BOA Slammed With Another $250,000 in PUNITIVE DAMAGES, Affirmed on Appeal

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see http://4closurefraud.org/2015/03/18/kaboom-bank-of-america-n-a-vs-pate-affirmed-homeowners-awarded-250000-in-punitive-damages-due-to-unclean-hands-and-fraud/

Just to piggy back on my article on Friday, it is awards like this that should give judges pause before they consider the documents presented by the banks in court to be worthy of any presumptions of authenticity, trustworthiness or credibility.

And this is a case where the doctrine of UNCLEAN HANDS justified denying the bank the option of the equitable remedy of foreclosure.

If we are dealing with parties who are known to have engaged in patterns of fraudulent conduct,  why should they be presumed to be on the right side of of the evidentiary rules? On the contrary, the rules of evidence are intended to result in an efficient rendition of the truth — not to be used for fraudulent pranksters stealing trillions of dollars in money and property.

 

 

Why Opposition to “Business Records” Exception to hearsay is No Gimmick

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See http://www.natlawreview.com/article/five-years-later-palisades-still-causing-trouble-lenders

The biggest problem I have with Judges, Lawyers and even borrowers is that they have failed to do the required research and analysis of the mortgage market and securitization schemes that have dominated our landscape since 1996. As a result they apply presumptions to which the foreclosing party is not entitled and they arrive at preconceived notion of facts and law that are wrong.

Nothing could have been more stark than the thousands of orders, judgments and appellate opinions that were tersely overruled by a unanimous U.S. Supreme Court. And there is an admonishment from the Scalia opinion (and recently the Florida Supreme Court) if you read between the lines. It says that you can’t legislate from the bench or change the rules in your local courtroom that effectively overrules Federal Law or which make the foregone conclusion inevitable in violation of due process and the rule making authority of the actual entities who have that power.

In other words just because “everyone is doing it” neither makes it right nor institutionalizes it; but most courts are still treating case precedent that was overturned and in violation of Federal law as though the Court has discretion. It doesn’t. Attaching the note to a complaint doesn’t make the note enforceable even if it technically gives the pleader “standing” until proven otherwise.

And when a homeowner denies the loan, denies the ownership and denies the balance, and denies the note and denies the mortgage, the Judge should allow for the simple inescapable fact that the issue is in dispute and that presumptions don’t decide the case — facts decide the case. I think many lawyers have not been aggressive enough in pushing these points.

And I think the reason is that deep down inside they believe their client is liable for “the debt” (even thought the lawyer has made no inquiry into the actual nature of the debt) and then they take a giant leap of faith that looks for gimmicks and loopholes rather than showing plainly that the foreclosing party has no ownership, doesn’t know the balance, has no idea if there is a default from the perspective of the actual creditors, and lacks both the authorization and the knowledge to pursue foreclosure.

I have spoken with many lawyers and many judges. It all comes down to the fact that if there wasn’t a real default, we wouldn’t be in court. That assumption is wrong. We are in court because the Banks figured out a way to eat their cake and still have it. The Banks were intermediaries selling IPO shares in REMIC entities — so the banks neither owned the securities nor did they own the loans. And the real “lenders” got screwed. The banks intentionally did the loan paperwork such that it appeared as though the banks owned or controlled the loans and the mortgage backed securities. That is an illusion — one which is perpetuated by the insistence of Judges on relying on presumptions that lead to erroneous conclusions of law and fact.

So the end result is that the Banks claim losses on loans they never owned nor had any financial stake in. They are strangers to the transaction and they are not being required to prove the loan or acquisition of the loan by proof of purchase (which if it existed would end 90% of the litigation over these fake mortgages and fake mortgage foreclosures). If you look at the books of the investors whose money was used to fund the loans through improper means, you can see why all of them are suing — they loaned money to a REMIC Trust through a broker dealer on the premise that it would go through a REMIC trust, get the tax benefits, and the REMIC trust would originate or acquire the loans.

None of that actually happened and so the investors are stuck with a receivable that is neither enforceable by the note nor secured by the collateral; the simple reason for this is that the true disclosures were not made at the time of the closing, placing the banks in the position of controlling the information flow to both the investors who had signed off on their ability to get any information and to the borrowers who could only speculate what was wrong with the recorded encumbrance that was unenforceable but still slandering their title.

