the proceeds (as defined in Section 9-102 (a)(64) of the Delaware UCC) thereof

    The UCC opinion expressed above is limited to the State of Delaware and is subject to a number of additional assumptions, qualifications, limitations and exceptions, including the following: (1) that Borrower has sufficient rights to the Filing Collateral and has received sufficient value and consideration in connection with the security interest granted; and (2) that each applicable security agreement and financing statement reasonably identifies the filing collateral.

    On January 17, 2002, the State of Delaware enacted the Asset-Backed Securities Facilitation Act, 6 Del. C. § 2703A (the “ABSFA”). The ABSFA effectively creates a safe harbour under Delaware state law for determining what constitutes a true sale in securitisation transactions.

    The ABSFA first provides that “[a]ny property, assets or rights purported to be transferred, in whole or in part, in the securitization transaction shall be deemed to no longer be the property, assets or rights of the transferor.”[1] Given the foregoing provision, to the extent Delaware law applies, the traditional legal criteria used in determining what constitutes a true sale in the context of a securitisation is intended to be irrelevant.The ABSFA further states that “[a] transferor in the securitization transaction … to the extent the issue is governed by Delaware law, shall have no rights, legal or equitable, whatsoever to reacquire, reclaim, recover, repudiate, disaffirm, redeem or recharacterize as property of the transferor any property, assets or rights purported to be transferred, in whole or in part, by the transferor.”[2] The ABSFA also provides that “[i]n the event of a bankruptcy, receivership or other insolvency proceeding with respect to the transferor or the transferor’s property, to the extent the issue is governed by Delaware law, such property, assets and rights shall not be deemed part of the transferor’s property, assets, rights or estate.”[3] The foregoing provisions facilitate reaching the conclusion that a true sale exists in the context of a securitisation transaction where Delaware law applies.A number of issues exist that may preclude the ABSFA’s application to a particular securitisation transaction, including whether federal law will preempt the ABSFA in making a true sale determination and whether Delaware law generally, and the ABSFA in particular, will apply to a transfer in a securitisation transaction. Although not yet judicially tested, the ABSFA is nevertheless a reason to seriously consider whether the parties to a securitisation transaction should choose for Delaware law to apply to their contractual relations

    While Delaware LLCs and DSTs may be organized for any lawful purpose (except some insurance-related purposes as to LLCs) lenders and underwriters often require that the LLC or DST be restricted to having only a single purpose. Thus SPE provisions are imposed to set limitations on how business is conducted. Some common SPE provisions include:

    • Prohibitions against the acquisition or ownership of any material asset other than (i) the property that is the subject of the proposed transaction (the “Property”), and (ii) such incidental personal property as may be necessary for the operation of the Property.

    • Prohibitions or restrictions on the company’s ability to take on additional debt.

    • Requirements that the company at all times maintain its separate existence and good standing and refrain from certain types of amendments to its governing documents, fail to preserve its existence as an entity duly organized.

    • Restrictions or outright prohibition of the company acquiring any subsidiaries, merging with or consolidating with another entity, or commingling any of its assets with those of any other entity, including parent companies and affiliates.

    • Requirements that the company pay its own debts from its own assets and maintain its own separate books and records.

    • Provisions forbidding the company from serving as guarantor for another entity’s debts or obligations.37

    ,

    On January 17, 2002, the State of Delaware enacted the Asset-Backed Securities Facilitation Act, 6 Del. C. § 2703A (the “ABSFA”). The ABSFA effectively creates a safe harbour under Delaware state law for determining what constitutes a true sale in securitisation transactions.

