CURRENT STATUS OF TILA RESCISSION AND ITS APPLICATION TO PAST, PRESENT AND FUTURE FORECLOSURES

Ultimately there will be recognition that the courts are vetoing legislation passed by congress simply because the judges disagree or are afraid of the consequences if they were to apply the law. Congress wrote it, passed it, and it was signed into law. In a nation governed by the rule of law there can be no space for exceptions. This is a violation of the most basic tenet of the US Constitution — division of governance into three co-equal branches of government. The courts are required under law to follow the law. Eventually the chickens are going to come home. How and when that will happen remains unclear.

I am of the opinion that an action should be brought to SCOTUS, using perhaps some non-traditional approaches for original jurisdiction to demand a remedy, to wit: vacating all orders, judgments and actions taken to enforce the void note and mortgage after rescission has been sent. The failure of the creditors to contest the rescissions should not be the basis for ignoring or invalidating the express wording of the statute.

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Here is the current status of TILA Rescission.
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Despite the clear wording of the statute and the clear wording of a unanimous Supreme Court decision, lawyers and judges continue to erroneously “read in” conditions to rescission under 15 USC §1635. They were told not to do that by SCOTUS in Jesinoski but they continue to do it.
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The practical effect is that judges are not following the law and therefore ruling in ways that basically ignore the TILA rescission.
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According to both statutory and case law, no lawsuit, no tender, no condition of any kind and of any nature is written in the statute and SCOTUS says the wording is clear and unambiguous and therefore nobody can read any conditions into the procedures set forth by the TILA Rescission statute. In Jesinoski SCOTUS unanimously said that no lawsuit and no tender was required. Tender is NOT required UNTIL the so-called lender complies with the three statutory duties set forth in the TILA Rescission Statute. In Jesinoski the Supreme Court expressly stated that it was ruling on WHEN the rescission was effective by operation of law. The Court expressly ruled that this was a procedural statute. It provides nonjudicial relief to borrowers just like many states provide nonjudicial relief to lenders.
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In an abundance of caution, I have been advising my clients to raise the issue but realize that virtually no court in the land, state or federal is going to say that the note and mortgage is void unless they are reversed by an appellate court — and the appellate courts have been doing the same thing as the trial courts. You probably don’t need that to preserve the issue because it is jurisdictional.
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By law, the rescission statute acts as a cancelation and release of the mortgage encumbrance because that is what the law says. If the note and mortgage are in fact void by operation of law then everything that comes after that is void.
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But if the courts refuse to apply that law because they have decided they don’t like the result then your notice of rescission will not get you any relief until SCOTUS, in a decision like Countrywide v Jesinoski, explicitly tells all the lower courts to stop pretending they can interpret the statute.
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Such a decision will only be effective if the court spells out that  rescission is and has been effective by operation of law upon delivery and that no other conditions apply. It can attacked on any number of grounds but the so-called lenders must do so within 20 days or they are time barred. And if they maintain that position for one year, they lose the right to enforce the debt, in addition to the their previous loss of the right to enforce the void note and void mortgage.
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Bottom line: the lawyer who says that tender is required before rescission is effective is wrong on the law but right as to the practical result. In fact any lawyer who advises clients about the weakness of any position based upon TILA Rescission is wrong on the law but right as to the practical effect.
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Ultimately the system is going to need to deal with the the consequences of rebelling against the clear pronouncements of law from the US Congress and the US supreme Court. There is absolutely no question that millions of foreclosures have proceeded without jurisdiction because the note and mortgage were void as a result of delivery of TILA Rescission. In many cases they were actually recorded in the chain of title. Decisions and actions taken without jurisdiction to do so are void according to all statutory law, common law and rules of civil procedure as required by the US Constitution.
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In my opinion that means that all homeowners who were deprived of clear title to their homes through foreclosure after sending a notice of rescission, still own their property. Lawyers for the banks were repeatedly told to ignore rescission at their own peril. They did it anyway.
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Ultimately there will be recognition that the courts are vetoing legislation passed by congress simply because the judges disagree or are afraid of the consequences if they were to apply the law. This is a violation of the most basic tenet of the US Constitution — division of governance into three co-equal branches of government. The courts are required under law to follow the law. Eventually the chickens are going to come home. How and when that will happen remains unclear.