So they come into court with a witness who has never been employed in the processing of the loan at hand and who is “trained” to represent things he or she in actuality knows nothing about — providing a layer of deniability to the lawyers and the banks. The witness says he is “familiar” with the record keeping of the entity he is employed by but neglects to mention that entity has done no servicing of the loan at any time or has no controls in place to kick back those loans where there are obvious discrepancies. Add the fact that the servicing entity represented by the witness has a long list of failures, fraud and settlements with provisions for future conduct that they continue to ignore, and only a fool would give them credibility on presumptions of fact and law based upon suspect paperwork  much of it backdated, robo-signed, forged etc.

So is it wrong to say that the banks are not entitled to the benefit of the presumptions in light of the obvious history of forgery, perjury and other flagrant violations? NO! And does it prejudice the bank in ANY way to require them to prove the facts that they want presumed? NO! If they have the proof then let them produce it. But in 8 years of following thousands of cases I have never seen a bank come forward and say ok, here is the proof of the loan and here is the proof we purchased it. And here is the proof of our authority to represent the party who purchased it.

Instead they want presumptions upon presumptions using untrustworthy hearsay documents to escape the most elements of proof. And the same banks who reject that argument, use that as policy when granting approval of loans — they presume nothing. They want backup and proof of everything including where you got the money from for the down payment. In a level playing field, what is good for the goose is good for the gander. That is all you should demand and you should do it aggressively. The question that should be asked of the Judge is “Do you really think it is better to come to the wrong conclusion based upon presumptions arising out of suspect paperwork proffered by known violators of disclosure, testimony and who have stone walled even the agreements they made in “settlements” with Attorneys general, government agencies and the Department of Justice.

Allowing the bank to continue to get away with this nonsense is causing massive damage to our economy and to the individual lives of the people affected. Not only is the Court coming to erroneous factual and legal conclusions, if is acting in continuing and furthering the fraudulent schemes of Wall Street banks. And that, my friends, is no gimmick. You should only owe money to the party who advanced it to you or on your behalf out of THEIR funds. And if the paperwork was screwed up so the banks could trade on should have been the property of the investors, that is not a problem for the borrower. There is no encumbrance and there is no note that is actually enforceable. Creating a new creditor based upon a second debt arising from one transaction out of thin air is not a solution to the mortgage crisis — it is part of the problem.

 

Statutory Requirements for Enforcement of Note or Mortgage

For further information please call 954-495-9867 or 520-405-1688

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So many people sent me this short white paper that I don’t know who to thank or even who wrote it. Any help would be appreciated so I can edit this article and give attribution to the writer.

The only thing that I would caution is that eventually, perhaps sometime soon, the importance of the Assignment and Assumption Agreement will rise in importance as to these enforcement actions based upon a fictitious closing, debt, note and mortgage. The A&A is an agreement between the “originator” and some other “aggregator conduit”.

The A&A essentially calls for violation of TILA by not disclosing the existence of a third party lender. It also allows for compensation and profits arising from the signature of the borrower on the settlement documents without disclosure of who received that compensation or made those profits and how much they were “earning.”

Whether this is ultimately determined to be a table funded loan or simply not a loan contract at all with the borrower remains to be seen. If it is determined to be a table funded loan with an undisclosed third party lender who is not even the aggregator in the A&A then according to regulations Z it is “predatory per se.” If it is predatory per se then how can anyone seek enforcement in equity (i.e. foreclosure)?

And while I am at it, to answer the question of many judges — “what difference does it make where the money came from? — ASK THE BANKS. They nearly always demand to see the bank account from which the down payment is being made and even going beyond that to require the borrower to prove that the money is the money of the borrower. If normal underwriting requires the borrower to produce proof of funding then why isn’t the bank required to prove that they funded the loan — either by origination or acquisition or both?

If a borrower gets the down payment from his Uncle Joe because he is in fact broke, then the Bank under normal underwriting circumstances won’t approve the loan. If a Bank has no financial stake in the alleged “loan” then why should THEY be allowed to enforce it? Isn’t that highly prejudicial to the real creditors? Isn’t the foreclosure judge making it harder for the real creditors to collect by entering judgment for a party who has no risk, no financial stake and no contractual right (or obligations) to represent the real creditor.

