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One of the things that irritates most homeowners and lawyers for foreclosure defense is how “evidence” is admitted that “proves” a fact that doesn’t exist. One of the tools for doing that is Judicial Notice or as we call it, “JN.” JN is used for documents that are inherently credible — not some document created by one of the litigants and uploaded to a quasi government site without any validation by any government entity. They are inherently credible because they were prepared by or taken from the records of a credible source — a party with not relationship to the parties in litigation and no stake in the outcome.

If you read the statute in your state you will see plenty of reasons why most documents proffered as being subject to Judicial Notice (JN) should be rejected as evidence without proper foundation and specific foundation for each issue addressed in the document. Foundation means testimony and maybe other documents for which there is a witness to provide the foundation.

In truth when the lawyers for the fictional claimant does this they are opening up the door as well as virtually admitting that they can’t prove the false fact without JN. By aggressively preserving and invoking objections and using motions to strike and motions in limine, as well as effective cross-examination, the truth of the matter asserted by the document can be eliminated.

Institutional litigants are misusing the court system throughout the dozens of state and Federal jurisdictions to get into evidence matters which are and should be barred from evidence or at least subject to dispute, and about which these same litigants often have no or little independent evidentiary support. One such major vehicle for advancing this practice is the use of Requests for Judicial Notice (RJN).

Documents uploaded to, for example, are proffered as subject to judicial notice, even though the SEC website acts merely as a platform for publication, and not a proper registry, and neither monitors nor validates any documents placed on their site.

In California, StorMedia,, Inc. v. Superior Court (1999) 20 Cal.4th 449, 457, fn. 9, has long controlled among other Cal cases RJNs in California litigation.  This case holds that “When judicial notice is taken of a document…the truthfulness and proper interpretation of the document are disputable.”

Yet it is very common in California foreclosure litigation for courts to treat RJNs as if they do establish the truth of the matter asserted within the documents. This enables institutional defendants in Cal. borrower foreclosure litigation, to point as evidence to Plaintiff’s presenting recorded documents only to dispute their content, as if the documents so presented and disputed are not subject to dispute, because of the taking of judicial notice.

FLA S Ct Reverses Course on Homeowner’s Award of Attorney Fees and Raises Other Issues for Defense of Foreclosures

For those of us that have access to the data, we know that homeowners are winning foreclosure cases all the time. Nobody else knows because as soon as a homeowner wins or gets into a winning position they are offered money for their silence. The situation worsened when Florida and courts in other states turned down the homeowner’s demand for attorney fees after the homeowner had flat out won the case — especially where the case was dismissed for lack of standing.

Here the homeowner once again wins, having advanced several defense narratives. The homeowner applies for recovery of attorney fees and the demand is rejected because the loan contract no longer exists or because the party seeking to use it was shown not to be party to it, at least when suit was commenced. The Florida Supreme Court reversed that decision and rejected others like it.

Recognizing the danger of the erroneous rulings from the trial court and the district courts of appeal, the Court rejected arguments that a dismissal, voluntary or otherwise, based upon lack of standing meant that the loan contract no longer existed. While not completely abandoning the lower courts the Florida Supreme Court has narrowed the issues such that it is again almost always arguable and even inevitable that if the homeowner wins the foreclosure case an award of fees will follow.

fla s ct attny fees 1-4-19 sc17-1387 Glass v Nationwide

see also Follow Up Article to this Article

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM.
A few hundred dollars well spent is worth a lifetime of financial ruin.
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).

This case opens a can of worms for the banks and servicers and corroborates much of what I have been writing for 12 years.

At issue was the homeowner’s right to prevail on an attorney fees award after winning the case in the trial court. This has previously been denied on the basis that cases dismissed for lack of standing meant that there was not contract. But the Florida Supreme Court says that the fact that just because the party involved had no right to enforce the contract doesn’t mean there was no contract.

The clear implication here is that the court did not want the erroneous rulings of trial courts and appellate district courts to be construed as completely canceling the loan contract. Any other ruling would be inherently ruling on the rights of unidentified third parties who DID have a right to collection of payment from the borrower’s debt and who did have a right to enforcement — without any notice to them because they are undisclosed and unknown.

The Supreme Court ruled that failure to allege or prove standing does not negate the fact that the homeowner is the prevailing party and entitled to fees under F.S. 57.105(7).

