TILA RESCISSION: W.V. Federal District Court:”LENDER” MUST FILE SUIT, DAMAGES AWARDED TO BORROWER

major hat-tip to Charles Cox in Nevada.

Federal Judge’s response to chicken little argument: [2] RMS argues that enforcing the statute as written would upend the mortgage industry. As noted, lending institutions faced with a notice of rescission have many options to protect their interests and ensure that the borrower is able to tender the loan proceeds. Most obviously, creditors may provide the required disclosures to limit the rescission period to three days, when parties are more likely to be able to easily return to the status quo. The Court is unconvinced that creditors will be unable to protect their financial interests if they are required to comply with § 1635 according to its terms.”(e.s.)

And that, my friends is the end of the free house myth and the sky is falling argument for making homeowners pay for bank malfeasance and negligence.

As I have said and predicted, the language of the TILA Rescission statute 15 USC §1635 is clear and unambiguous. This decision will eventually pull the plug on all claims of securitization whether true or false.

The problem for the financial industry is (a) they have no way of actually identifying the debt from the perspective a creditor and (b) therefore they have no creditor to identify. In order to file a claim to change or vacate the notice of rescission they must allege and prove standing without the void note and void mortgage. That requires a creditor.

However this case does not test the three year express limit on TILA rescission. I say that all rescissions are effective by operation of law when delivered (or mailed using USPS) regardless of whether or not the rescission is contested. I say that TILA Rescission creates a procedural hurdle that the banks have been dancing around for over a decade. The three year limitation could be an adequate defense and grounds to vacate the TILA rescission — but only if “someone” asks for it and that “someone” must be a party with standing that does not rely on the void note and void mortgage. This is an issue for another day.

Thre question in this case is whether there will be an appeal and if so, in whose name?

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see LAVIS v. REVERSE MORTGAGE SOLUTIONS LLC Dist

For more discussion on TILA Rescission just use the search bar here on this blog “TILA RESCISSION.”

Without further comment ad nauseum but with at least one well-deserved “I told you so” here are some significant quotes from a West Virginia District Court Judge:

RMS conceded that it could not demonstrate that Ms. Lavis was provided notice of her right to rescind, which extended the time in which Ms. Lavis could exercise that right. Ms. Lavis cites the testimony from RMS’ corporate representative, confirming that it had a copy of her notice of rescission, with a receipt stamp dated May 17, 2016, and that RMS did not release the deeds of trust or file a civil action to maintain the lien within twenty days after that notice.

The Court further finds that RMS failed to preserve any right to tender from Ms. Lavis. Ms. Lavis took all appropriate steps required under the statute to rescind and to protect her rights. Despite its status as a sophisticated entity with access to the expertise of counsel, RMS did nothing in response to Ms. Lavis’ notice of rescission. It did not take steps to terminate her security interest. It did not request that she proffer regarding her ability to tender or submit a request for a specific amount in tender. It did not file suit to preserve its right to tender or to delay its obligation to terminate the security interest pending Ms. Lavis’ demonstration of an ability to tender the loan proceeds. After Ms. Lavis filed this action to enforce her rights, RMS did not file a counterclaim for return of the loan proceeds. It did not file a motion or other response requesting that the Court alter the procedures set forth in 15 U.S.C. § 1635(b). Instead, it continued to insist, even through the end of trial and in its briefings considered here, that it could simply ignore Ms. Lavis’ rescission of the loan.[2](e.s.)

 

The evidence related to rescission was not significantly in dispute, although the parties vigorously dispute the legal implications of the facts. RMS did not provide Ms. Lavis with required disclosures regarding the right to rescind at the loan closing, giving her three years to exercise her right to rescind. Ms. Lavis sent a letter, dated May 12, 2016, informing RMS that she was exercising her right to rescind. Although RMS does not dispute that Ms. Lavis retained the right to rescind, it did nothing in response to the letter. To date, RMS has taken no steps to effectuate rescission or to honor its statutory obligations triggered by Ms. Lavis’ letter.