And lastly is the wrong assumption about the chronology of these transactions. The mortgage backed securities were “sold forward,” which is to say there was nothing in the Trust when they were sold — and as it turns out in most cases the Trust never got any loans. Further the notes and mortgages were also sold forward in a cloudy arrangement in which the ownership and balance due was at least in doubt if not unknown. You must remember that the banks were not in the business of loaning money — they were in the business of selling mortgage backed securities for empty trusts and then using the money any way they chose.

All that said the following was received by me from several people and I agree with virtually all of it.

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Statutory Requirements For Establishing The Right To Enforce An Instrument

1. Prove status of holder of the instrument. (UCC § 3-301(i)); or

2. Prove status of non-holder in possession of the instrument who has the rights of a holder. (UCC § 3-301(ii)); or

3. Prove status of being entitled to enforce the instrument as a person not in possession of the instrument pursuant to UCC § 3-309 or UCC § 3-418(d). (NOTE is lost, stolen, destroyed).

UCC § 3-309, requirements.

a. Prove possession of the instrument and entitled to enforce it when loss of possession occurred. (UCC § 3-309(a)(1)).

i. If illegality or fraud were involved in the original transaction, it cannot be proved that the person is entitled to enforce the instrument.(See UCC § 3-305. DEFENSES)

b. Prove non-possession of the NOTE is NOT the result of a transfer. (UCC § 3-309(a)(2)).

NOTE: If discovery shows that the instrument was sold by the person claiming the right to enforcement, a transfer occurred, and such person is NOT entitled to enforce the instrument. (See UCC § 3-309(a)(ii)).

c. Prove that the person seeking enforcement cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process. (UCC § 3-309(a)(3)).

NOTE: If discovery shows that the instrument was sold by the person claiming the right to enforcement, a transfer occurred, and such person is NOT entitled to enforce the instrument. (See UCC § 3-309(a)(ii)).

d. A person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person’s right to enforce the instrument. (UCC § 3-309(b)).

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UCC § 3-309 Enforcement Of Lost, Destroyed, Or Stolen Instrument.
(a) A person not in possession of an instrument is entitled to enforce the instrument if

(1) the person seeking to enforce the instrument​
(A) was entitled to enforce the instrument when loss of possession occurred, or
(B) has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred; ​
(2) the loss of possession was NOT the result of a transfer by the person or a lawful seizure; and​
(3) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.​

(b) A person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person’s right to enforce the instrument. If that proof is made, Section 3-308 applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.

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An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. (UCC § 3-203(a)).

If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur. The transferee obtains no rights under this Article and has only the rights of a partial assignee. (UCC 3-203(d)).

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If the bank, mortgage company, etc., sold the NOTE, they have no right to enforce the NOTE, through foreclosure or court proceeding pursuant to the fact that the UCC bars such claimant from invoking the court’s subject matter jurisdiction of the case.

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Even if the claimant produces the original wet-ink NOTE, there is a defense to the action pursuant to UCC 3-305.

Illegality and false representation (fraud) perpetrated in the transaction.

Did the bankdisclose the SOURCE of the money for the transaction?Did the bank inform the NOTE issuer that the money for the transaction was provided at no cost to the bank?

Did the bank disclose that the NOTE would be sold at the earliest possible convenience, and that such sale and receipt of money from a third party would actually pay off the NOTE? (Satisfaction of Mortgage).​

Many discovery questions to be asked when a claimant initiates foreclosure proceedings.

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Many assume that the bank/broker/lender that begins the process is actually providing the money for making a “loan,” when in fact, the bank/broker/lender is only making an “exchange,“ of notes, at no cost, and then, coercing the issuer of the promissory note into the comprehension that he is receiving a “loan.” The following was stated in A PRIMER ON MONEY, SUBCOMMITTEE ON DOMESTIC FINANCE, COMMITTEE ON BANKING AND CURRENCY, HOUSE OF REPRESENTATIVES, 88th Congress, 2d Session, AUGUST 5, 1964, CHAPTER VIII, HOW THE FEDERAL RESERVE GIVES AWAY PUBLIC FUNDS TO THE PRIVATE BANKS [44-985 O-65-7, p89]

“In the first place, one of the major functions of the private commercial banks is to create money. A large portion of bank profits come from the fact that the banks do create money. And, as we have pointed out, banks create money without cost to themselves, in the process of lending or investing in securities such as Government bonds.”​

In this instance, the transaction was funded by using the prospective property (collateral) and the signer’s promissory note as if the property and the Note already belonged to the bank/broker/lender. [Editor’s note: Those loans NEVER belonged to the Bank who was selling them before they even existed.]