Citing its own decision in 1989, Katz v Van Der Noord 546 So 2d 1047, the Supreme Court held that even if the contract is rescinded or held to be unenforceable the prevailing party is still entitled to fees under the reciprocity provisions of F.S. 57.105(7).

This upends a basic strategy of the banks and servicers. Up until this decision they were virtually guaranteed an award of fees and costs if they won and immunity to fees if they lost. This reopens the fees issue and may give attorneys a reason to accept foreclosure defense cases — even on contingency or partial contingency.

But the court, perhaps in dicta, also mentions whether the note is negotiable, quoting from the homeowner’s arguments and pleadings.

Up until now the mere existence of the original note and in many cases a copy of the note, was sufficient to regard the note as a negotiable instrument. But the Florida Supreme Court is hinting at something here that the banks and servicers really don’t want to hear, to wit: it takes more that announcing the existence of a note to make it negotiable. This is not so.

Which brings me to my final point: read carefully the day the claimant is introduced and you will probably find that the note and assignment are not facially valid because they require reference to parole or extrinsic evidence. This bars legal presumptions, at least in the absence of a specific reference to the documents supporting the execution of the instrument as a substitution of trustee, an assignment or an endorsement.

The court was more than hinting at the idea that subsequent treatment of the note, which may have been a negotiable instrument at the time of execution (if the “lender” was in fact the lender). The question is whether the note is facially valid, to wit: whether the note specifically names a maker, payee and an unconditional promise to pay. If the originator was not the lender then extrinsic evidence would be required to prove the loan and the debt and the party who would have been appropriately named as payee on the note.

If subsequent indorsements or assignments for a note that WAS negotiable remove certainty from one or more of the elements of a facially valid instruments, then it is no longer a negotiable instrument. And THAT means that the all “reasonable” assumptions and legal preemptions are taken off the table.

The reason is simple. In order to be a negotiable instrument the assignee or successor must have certainty as to the parties and terms of the note. If extrinsic or parole evidence is required to provide that certainty the instrument is not negotiable and thus not entitled to any assumptions or presumptions.

So for example (taken from another case) when a Substitution of Trustee occurs in a nonjudicial state and it is executed by “U.S. Bank National Association, as trustee, in trust for registered Holders of First Franklin Mortgage Loan Trust, Mortgage Loan Asset-Backed Certificates, Series 2007-FF I, by Select Portfolio Servicing, Inc., as attorney-in-fact” then there are several points that require extrinsic or parole evidence, making the note non negotiable or at least arguably so.

In this scenario for an assignee to take a note from a party claiming rights to enforce in this instance one must know

  1. The name of the Trust, and the jurisdiction in which it was organized and is now existing.
  2. The instrument by which US Bank claims to be trustee
  3. Identification of “registered holders”
  4. The identification and content of the certificates
  5. The instrument by which SPS claims to be “attorney in fact”
  6. If you look closely you will also see that there is a question as to whom it is claimed that SPS is representing as attorney in fact. In any event “attorney in fact” means that a power of attorney exists but without specific reference to that power of attorney by date and parties, extrinsic or parole evidence is required meaning that no assumptions or legal presumptions may be made.

In other words the note cannot be accepted by anyone without extrinsic evidence. The fact that documents are apparently accepted by the assignees doesn’t change anything as to the facial validity of the document. Without facial validity there can be no negotiability under Article 3 of the UCC. Without negotiability there can be no assumptions or legal presumptions and thus the claimant must prove every element of its claim without presumptions.

And of course when the homeowner wins an award of attorney fees is now once again probable in addition to court costs.

Remember always: the point is not who can get away with enforcement. The point of the law is assuring that the owner of the debt is the one enforcing the debt and collecting the proceeds of enforcement. Before false claims of securitization this premise was almost universally true. Now it is rarely true that the true owner of the debt is represented.

And the apparent absence of such a party due to manipulation of the debt by intermediaries, does not legally create a vacuum into which anyone with knowledge and access to data may step in and claim rights of enforcement. As stated in California Ivanova decision the law does not allow the borrower’s debt to be owed to anyone whose premise is simply that they claim it.