14 Responses

  1. Ian — you are correct. Borrowers are told that they have a grace period to pay, but they are not told that on 31st day they are considered in default. But, that is not what I am talking about for the default.

    If there was refinance, the PRIOR loan was being liquidated (reported as not collectible) at the same time the “refinance” is being put through Therefore, the new loan is nothing more than a restructure and a transfer of debt. There is no funding. And, there was no “refinance” even though the borrower are told it is a refinance. And, that is why the trusts are bogus. If there was actual funding, the loan asset would have been on a bank’s balance sheet prior to the transfer to an off-balance sheet (trust) conduit. This is required for valid securitization. . The loans went straight to off balance sheet. This is not valid securitization. The trust loans were not derived from valid balance sheet assets. Also, for valid securitization, once a loan was reported in default, it is removed from the trust and put back onto the bank’s balance sheet for charge-off or sale to debt buyer. With the trusts, this does not happen. The debt collector servicer continues to service for the credit default derivative CONTRACT swap holder – to the trust — not the bank itself. (note – Swaps contracts are contracts not securities).

    This is why the government, at bail-out, purchased the securities, and did not force GAAP requirements that the trust loans be put back to the bank’s balance sheet. They could not be put back as they were never there in the first place. It is also why the trusts all had a “servicer” who is a debt collector.

    This is also why I keep saying that investors did NOT fund the loans. Valid securitization simply does NOT work that way.

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  2. Typo/spellcheck- GAAP, not GASP: although the way things are going, perhaps GASP is a more fitting term!
    And in the next post, ….. the 31st day after the due date is what I typed. I have to disable spellcheck… somehow-

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  3. ANON-
    To buttress your ststement that the loans were already in default, I read in a number of PSAs all Of which stated that the “mortgages” became in default on the 31st day agmftrr the due date. What happened then behind the scenes I have no idea. I would assume putback claims to the originator, CDSs kicking in, etc.
    But from my perspective, there I am 3 or 4 weeks later , remitting payment to “catch me up and be current “ on a debt which was charged off and paid in full a month prior. And here I am, years later, having paid them an additional mid 6 figure total of mortgage payments-
    Makes me feel “silly”…..

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  4. ANON- another important explanation thank you.
    But as to “the original stated lender or it’s successor”:
    Isn’t the problem here that the successor to the original stated lender has been replaced by a debt collector, and , as opposed to a traditional mortgage loan, no one has purchased any debt, they are buying MSRs, and telling us all that they are the lender, when they are in fact the end of the line and are keeping the proceeds of sale while cooking their books to make it appear that they are just recouping “services advances? In direct violation of GASP and FASB?

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  5. Yes – Kali — I recall that Wells post. Here is the problem with the refinances — there was no need for funding because the loans did not have to be funded as they were already classified as default debt. Only cash out was funded. So catch 22– that in itself is a TILA violation, but because it was not technically a mortgage, they claim not subject to it. Here’s what one government official once said to me:

    “How do you know that these loans were all not really in default?”

    My Answer — because no one told the borrower that they were in default.

    So when there is an later actual default — all the docs are bogus.

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  6. @ ANON

    I generally agree on the premise that TILA specifically applies to a lender of its OWN MONIES.

    That is their factual [conduit loan servicing] problem: their LACK of intent to lend anything; which was in fact their ruse: the actual intent to deceive and misrepresent their knowing and intentional narrow capacity as a SECURITIZATION CONDUIT BROKER, resulting in their elimination of any and all risk in the origination transaction, and their concealing the planned divesting of any further beneficial interest in the FAKE paper trail at the inception time/event of securitization.

    As I had posted, WELLS admits [and has apparently removed from the web: https://www08.wellsfargomedia.com/assets/pdf/commercial/financing/real-estate/Conduit_Loan_Servicing.pdf%5D:

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  7. And, may i add – many years ago a law firm (not out of business) whose name was on many, many trusts, told me these vehicles were just a parking spot for “debt.” The word these used to me was that they were a “shell.” Just a transfer of debt collection. Note that the servicers identify themselves as debt collectors.

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  8. Rescission is an option of remedy under the TILA. TILA applies to Lenders. Covered persons under the TILA are the creditors/Lender. Those that have a beneficial security interest in securities derived from loans are NOT creditors, lenders or covered persons. And, therefore, do not have to abide by TILA.