So, if the bank used the promissory NOTE, as money, to create the cash reserve which was then used to validate the bank check issued on the face amount of the promissory NOTE, at no cost to the bank, without NOTICE to the signer of the promissory NOTE, and without fully disclosing these facts and aspects of the transaction, the bank committed a DECEPTIVE PRACTICE, FRAUD.

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TILA Rescission is Changing Foreclosure Defense

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At least one case in bankruptcy has been reopened because of the new Supreme Court ruling on TILA Rescission. Like many cases in and out of bankruptcy court, tens of thousands of homeowners sent notices of rescission to the apparent lender, servicer, trustee on deed of trust or others involved in the scheme of securitization. And many of them did it years ago during the three year statute of limitations starting with the date of “consummation.”

There appears to be some confusion arising out of what appears to be a splitting of legal hairs but in fact is just the reverse. TILA rescission is “effective” upon sending the notice — i.e., when it was dropped in the mailbox using the US Postal service. Lawyers and Judges appear to be dumbstruck by the US Supreme Court decision where Justice Scalia simply said that the statute is clear and no further interpretation is required. He said, for a unanimous court, that rescission was effective the date of the notice.

This is very challenging for lawyers who are used to arguments about due process which means an action in court. TILA rescission is an action out of court. NOTHING is required from the borrower other than a notice that he or she or they are cancelling the loan papers. There is no cause of action for TILA rescission because it is already done privately. That isn’t me talking that is the U.S. Congress in TILA and Justice Scalia for the US Supreme Court.

And the rest is simple: Within 20 days the “lender” must effectuate the return of the canceled note and the release of the borrower’s collateral (home) from the mortgage or deed of trust. Within that 20 days the “lender” or “Creditor” must also disgorge all money paid by borrower or to otherwise paid out at the time of the loan closing and any payments made thereafter, which would include monthly payments right up through the date of the last payment. This is not common law rescission.

By definition, any lawsuit filed by the borrower to ENFORCE the rescission — i.e., to get the note, satisfaction of mortgage and disgorgement of money — is NOT an action to EFFECTUATE rescission. The intent of the statute is crystal clear — that the borrower doesn’t need to be a lawyer or financier to cancel the deal. It is canceled by mailbox. No particular form is required.

If the lender MUST comply with the rescission (return canceled note, satisfy the mortgage and return the money) within 20 days, they cannot win by stonewalling and then recasting the Borrower’s lawsuit to ENFORCE the rescission that is already effective. The Banks don’t have the option of raising defenses when the Borrower files a lawsuit for enforcement. The Banks can ONLY file an action opposing the rescission within the 20 days from the date of rescission which is the date of the notice which is the date of mailing.

So what does all this mean? If you had a mortgage that had a loan “closing” date of June 1, 2006 and you sent a notice of rescission on October 2, 2008, there is absolutely no doubt now that the note and mortgage were voided by operation of law (meaning it is automatic without a lawsuit) as of October 2, 2008.

Everything else after rescission is VOID other than return of the canceled note, filing a satisfaction or release of the mortgage or deed of trust and disgorgement of the funds received paid to the borrower. The only possible way of stopping this is by the lender filing a lawsuit within the 20 days to contest the rescission. Any other interpretation would  go against the simple instructions in TILA and Scalia’s opinion — that the rescission is effective upon notice. Such an interpretation would mean that rescission is not really effective until a Judge rules on it. That is the opposite of what TILA says and the opposite of what the Supreme Court says TILA says.

If there was a judgment entered on the note or mortgage or there was a sale they are all VOID. The court lacked subject matter jurisdiction because there was no mortgage or note on the date the court entered its order or judgment.

The interesting thing is in bankruptcy. The discharge order was based upon the trustee’s abandonment of the property. The abandonment was based upon a misinterpretation of the courts in that jurisdiction.

Hence the schedules are wrong in hundreds of thousand of bankruptcies across this great land of ours. The borrower had an unencumbered asset (his home) thus changing the equation of assets and liabilities completely.

But everyone thought the home was encumbered despite the prior rescission because the rescission was considered not effective until a Judge ruled that it was effective — and until the Borrower tendered property or money to the lender. The US Supreme Court said that interpretation is wrong for two reasons, to wit: (a) that isn’t what the statute says and (b) the misinterpretation stems from using common law rescission theories which are not applicable.