9th Circuit Creeps Up the Ladder in Hoang TILA Rescission Breakthrough

This case comes the closest yet to the truth about TILA Rescission. And it requires that TILA Rescission be applied — if there is an action to enforce within the statute of limitations covering contract actions in the state in which the property is located.

The court’s conclusion that there must be a statute of limitations is derived from its erroneous assumption AGAIN that TILA rescission is a claim rather an event. Jill Smith has done an outstanding job of moving us toward the final step in TILA REscission, to wit: TILA Rescission is procedural and it is an event. Once delivered it has ended the loan, the note and the mortgage by operation of law, just as the statute says. There is no statute of limitations on an event because it is not a claim.

Only a claim for breach of TILA duties could be subject to a statute of limitations. Failure to file suit, as specifically and expressly pointed out by a unanimous SCOTUS decision in Jesinoski does not affect the effect of TILA rescission. Courts don’t like it but that is the law and now this court has moved up to the precipice of saying exactly that.


Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult.
I provide advice and consultation to many people and lawyers so they can spot the key required elements of a scam — in and out of court. If you have a deal you want skimmed for red flags order the Consult and fill out the REGISTRATION FORM. A few hundred dollars well spent is worth a lifetime of financial ruin.
Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345 or 954-451-1230. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).

Hoang v Bank of America 12-6-18

See also ! Financial Freedom Acquisition LLC v. Standard Bank & Trust Co., 2015 IL 117950

! Financial Freedom Acquisition v Standard Bank -Analysis

! If You Own Your Home in a Land Trust

TILA Rescission is no more a claim than a warranty deed. It just exists. You don’t need to sue periodically because by operation of law (the exact wording of the TILA REscission statute) the deed exists and confirms title. In the same way TILA Rescission eliminated the lien encumbrance, the note and even the loan agreement and replaces it with a statutory “agreement” to unwind the debt.

The note and mortgage remain void throughout any time period after the notice of rescission is sent. This court gets close but veers off what they obviously believe is a radical end result — i.e., that the right to claim the debt expires if the creditor fails to comply with the duties imposed by TILA REscission and refuses to even acknowledge the existence of the rescission. That “radical result” is precisely what is mandated by the statute and the courts have no right to legislate it away. The legislature has that power but not the courts. Simple as that.

Contrary to what this court is saying a demand for injunction (as one would do under authority of a valid warranty deed) is NOT a lawsuit to enforce the rescission. The rescission is already in force. And the note and mortgage no longer exist. A Lawsuit to enforce the rescission would ONLY be a lawsuit that seeks to enforce the statutory duties during the time allowed by the statute of limitations in TILA which everyone agrees does not apply.

Ultimately the statute says that regardless of ANY defense a claimed creditor might have (including limitations which is an affirmative defense) the rescission is effective when delivered (mailed under USPS). Even the three years can only be raised by a party with standing and who can prove it WIThout reference to the note or mortgage. Real facts showing they paid for the debt . Those facts don’t exist and most people know it. But because of the “free house” myth they continue to flout the law and legislature from the bench.

But this case almost gets me over the hump where I can say “I told you so.”

Here are some notable quotes from this very important decision.

If a creditor fails to make required disclosures under the Truth in Lending Act (TILA), borrowers are allowed three years from the loan’s consummation date to rescind certain loans.1 15 U.S.C. § 1635(f). Borrowers may effect that rescission simply by notifying the creditor of their intent to rescind within the three-year period. Jesinoski v. Countrywide Home Loans, 135 S. Ct. 790, 792 (2015). TILA does not include a statute of limitations outlining when an action to enforce such a rescission must be brought

On April 15, 2013 (within the three-year period), Hoang sent the Bank notice of intent to rescind the loan under TILA. The record reflects that the Bank took no action in response to receiving the notice.

Once a borrower rescinds a loan under TILA, the borrower “is not liable for any finance or other charge, and any security interest given by the [borrower] . . . becomes void upon such a rescission.” 15 U.S.C. § 1635(b); see 12 C.F.R. § 226.23(a)(3). Within 20 days after the creditor receives a notice of rescission, the creditor must take steps to wind up the loan. 15 U.S.C. § 1635(b). “Upon the performance of the creditor’s obligations under this section, the [borrower] shall tender the property to the creditor . . . [or] tender its reasonable value.” Id. Once both creditor and borrower have so acted, the loan has been wound up.