    Therefore, it is impossible to rescind a loan with the trustee to the trust, or the beneficial security investors. But, there must be a party to execute the right to rescind with. That party would be the original stated lender on the mortgage or it’s successor. A security trust/trustee is not a successor. Thus, TILA rights have been violated. Please let me know if anyone disagrees with this.

    Kali — the case you post involves WAMU and Chase. This I see for many. Yet Chase won a case against the FDIC– and the FDIC actually paid them hundreds of millions of dollars, and released them from several billion in the global settlement. This involved the liability for many WAMU trusts, and, perhaps, for any trust that WAMU had its hands in. Is the FDIC now liable to borrowers who had a WAMU related loan? Any court will kick out an action against the FDIC.

    All is a huge mess.

    Liked by 1 person

  9. OPPS!

    I see the Naifeh decision was cited to in Hinrichsen.

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  10. @ MB on the bubble

    You are correct; it ALREADY IS TOO LATE.

    The horse is outta the barn:

    US Bank National Association v. Naifeh et al.

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

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  11. sORRY, i JUST WASTED OVER AN HOUR TRYING TO COMPLETE YOUR FORM..mY CASE IS BACK TO 2008. iTS BEEN 10 YS OF PUE HELL. uPR “SUBMIT” REQUIRES TOO MUCH UNAVAIL DATA. I AM NOW 80, vIENAM eRA ptsd AND HARING LOSS VET. i STILL AWAIT MY f9 aPPEAL HEARING BUT EXPECT I WILL BE IN gODS ARMS b4 THE CORRUP va aDMIN HONORS ITS DEBTE TO ME AND TGHOUSANDS OF OTHER NAM eRA VETS, THOSE OF US WHO HAVE NOT TAKEN OYR LIVES SO FAR. tHANKS ANYWAY..I AM OUT OF ANY RESOKVE OR HOP AT THE HANDS OF wILBUR rOSS jRS CORRUPT HAND AS THE ONCE SOLE OWNER OF ahmsi..i HAVE BEAT MYSELF BEYOND HOPE OF JUSICE AND i ACCEPT MY FATE.

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  12. Bear in mind that Judge Dana Sabraw is a United States Federal District Judge and not just opposing counse:

    Here, Plaintiff argues MLD has not taken any of these actions, and Defendant has not provided any evidence to the contrary. The Ninth Circuit, consistent withJesinoski, recognized “[i]f [the lender] had acquiesced in [the borrower]’s notice of rescission, then the transaction would have been rescinded automatically, thereby causing a security interest to become void[.]” Yamamoto v. Bank of New York, 329 F.3d 1167, 1172 (9th Cir. 2003); see U.S. Bank N.A. v. Naifeh, 1 Cal. App. 5th 767, 779 (Cal. Ct. App. 2016), review denied (Nov. 9, 2016) (“a timely notice of rescission automatically renders the security interest void under section 1635(b) where the creditor acquiesces in the rescission or ignores it.“). In other words, “when the unwinding process is not completed and neither party files suit within the TILA statute of limitations[,] . . . Jesinoski directs that the rescission and voiding of the security interest are effective as a matter of law as of the date of the notice.” Paatalo, 146 F. Supp. 3d at 1245; see Hoang v. Bank of Am., N.A., No. C17-0874JLR, 2017 WL 5559846, at *7 (W.D. Wash. Nov. 16, 2017) (“If a borrower effects rescission through notice under § 1635(a), he is not required to also bring a claim to enforce that rescission or have a court declare his rescission proper because he and the lender can complete the rescission process.”).[3] Thus, this argument is without merit.

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  13. Neil:

    How does your most recent TILA commentary comport with Judge Sabraw’s very recent ruling (9th Circuit) against BOA as it pertains to TILA Rescission?

    http://stopforeclosurefraud.com/2018/07/24/the-shit-done-hit-the-plan-hinrichsen-v-bank-of-america-na-tila-specifically-plaintiffs-theory-of-liability-on-each-of-his-claims-is-as-follows-on-january-12-2012-plaintiff-exercised-a/?awt_l=M08I7&awt_m=3YPF0IkZzaShwSR

    How do you interpret BOA’s decision to NOT appeal? My guess is that BOA wants to try and quarantine the damage to the lowest level court and avoid an even more damaging precedential Appellate decision.

    Henrichsen had/has the very real potential of being the catalyst for the SCOTUS intervention you suggested.

    Your thoughts???

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