The problem here is that orders entered during bankruptcy are considered adjudications in some cases and therefore it is necessary to reopen cases to set aside orders for which the court lacked jurisdiction over the subject matter.

This could get interesting.

Pondering TILA Rescission

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see Jonathen Foxx article on TILA Rescission BEFORE the Supreme Court decision http://nationalmortgageprofessional.com/news/42119/tila-versus-tila-rescission-notice-or-lawsuit

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In my continuing research into the mechanics of rescission I keep bumping into articles like the Foxx article in the link shown above. While he concedes that no lawsuit is required to “effect” rescission, he seems concerned that the mechanics (procedure) are such that the impact on banks would be onerous and impossible to fulfill.

My answer to that is simple and seems to be borne out by the unanimous Supreme Court decision penned by Justice Scalia. The answer is that it isn’t supposed to be nice to the banks. It was decided by the highest legislative authority in the country (Congress, and now the highest court in the land) that rescission is effective as of the date of mailing and that all the duties and obligations of the creditor commence as of the date of rescission, and that they have 20 days to do it all. If they fail to comply then they are responsible for their own “injury’ (if that have one) in potentially waiving or suspending any right they have to recover the net debt due from the borrower whose obligation they purport to own, manage or service.

Foxx is right when he says that getting an actual final decision from any court during the 20 day period puts an impossible burden on the creditor who believes that the the rescission was improper or otherwise barred by some set of facts, rules or laws. But that is exactly what  Congress did after very careful consideration of the competing ideas and claims from both the consumer side and the banking side.

The simple truth is that if the bank was the actual lender and they had all their proof of their disclosures etc., they would easily get a court order to set aside the rescission. Presumably their failure to comply with TILA would then be excused. And speaking of presumptions TILA says that if the borrower signs an acknowledgement that the disclosures were made, there is a presumption that the disclosures were in compliance with statute.

So IF the creditor proves they are a creditor on the basis of proper pleading the burden shifts back to the borrower to justify the rescission notice. BUT that is only true if the creditor files a lawsuit within 20 days of the notice contesting the the rescission. And yet, there is no evidence that any 20 day lawsuit has been filed by any creditor or servicer who received a rescission notice. Instead they have cooked themselves in their own stew.

Instead of complying with statute by giving back the note, mortgage satisfaction and the money AND/OR filing the action to contest the rescission, the banks instead either ignored the notice or sent back a notice of rejection of the rescission which completely cures the borrower’s problem about delivery of the notice.

Actually in most cases the Banks had no choice. If they had filed suit the way the TILA statute demands, then they would be admitting that the loan was not necessarily secured (and that the note was not necessarily a negotiable instrument) and in fact that the alleged debt was at that moment unsecured by operation of law. Sales and resales, of mortgage backed securities, guarantees, insurance, credit default swaps and other hedge products would have come to a screeching halt. So the banking industry took the position that there was at least an arguable basis for rejecting the rescission. By kicking the can down the road they enlarged the time that they could sell more bogus mortgage backed securities and enlarged the negative impact on the country.

PRACTICE SUGGESTION: Consider the fact that the current interpretation of TILA allows for rescission and might allow for equitable tolling (this is still in doubt), the defined elements of negotiable paper might not be present until all possibilities of rescission were obliterated. Hence being a holder or even a holder in due course of the paper would not give rise to any presumptions in favor of the bank, “lender,” or servicer as holder or anything else. It would be a simple lawsuit based upon alleging and proving up the debt and alleging and proving the mortgage as collateral for the debt — something the banks don’t seem to be able to do because they misused the investor money in the first place and if they proved or even alleged what they really did with the investor money they would be admitting to potentially criminal and certainly civil fraud.