However, the Supreme Court altered that usual procedure in Jesinoski. It eliminated the need for a borrower to bring suit within the three-year window to exercise TILA rescission. Instead, “rescission is effected when the borrower notifies the creditor of his intention to rescind.” Jesinoski, 135 S. Ct. at 792. “[S]o long as the borrower notifies within three years after the transaction is consummated, his rescission is timely. The statute does not also require him to sue within three years.”

A party may amend its pleading with the court’s leave, which “[t]he court should freely give . . . when justice so requires.” Fed. R. Civ. P. 15(a)(2). “This policy is to be applied with extreme liberality.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (internal quotation marks omitted). “Dismissal with prejudice and without leave to amend is not appropriate unless it is clear on de novo review that the complaint could not be saved by amendment.” Id. at 1052. Leave to amend can and should generally be given, even in the absence of such a request by the party. See Ebner v. Fresh, Inc., 838 F.3d 958, 963 (9th Cir. 2016) (“[A] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.”).


TILA RESCISSION: The Bottom Line for Now

Probably the main fallacy of the people who say that TILA Rescission is not possible or viable is that they project the outcome of a lawsuit to vacate rescission. Based upon their conjecture, they assume that Rescission is no more than a technicality. Congress, and SCOTUS beg to differ. It was enacted into law 50 years ago in an effort to prevent unscrupulous banks from screwing consumer borrowers.

Let us help you plan your TILA RESCISSION narrative and strategy: 202-838-6345. Ask for a Consult.

Register now for Neil Garfield’s Mastering Discovery and Evidence in Foreclosure Defense webinar.

Get a Consult and TEAR (Title & Encumbrances Analysis and & Report) 202-838-6345. The TEAR replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps). to schedule CONSULT, leave message or make payments. It’s better than calling!

I keep getting emails from non lawyers who have a “legal opinion” that not only differs from mine, but also the opinion of hundreds of lawyers who represent the banks and servicers. They say that because disclosures were probably made that rescission is nothing more than a gimmick that will never succeed and they point to the many case decisions in which courts have ruled erroneously in favor of the banks despite a rescission that eliminated the subject matter jurisdiction of the court, since the loan contract, note and mortgage no longer exist. The debt, however, continues to exist even if it is unclear as to the identity of the party to whom it is owed.

First the courts ruled erroneously when they said that tender had to be made before rescission was effective. Then the courts said that no rescission could be effective without a court saying it was effective. That one put the burden on proving the figure to make proper disclosure on the homeowner. The Supreme Court of the United States, (SCOTUS — see Jesinoski v Countrywide) after thousands of decisions by trial and appellate courts, told them they were wrong. As of this date, no court has ever ruled that the rescission was vacated — the only thing that could stop it.

The lay naysayers keep harping on how wrong I am about rescission. Unfortunately many people believe what they read just because it is in writing. In my case I simply instruct the lawyers and homeowners to simply read the TILA Rescission statute and the unanimous SCOTUS decision in Jesinoski. What they will discover is that I am only repeating what they said — not making it up as some would have you believe.

To the naysayers and  all persons in doubt, i say the following:

As I have repeatedly said, in practice you are right, for the time being.
But the legal decision from SCOTUS will undoubtedly change the practice. The law is obvious and clear. SCOTUS already said that. So no interpretation is required or even permissible. SCOTUS said that too. TILA Rescission is mainly a procedural statute, not a substantive one. SCOTUS said that too. On the issue of when rescission is effective, it is upon mailing (USPS) or delivery. SCOTUS said that too. On the issue of what else a borrower needs to do to make TILA rescission effective, the answer is nothing. SCOTUS said that too.