    The ABSFA first provides that “[a]ny property, assets or rights purported to be transferred, in whole or in part, in the securitization transaction shall be deemed to no longer be the property, assets or rights of the transferor.”[1] Given the foregoing provision, to the extent Delaware law applies, the traditional legal criteria used in determining what constitutes a true sale in the context of a securitisation is intended to be irrelevant.The ABSFA further states that “[a] transferor in the securitization transaction … to the extent the issue is governed by Delaware law, shall have no rights, legal or equitable, whatsoever to reacquire, reclaim, recover, repudiate, disaffirm, redeem or recharacterize as property of the transferor any property, assets or rights purported to be transferred, in whole or in part, by the transferor.”[2] The ABSFA also provides that “[i]n the event of a bankruptcy, receivership or other insolvency proceeding with respect to the transferor or the transferor’s property, to the extent the issue is governed by Delaware law, such property, assets and rights shall not be deemed part of the transferor’s property, assets, rights or estate.”[3] The foregoing provisions facilitate reaching the conclusion that a true sale exists in the context of a securitisation transaction where Delaware law applies.A number of issues exist that may preclude the ABSFA’s application to a particular securitisation transaction, including whether federal law will preempt the ABSFA in making a true sale determination and whether Delaware law generally, and the ABSFA in particular, will apply to a transfer in a securitisation transaction. Although not yet judicially tested, the ABSFA is nevertheless a reason to seriously consider whether the parties to a securitisation transaction should choose for Delaware law to apply to their contractual relations

    While Delaware LLCs and DSTs may be organized for any lawful purpose (except some insurance-related purposes as to LLCs) lenders and underwriters often require that the LLC or DST be restricted to having only a single purpose. Thus SPE provisions are imposed to set limitations on how business is conducted. Some common SPE provisions include:

    • Prohibitions against the acquisition or ownership of any material asset other than (i) the property that is the subject of the proposed transaction (the “Property”), and (ii) such incidental personal property as may be necessary for the operation of the Property.

    • Prohibitions or restrictions on the company’s ability to take on additional debt.

    • Requirements that the company at all times maintain its separate existence and good standing and refrain from certain types of amendments to its governing documents, fail to preserve its existence as an entity duly organized.

    • Restrictions or outright prohibition of the company acquiring any subsidiaries, merging with or consolidating with another entity, or commingling any of its assets with those of any other entity, including parent companies and affiliates.

    • Requirements that the company pay its own debts from its own assets and maintain its own separate books and records.

    • Provisions forbidding the company from serving as guarantor for another entity’s debts or obligations.37

  3. can a lender transfer to a vehicle without invoking power of attorney? is that possible, so that the lender retains legal title and the SPV has beneficial interest?

  4. question everything- I’m in Missouri as well. Good luck getting any judge to do the right thing in Missouri..I’m near St. Louis. More than likely they will ignore your rescission notice. A unlawful detainer isn’t done unless they’ve already completed the foreclosure sale in their eyes. They will give a hearing before eviction usually. You may even get a continuance, If you don’t go to the hearing you won’t know. However, if they don’t if you can avoid that eviction on your record it’ll make it easier to get another place. Not sure what your appealing in state court. Do you keep yourself up to date in what the state is filing online? Even though I had my home stolen I got more satisfaction out of the Federal Courts here in St. Louis than I did the state court! Best of luck:)

  5. Neil should devote an entire show on a Thursday to this aspect alone – if a court lacks jurisdiction and enters judgment – then the court through that judge ‘adjudicated’ (acted) not as a judge – but merely as an employee of a county/court – which would perhaps pierce judicial immunity protections?? (Not sure – sounds logical though.)

    If a party files a lawsuit without any legal rights to do so and is not injured, and the defending party puts forth issues re court’s lack of jurisdiction – based on facts the court was denied jurisdiction because of plaintiff’s own conduct – then would or could this be grounds to file for damages and name the judiciary in a capacity acting as an employee rather than as a judge?? This may help to bring down inflated egos and biased judges a notch or so and remind them who they are and who they serve – that at the end of the day they are just public servant employees whose jobs are to preserve and enforce laws not smoke them.

  6. So can I bring up the lack of subject matter jurisdiction even if the case is on appeal? Our attorney who quit before filing his appeal brief never bothered to fight the nonjudicial foreclosure, has instead been fighting unlawful detainer even though we filed our rescission notice to the bank and servicer right after they sent us notice of acceleration. I’ve gotten conflicting advice. I think I should be able to go to the original court and file a motion to vacate due to lack of subject matter jurisdiction. I was told since we are in state appeal, I can only file a brief based on this and hope the court allows it since our attorney never brought it up. Any help or answer would be great. We are in Missouri, nonjudicial – then to unlawful detainer, now in “appeal”. Thanks in advance.

  7. Totally correct. When will courts stop playing politics and rule based on justice interest. 

    Sent from Yahoo Mail on Android

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