Here are some quotes form the Foxx article that I found interesting:

TILA Versus TILA: Rescission by Notice or Lawsuit

Thursday, September 4, 2014 – 12:54
Given the immense legal implications, especially with respect to the loan flow process from point of sale through portfolio and securitization, I would urge a familiarity with the positions taken by both parties to the litigation. ….
The Big Question
Jesinoski v. Countrywide cites Section 1635 of TILA to present the foundation upon which the deliberations are to proceed. In that section, it states that a borrower “shall have the right to rescind the transaction until midnight of the third business day following … the delivery of the information and rescission forms required under this section … by notifying the creditor … of his intention to do so.” …
“Does a borrower exercise his right to rescind a transaction in satisfaction of the requirements of Section 1635 by “notifying the creditor” in writing within three years of the consummation of the transaction, as the Third, Fourth, and Eleventh Circuits have held, or must a borrower file a lawsuit within three years of the consummation of the transaction, as the First, Sixth, Eighth, Ninth, and Tenth Circuits have held?” [Editor’s note: this article was written before the Supreme Court decision stating that no lawsuit was required for rescission to be effective under TILA. Thus a matter considered settled by the legal communities in a majority of states were wrong.] …
The Three-Year Gauntlet
Stepping through the rescission timeframe toward the three year mark, this is a brief outline of how TILA  sets forth the obligations of borrower and creditor:
1. A borrower who secures the loan with a principal dwelling “shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section … whichever is later” by notifying the creditor of the intention to do so.
This means that the borrower has an unconditional right to rescind for business three days after the consummation of the transaction and, as a remedy for a creditor’s violation of the Act’s disclosure requirements, extends that right to rescind until three days following the ultimate delivery of the required disclosures.
2. A borrower’s exercise of the right to rescind “sets in motion a series of automatic steps to unwind the transaction,”  imposing obligations on both the creditor and the borrower. When a borrower “exercises his right to rescind, he is not liable for any finance or other charge, and any security interest given by the borrower becomes void upon such a rescission.”
3.  Following the borrower giving notice to rescind, and within 20 days after receipt of a notice of rescission, the creditor must return to the borrower any money or property given as … down payment … and “shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction.”
4. The borrower’s time limit for exercising the right of rescission is three years from the transaction’s consummation,  even if a creditor never delivers the disclosures required by the Act. …
the respondents (banks) concluded that, outside of the three-day unconditional rescission period, TILA does not impose any obligation on lenders to rescind a mortgage upon a borrower’s unilateral demand. [Editor’s note: As said above, they were wrong — but wrong like a fox. They steadfastly refused to file an 20 day actions required by TILA because the negotiability of the notes and mortgages would have been obliterated. It doesn’t matter, they will now argue, that we were wrong — everyone thought we were right. AND now it is too late to file an enforcement action under the provisions of TILA because it is time-barred. The problem for the banks is that the borrower does not need to file an action to enforce the rescission. They can if they want to. But all they really need to do is to clear title based upon the FACT that the mortgage is void.] …
Even if it could somehow be interpreted that a lawsuit is required to rescind the loan transaction, within the specified timeframe, Section 1635’s procedures clearly do not contemplate how a court proceeding could be held in a timely manner.
Recall that the statute expressly states that within 20 days after receipt of a notice of rescission, the creditor must return 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.”  The provision specifies that those procedures of Section 1635(b) are triggered by “receipt of notice of rescission,” not by a lawsuit. Moreover, the time limits established here and elsewhere in Section 1635(b) are tied to the actions of the borrower and creditor.  Therefore, operationally, to comply with the pleadings timeframe, the statute would be inconsistent with the established rules to commence legal action set forth in the Federal Rules of Civil Procedure for establishing times for responsive pleadings.
A reasonable interpretation of Section 1635,  therefore, is that the notice to a creditor triggers rescission, and the default procedures of Section 1635(b) follow automatically in due course from that notice, without requiring the initiation of a court proceeding.”