Hence the current argument that you keep making is true “in practice” but only for the moment. SCOTUS will soon issue another scathing attack on the presumptuous courts who defied its ruling in Jesinoski. There can be no doubt that SCOTUS will rule that any “interpretation” that contradicts the following will be void, for lack of jurisdiction, because the loan contract is canceled and the note and mortgage are void:

  1. No court may change the meaning of the words of the TILA Rescission statute.
  2. Rescission is law when it is mailed or delivered.
  3. Other than delivery no action is required by the borrower. That means the loan contract is canceled and the note and mortgage are void. They do not exist by operation of law.
  4. Rescission remains effective even in the absence of a pleading filed by the borrower to enforce it.
  5. Due process is required to vacate the rescission. That means pleading standing and that proper disclosure was made, an opportunity for the borrower to respond, and then proof that the pleader has standing and that proper disclosures were made.
  6. Pleading against the rescission must be filed within 20 days or it is waived.
  7. At the end of one year both parties waive any remedies. That means the borrower can no longer enforce the duties imposed on the debt holder and the debt holder may no longer claim repayment.
  8. The only claim for repayment that exists after rescission is via the TILA Rescission statute — not the note and mortgage. This is based upon the actual debt, not the loan contract or closing documents.
  9. Any claim for repayment after rescission is predicated on full compliance with the three duties imposed by statute.
  10. A court may — upon proper notice, pleading and hearing — change the order of creditor compliance with the three duties imposed upon the debt holder. This does not mean that the court can remove any of the duties of the debt holder nor summarily ignore the rescission without issuing an order — upon proper notice, pleading and proof — that the rescission is vacated because the proper disclosures were made or for any other valid legal reason that does not change the wording of the statute.
  11. The three duties, which may not be ignored, include payment of money to the borrower, satisfaction of the lien (so that the borrower might have an opportunity to refinance), and delivery of the original canceled note.

Virtually 100% of lawyers for the banks and servicers agree with the above. They have advised their clients to file a lawsuit challenging the TILA Rescission because such a lawsuit could be easily won and would serve as a deterrent to people attempting to use TILA rescission as a defense to collection or foreclosure efforts. Yet their clients have failed to follow legal advice because they know that they have no debt holder to whom funds can be traced. If they did identify the debt holder(s) they would be showing that they played just as fast and loose with investor money as they have done with the paperwork in foreclosures.

Does this mean a free house to homeowners? Maybe. Considering how many times the loans were sold directly and indirectly, and how many times the banks received insurance, bailout and purchases from the Federal Reserve, that wouldn’t be a bad result. But the truth is that everyone knows that won’t happen unless the courts continue their decisions with blinders on.

In the end, the homeowners do owe money to the investors whose money was used too fund the loans, directly and indirectly. Whether it is secured or not may depend upon state law, but as a practical matter very few borrowers would withhold their signature from a valid mortgage and note based upon economic reality.

Even the Bank Attorneys Admit that NO Tender or lawsuit is Required in TILA Rescission. Burden is on the “lender” side.

It appears that I have struck a nerve with many of the people who seek to prove me wrong in my “theories.” They are facts, not theories. And as explained by yet another attorney writing an article for the banks and bank attorneys, it is up to the “bank” side of the equation to do anything about rescission. The borrower need do nothing except send the notice. If the “bank” side does nothing they do so at their own peril — not the homeowner’s peril. READ THE STATUTE and the unanimous decision by SCOTUS in Jesinoski v Countrywide.

Although trial judges treat the matter as unsettled or even settled opposite to the express wording of the statute and the only case that matters, the issues raised defensively by the “bank” side relative to TILA Rescission are plainly without merit and well-settled by statute and SCOTUS.

The article below seeks to point out that the TILA Rescission statute allows a court of competent jurisdiction to change the order of things — if petitioned to do so. She avoids the obvious problem: that nobody has filed such a suit because they (a) don’t have standing and (b) they are winning anyway by playing to the bias of judges.

“A borrower may effectuate rescission “by notifying the creditor.” 12 U.S.C. § 1635(a). The United States Supreme Court held in Jesinoski v. Countrywide Home Loans, Inc. that a borrower need only send written notice to a lender “in order to exercise his right to rescind”; it is not necessary for the borrower to also sue for rescission to “exercise” the right of rescission. 574 U.S. ___, 135 S.Ct. 790, 793 (2016).”

Let us help you plan your narrative and strategy: 202-838-6345. Ask for a Consult.
Register now for Neil Garfield’s Mastering Discovery and Evidence in Foreclosure Defense webinar.
Get a Consult and TEAR (Title & Encumbrances Analysis and & Report) 202-838-6345. The TEAR replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps). to schedule CONSULT, leave message or make payments. It’s better than calling!