15 U.S.C. § 1365(b) sets forth the procedures involved in rescission, using mandatory “shall” language. Within twenty days after an obligor exercises the right to rescind, “the creditor shall return to the obligor any money or property given as earnest money, down payment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction.” 15 U.S.C. § 1635(b) (emphasis added.) This language is not permissive.

The Court has repeatedly held that the clear language of the statute, as well as the Supreme Court’s discussion of the issue in Jesinoski v. Countrywide Home Loans, Inc., demonstrate that, absent a suit or motion to alter the procedures set forth in the statute and regulations, a creditor’s obligation to return funds and terminate the security interest precedes any obligation of the borrower to tender loan proceeds. 135 S.Ct. 790, 793 (2015).

The Court further finds that RMS failed to preserve any right to tender from Ms. Lavis. Ms. Lavis took all appropriate steps required under the statute to rescind and to protect her rights. Despite its status as a sophisticated entity with to the expertise of counsel, RMS did nothing in response to Ms. Lavis’ notice of rescission. It did not take steps to terminate her security interest. It did not request that she proffer regarding her ability to tender or submit a request for a specific amount in tender. It did not file suit to preserve its right to tender or to delay its obligation to terminate the security interest pending Ms. Lavis’ demonstration of an ability to tender the loan proceeds. After Ms. Lavis filed this action to enforce her rights, RMS did not file a counterclaim for return of the loan proceeds. It did not file a motion or other response requesting that the Court alter the procedures set forth in 15 U.S.C. § 1635(b). Instead, it continued to insist, even through the end of trial and in its briefings considered here, that it could simply ignore Ms. Lavis’ rescission of the loan.[2](e.s.)

A finding that RMS is entitled to tender, despite its disregard of its obligations over a period of years and its failure to take any measures to preserve its rights under the statute, would incentivize lending institutions to follow RMS’ poor example.

9 Responses

  1. has Lavis been appealed??

    Like

  2. OOPS!

    Posted to the wrong article.

    @ ALL

    Kalifornia affirms TILA rescission:

    US Bank National Association v. Naifeh et al.

    http://www.courts.ca.gov/opinions/archive/A142994M.PDF

    Like

  3. great ruling even if not as comprehensive as some of us would like… a step in the right direction is better than a step backward, right? while not controlling outside that jurisdiction, it is persuasive in all courts. USE IT. i doubt they will lose on appeal.

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  4. Most got the bogus disclosures. There are other reasons for rescission, but the borrowers don’t know them to even plead them. And, the courts will also not likely like them, and not grant discovery. Won’t grant discovery because borrower is supposed to know about it before he/she comes to court. But, that is impossible because the government blocked all by settlements that ceased investigation.

    What ever happened to the FOIA bill proposed for Freddie and Fannie?
    Never heard about it again. . . .

    Like

  5. I answered my own question.

    Keiran’s Petition for Writ of Certiorari at SCOTUS has been denied. The various documents filed at SCOTUS can be viewed at this link by searching the case number: https://www.supremecourt.gov/docket/docket.aspx

    Keiran’s case number is 17-672.

    Also, Junk’s Petition for Writ of Mandamus has been denied. Junk’s case number is 17-929.

    Like

  6. The Lender has an obligation to give you copies of the disclosure that you have a right to rescind the loan. Failure to give the disclosures stop the clock until the Lender has complied with this statutory requirement.

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  7. Any word on that litigant who was doing a writ of certiorari or mandamus to SCOTUS in response to the lower federal courts denying a TILA rescission?

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  8. javagold — great question. Not an attorney — but — do not think allowed on purchase money transaction.

    Modification? First you have to ask– modification with WHO?? No one knows. Modified with original lender is what it is supposed to be, but those original lenders ate GONE. So whether there is even a valid modification is in question. And, that is the really GREAT question you ask. .

    As to this case here — timely. All depends on how courts view “timely.” Much disagreement in the courts. My guess is that SCOTUS will not visit the issue again despite the disagreement. So a toss up with the judge you get.

    Like

  9. Is a recission possible….only on a refinance ??

    Or also allowed:

    1. On a purchase money transaction??

    2. On a modification???

    Like

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