Sending Notice of TILA Rescission: The importance of the procedure

For assistance or further information regarding TILA rescission or related topics please call 954-495-9867 or 520+405+1688
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? CAN YOU RESCIND A PURCHASE LOAN AND/OR ON A RESIDENTIAL AND INVESTMENT PROPERTY??
First let me say you can rescind any deal if you prove fraud or mistake and tender back whatever you got out of the deal — at common law. My comments are limited to TILA rescission which is a specific statutory remedy that works in very specific ways and favors the borrower, not the alleged lender.
I failed to address one specific question (see above) last night when I was on my radio show. There are many conditions and provisions regarding what loans are subject to rescission or the other disclosure requirements of TILA. Whether a specific loan is actually eligible for rescission is a matter of fact, legal argument and conclusions. Some analysis and consultation with a licensed attorney in your jurisdiction is required.  But the way TILA was written if the borrower has reason to believe that the disclosures were not adequate (within the  tolerances specified by TILA) the borrower can send the notice of TILA rescission and make demand for the note, mortgage and money. What the US Supreme Court unanimously ruled about one month ago was that hundreds of judges on trial benches and appellate benches were completely wrong in applying principles of common law rescission to TILA rescission. No lawsuit is required to have the rescission effective. A letter does it all. And no tender is required from the borrower — quite the opposite the creditor must return all money ever paid by the borrower going all the way back to origination.
Those issues are ONLY addressed IF a creditor files a declaratory action against the borrower seeking a judicial determination that the rescission should not be allowed to stand. So the question about whether it was right to send the notice doesn’t stop anyone from sending it. But if the creditor files a challenge in court (not a letter stating its rejection), then and only then a Judge may decide whether the the rescission stands. But in order to do that the creditor must allege and prove the loan disclosures were complete and accurate; they must prove the loan origination, the loan acquisition and the money trail to establish standing (in my opinion). Without that, the burden of proof cannot shift to the borrower without violating the spirit and express wording of TILA.
There is a reason why it works that way. The purpose of allowing a borrower to cancel a deal (TILA rescission) with a simple letter is to take away the power of the “lender” to tie up the borrower and extort the borrower into complying with predatory loan terms or inadequate disclosures. Rescission is “effective” the date of the notice. It’s done. The mortgage and note are gone.
The purpose of TILA rescission is actually pretty specific. The idea is to allow a borrower to completely cancel the old deal especially the note and mortgage by operation of law without a lawsuit or tender so that the borrower can then go to an alternate lender and get a new loan from a new lender and give the new lender an enforceable first mortgage lien on the property without the risk of the prior lender contesting the right of the new lender to be in first position on the chain of title. Without stating that the mortgage and note are gone the borrower would not have the alternative which is what TILA is all about — choice. Stonewalling and “rejection” letters are exactly what TILA does not allow.
So what happens if you send a notice of rescission and you were wrong about whether you or your loan qualifies for rescission? Let me state that you don’t know if you are really wrong until the issues are litigated. And I would state that if you have no arguable right to send the rescission there might be some exposure to a claim of abuse of process and damages for attorneys fees, costs or even sanctions. But it seems very unlikely to me that such a result will occur given the current track record of apparently zero actions filed by creditors within the 20 day window since the the whole securitization myth was propagated. And if they don’t file the action within 20 days it doesn’t appear to matter how wrong the borrower was — the issue is over. This is just like non-judicial foreclosure where the borrower must file for a TRO within a short window or a judicial foreclosure where the borrower must answer within a short time period.
The answer is that you can draft anything and you can send anything. The banks have proven this with their fabricated assignments, endorsements, allonges, powers of attorney etc. The real question is what happens if you send a notice of rescission when there are potentially factors that could have a court rule in favor of the bank if the bank filed the required challenge within 20 days of the notice.

And the answer to THAT question, I think, is mostly based on procedure. TILA is very specific as to what happens and when. Reg Z also helps. A notice of rescission is effective upon notice as stated by TILA (and US Supreme Court) and Reg Z, and under Reg Z that means the note and mortgage are nullified back to the origination. So sending notice of rescission would be effective against virtually any loan, regardless of factors that might allow the bank to reinstate the note and mortgage.

If a creditor does file the lawsuit within 20 days, then there might be a judicial finding that the borrower, or the loan or the property or the circumstances were such that the rescission is not proper and therefore will be set aside. If that happens the note and mortgage would be reinstated (because they were nullified by operation of law at the moment the letter was dropped into a mailbox). That much is very clear from Justice Sclaia’s opinion written for a unanimous Supreme Court.

I think this is a situation where the presumptions are reversed from that of a foreclosing party. In a TILA rescission the rescission is effective from date of notice and is conclusively presumed to be valid unless the creditor files the action within 20 days AND WINS. The problem the bank has is that in this case they must establish standing by alleging and proving that they are a creditor — which in many cases would involve disclosures that the banks have been fighting against for 8 years. So I conclude, for the present, that the odds are against the banks filing these actions within the 20 day window. Hence even a “bad” rescission would apparently nullify the note and mortgage — unless and until a real creditor files a real lawsuit within 20 days and proves that there were adequate disclosures and/or that the loan was not subject to TILA rescission.

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