SeeLaw360: When to Consider Modifying TILA Rescission Procedures

Guide to understanding TILA Rescission.
  1. If someone is giving you advice or analysis and they don’t have a law degree and some experience practicing law, ignore them.
  3. READ THE ONLY CASE THAT MATTERS: Jesinoski v Countrywide, decided by the highest court in the land — the Supreme Court of the United States. (SCOTUS)
  4. Be prepared for push back because that is working for the “bank side.” They are wrong and they know it but they are still convincing judges to ignore the wording of the statute and ignore the word of the boss of bosses (SCOTUS).
  5. A court decision that does not vacate the rescission is no decision at all. The courts have been careful to avoid this obvious issue. Since the rescission is effective when mailed (or delivered), that is the moment when the loan contract is canceled, and the note and mortgage rendered void. Any court that moves forward despite rescission is exceeding its jurisdictional authority as there is no longer subject matter jurisdiction.

There many shills and well intended people out there on the internet who have strong opinions about TILA Rescission. Nearly all of them have no law degree and no experience practicing law and lack any useful knowledge about court procedure. They should be ignored. Even the “bank” lawyers ignore them.

Their erroneous points come down to this:

  1. if the disclosures to the borrower were complete, then rescission doesn’t count
  2. it is up to the borrower to make TILA rescission effective.
  3. if the borrower cannot tender the principal back then the rescission is not effective.
  4. the TILA statute allows courts to change the order of duties of the “bank” side and the borrower side.

All four points are dead wrong because of due process. You can’t get relief unless you plead for it. So far the “bank” side has convinced judges they don’t need to file a pleading to get rid of an effective TILA Rescission. That is going to change.

The statute contains no presumptions that the disclosures are complete. In our legal system that means that a party with standing must bring an action that requests relief from rescission on the grounds that disclosure was complete. And they must bring such an action timely under the TILA Rescission Statute (i.e, within 20 days).

TILA rescission is effective at the moment of mailing or delivery by operation of law (i.e., the TILA Statute). The Supreme Court has already ruled unanimously that no lawsuit or other action is required by the borrower on the issue of rescission. Sending it means the loan contract is canceled and the note and mortgage are void.

No tender of money or property is required by the TILA statute in order to make rescission effective. This is not a theory. This is what the statute says and what the Supreme Court of the United States says. You can disagree with it all you want but the matter is legally settled.

The fact that the statute allows the court to reorder the statutory duties and obligations does not mean anyone asked the court to do so. If they did, the borrower would be entitled to due process — i.e., time to respond to the new order of things. Obviously that pleading is not going to submitted by the borrower. Just as obviously that pleading must be filed seeking relief from the rescission and allowing due process — i.e., litigation over whether the sending of the rescission was lawful but only in the context of a pleading filed by a party with standing.

And that is the point. There probably is no party with standing once you strip away the note and mortgage. The owner of the debt is most likely unknown. And that is where we are. Eventually SCOTUS will rule again on TILA Rescission. If the next ruling is consistent with their last ruling they will once again strike down the procedures and substance of court rulings that ignore the existence of the TILA rescission which was effective by operation of law, from the moment it was sent or delivered.

Here are some relevant quotes from the article cited above, written by an attorney working for a firm that represents banks:

Lenders at times find themselves assessing how to handle a claim by a borrower that he or she is entitled to rescind a loan under the Truth in Lending Act (TILA). Rescission under TILA is distinct from common law rescission due to one main difference: unlike common law rescission, which requires the rescinding party to tender any benefits received under the contract back to the other party as a condition precedent, TILA allows a borrower to exercise the right of rescission before such tender must occur. This can result in putting a lender on its heels, seeking to defend against the merits of a TILA rescission claim before even knowing if the borrower can fully effectuate the rescission by ultimately tendering the proceeds of the loan back to the lender.

However, it is possible to avoid this situation, even when operating within the framework of TILA. A strategically useful but often under-utilized tool for lenders in litigation involving rescission under TILA is to seek an order altering the statutorily prescribed procedures for rescission.

Overview of Rescission under TILA

Ordinarily, under section 1635(a) of TILA, a borrower has the unconditional right to rescind a loan for three days after the consummation of the transaction, delivery of notice that the borrower has a right to rescind or delivery of all material disclosures – whichever comes later.[1] Thus, if the lender provides the borrower with the requisite material disclosures upon closing the loan, a borrower’s right of rescission under TILA is extinguished after three days.

Assuming, however, that a lender does not provide a borrower with all necessary “material disclosures,”[2] section 1635(f) of TILA extends a borrower’s right of rescission to three years after the consummation of the transaction.[3]

While common law rescission requires a rescinding party to tender the benefits received pursuant to an agreement back to the other party as a condition precedent, TILA prescribes otherwise. Section 1635(b) states that when a borrower “exercises his right to rescind under subsection (a), he is not liable for any finance or other charge, and any security interest given by the obligor … becomes void upon such a rescission.”[4] Moreover, upon the exercise of rescission “under subsection (a)” of TILA, the lender is required to return any down payments provided by the borrower and “take any action necessary or appropriate to reflect the termination of any security interest created under the transaction” within 20 days of receiving a notice of rescission.[5] Only after a lender performs its obligations under subsection (b) is the borrower required to tender back any benefits received, such as loan proceeds.[6] Notably, however, both section 1635(b) and TILA’s implementing regulation, Regulation Z, provide that the procedures for rescission under TILA may be modified by court order.[7]



When and What is Consummation of Contract?

Like many other “Black letter law” situations, when it comes to foreclosures the courts are ignoring all precedent, statutes, rules and regulations when they consider a loan contract consummated when one party signs documents — without the other side showing it signed documents and performed its obligations. Without consideration passing both ways, there is no contract to enforce.

The argument that there is nothing for the lender to sign is without merit. The further argument that therefore the only signature that counts in a written contract is the signature of one side is equally ridiculous. It is true that lenders don’t sign the notes and mortgages. But for lenders, their part of the contract only comes alive when they comply with TILA and perform — i.e., they give the loan of money.

To view it any other way would be saying that performance by the “lender” is optional. And that would by all accounts be an executory contract that would be unenforceable until the optional performance was completed. Hence consummation can only be (a) when the money appears (b) from the “lender” identified on the disclosure documents.

The banks craftily spotted the loophole that lenders don’t sign the actual instruments that provide evidence of a written loan contract. But those instruments may not be used to sidestep mutuality and reciprocity that MUST be present in every situation where a party is relying upon paper instruments instead of proving the loan from scratch. If a third party performs the duties promised by the originator there is no enforceable contract even if there is a separate remedy for recovery of money.

Consummation and consideration should be treated as fair game in discovery instead of annoying protests from the homeowner. The Courts have the power to make legal decisions — not political ones.

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Consummation vs Closing

Seems like various state laws redefine “consummation” as not the actual consummation (the initial fulfillment of promises made by both parties to a contract – think marriage) but instead, make it apply to the moment that a written obligation of a debtor (the wife) is signed at a “closing” in a loan transaction… These definitions do not take into account the duty of the originator or alleged lender (the husband) to timely perform their duties, especially to provide a record of the funding in the purported debtor’s name toward the discharge of the contracted obligation. This occurs most often in “refinance” deals where there is no seller or buyer, simply a rearranging of computer entries between financial institutions. This leaves the alleged debtor (the wife) wanting for proof of fidelity, consideration and performance while operating under the presumed legal disability created by the state’s definition. As you can imagine, and we have seen, this can have a deleterious effect on a judge’s or debtor’s ability to accurately calculate the deadline to timely file a TILA rescission notice within the three year statute of repose.

I think this comment is correct. By defining consummation as the moment when one party signs documents without regard to when or even whether the other party signs and performs contractual duties, the courts are letting originators off the hook for fraud, TILA violations and more. Like the debt itself the obligation is not open ended to anyone who claims it. It is owed to the party that owns the debt or obligation.

In normal contract law there is some fuzziness about consummation and sometimes rules of estoppel apply. But the normal rule is simply that the transaction is consummated and the documents are effective when the documentation is completed and executed by both sides, and consideration has passed both ways.

By considering consummation to be when only one party signs the courts are ignoring a basic legal doctrine that has been solid for centuries — consideration must pass before the documents can be used for enforcement.

This is particularly important in the modern era where “lenders” have been replaced by “originators.” In many cases the originator is not the lender. Hence no enforceable contract can be said to exist unless there is proof that the originator was acting for a third party Lender.

If the third party was not disclosed they would be admitting to a TILA violation. If the third party is not a lender either but rather a conduit, then we have (a) no consideration and (b) nondisclosure at “closing” as to the identity of the lender.

By “no consideration” I don’t mean that the homeowner did not receive money or the benefits of a disbursement.  I mean that nobody in the chain starting with the originator has paid that consideration and thus nobody in that chain of command is party to an enforceable contract. Like the fabricated assignments, allonges and endorsements, the existence of a paper instrument even if signed does not mean that the provisions contained therein are enforceable. Under contract law it is the transaction that must have consummated between the parties to the written contract. THAT is something that does not occur, even in the c leanest of cases, until after the closing and sometimes months or even years after.

By revealing the absence of a payment by the originator, one accomplishes two things. (1) the written loan contract (note and mortgage or Deed of Trust) was never enforceable and thus cannot be enforced by successors. (2) clear violations of TILA disclosure requirements have been violated.

BUT none of this means that there is no debt — assuming that money appeared after closing. The debt exists. The homeowner does owe money. And while the homeowner does not owe just anyone, he/she owes money to the person or parties who are out of pocket for the loan. Their remedy is probably an action in equity seeking to claim the paperwork AFTER they have proven that they are the real parties in interest. Or, their remedy would be simply the equitable action for unjust enrichment. In the first case they MIGHT preserve the mortgage encumbrance. In the second, they have no collateral.

Rescission Precision Goes to U.S. Supreme Court Petition for Mandamus

10 years ago, seeing where the foreclosure wave was going and watching court cases, I said on these pages that the only solution to these foreclosures is Mandamus. First to stop judges from applying legal PRESUMPTIONS and second to stop judges from ignoring TILA rescission. Now someone has done it and others might follow suit, if you pardon the pun. Lawyers were not well versed in mandamus and pro se litigants had never heard of it. So for the most part everyone has been screaming and yelling about injustice, fabrication, forgery and perjury.

Ironically it is Dan Junk, pro se, who has done the best legal writing on the issue of TILA Rescission and has chosen, in my opinion, the best route to getting the Supreme Court to issue an order prohibiting judges from disregarding TILA Rescission and requiring judges to follow the law in 15 U.S.C. §1635. The irony is doubled because of Dan’s last name (Junk) and the fact that the securitization scheme arose partly out of the junk bond craze 30 years ago. Except of course that back then Wall Street pirates WERE sent to prison.

SCOTUS has the option of taking any case they want to review. They did take the Jesinoski v Countrywide case from which this Petition for Mandamus arises. And once they take it for review, they can still deny the writ leaving decisions on rescissions in limbo and creating case precedent where Judges have the option of disregarding the law as written in a statute in virtually any kind of case.

This one was filed, as I understand it, last Friday. It may or may not be considered timely. The reason I am publishing the Petition for the Writ of Mandamus is  that it attacks exactly on point what is happening in the courts — namely, “denying” the existence and effect of TILA rescission even after it has taken effect as a nonjudicial remedy.

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Junk SCOTUS Petition for Writ of Mandamus on TILA RESCISSION

Hiding in Plain Sight_ Jesinoski and the Consumer_s Right of Resc

Jesinoski decision

Dan Junk attended one of my first seminars back in the days when I was co-presenting with Brad Keiser. In litigation for around 9 years, he has followed this blog (and many others) and fought off the “inevitable” foreclosure as long as he could in Ohio. Besides clear evidence of substantive defenses Dan had sent a notice of rescission within the 3 years stated in the TILA Rescission statute.

Like thousands of judges across the country in State and Federal courts, the timely and effective rescission was ignored simply because the judges didn’t like the result. The ultimate decision was against him because the courts continue to allow legal presumptions to apply even though they create “alternate facts” in conflict with reality.

Blind justice supposedly requires courts to apply the law, as written by the Federal and State legislatures. The answer for Dan was not in some attempted appeal but rather to seek a sweeping ruling from the Supreme Court of the United States that specifically requires all judges, whoever situated, to follow the TILA Rescission law. There is adequate evidence to show that this is of great public importance inasmuch as virtually all judges are committing the same “error” to wit: not taking TILA rescission literally or seriously.

We’ll see what happens. But in the meanwhile do give a careful read of the Brief Dan filed. This could be a moment where everything changes.

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