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

major hat-tip to Charles Cox in Nevada.

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

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

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

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

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

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

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 consent 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.

PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.

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 ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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see LAVIS v. REVERSE MORTGAGE SOLUTIONS LLC Dist

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

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

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

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

 

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

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

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

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

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

Statute of Limitations on TILA Rescission: How long does the debt survive after notice of TLA rescission?

The simple answer is that the debt, or the claim on the debt, ends 20 days after notice of rescission. Otherwise the statute 15 U.S.C. §1635 and SCOTUS would have had no meaning when it says that the rescission is effective by operation of law at the time the notice is delivered. It provides a  very short window for “lender’s” compliance.

In reality, I have referred to a one year limitation because the courts are trying to mitigate the punitive intent of the TILA rescission statute. 15 U.S.C. §1640(e) basically leans toward a one year limitation for borrower’s claims against “lenders” based upon disclosure which is what TILA rescission is all about.

The borrower has every right to force compliance and get a court order requiring (a) return of canceled note (b) filing a release and satisfaction of the encumbrance and (c) payment of money to the borrower — but they have no such right after one year has expired starting with the date of the notice or date of delivery.

Employing analysis based upon the goose and the gander, it would follow that the one year limitation would also apply to “lenders” seeking payment from the borrower based upon the statutory requirement that the borrower pays the debt.

If this analysis was adopted as doctrine it would create a window of opportunity for a lender in violation of the three statutory duties under TILA rescission to cure the violation and bring the claim for repayment. This interpretation would be contrary to the wording and intent of the TILA rescission statute — as it would cloud the purpose of the statute — to enable borrowers to get out of the deal they are in and seek a new deal instead. Nobody would lend to the borrower if there was a risk that they might still owe money to a prior lender, even though the law makes the debt unsecured. Nonetheless it is entirely possible that the courts will invent such a doctrine. 

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 consent to many people and lawyers so they can spot the key elements of a scam. 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.

PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORMWITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS ARE NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.

Get a Consult and TERA (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).

THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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Any borrower claim based upon a remedy in the TILA statutes has a one year limitation. In TILA rescission, the claim for the debt arises not from the note and mortgage which are void, but from 15 USC §1635. The statute replaces the contract. The “lender” has a claim to collect the debt under that statute. But they must first comply with their three statutory duties before they can demand and then enforce collection of the debt. The debt can be satisfied by tendering title to the home. But a part of the debt is easily satisfied by the payment to the borrower from the Lender.

The confusion arises from the fact that statutory rescission is different from common law rescission. Common law rescission puts tendering payment on the debt first, whereas statutory rescission puts payment of the debt last.
In TILA Rescission, while there is no express limitation provision as to the ability of the lender to collect on the debt, they can never collect the debt unless, within 20 days, they have complied with the three duties set forth in the statutory scheme for statutory rescission. After that they are barred from enforcing the debt. It is intended to be punitive to encourage “lenders” to comply with disclosure requirements.
Theoretically then, they can never collect the debt because they never comply with the three duties that are condition precedent to seeking payment on the debt. So academically speaking the “lender” is barred after 20 days. But realistically the language of the statute leans heavily to one year for claims arising from TILA and that includes rescission although the statute doesn’t say that expressly.
So I have taken the position that they are barred after 20 days from ever expressing a claim on the debt or, if one wants to “interpret” the statute (against the advice of SCOTUS in Jesinoski) the limitation would be one year from the date of rescission or from the last day that “lender” compliance was due. That interpretation would mean, though, that the “lender” had complied with its duties under statutory rescission 15 U.S.C. § 1635.
Lastly there is another academic thread that would state that there is no limitation on the right of the lender to collect the debt as long as they complied with the statute even if it was outside of the 20 day period. This conclusion seems unlikely as it would change the wording in 15 U.S.C. §1635 and render lender’s compliance practically irrelevant. It would insert language into the statute that would mean that the rescission was not effective when mailed and there was nothing the borrower could do about that.

TILA Rescission Time Limits

If you slow down and logically go through the statute and the Jesinoski decision it is easy to analyze the situation and come to a correct conclusion. This is not argument of law, it is the application of logic. SCOTUS and the statute state unequivocally that the rescission is effective WHEN it is mailed, by operation of law. Everything else happens afterwards.

Let us help you plan your TILA rescission strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult

PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK ORDERED BY YOU. THE INFORMATION ON THE FORMS IS NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.

Get a Consult and TERA (Title & Encumbrances Analysis and & Report) 202-838-6345. The TERA replaces and greatly enhances the former COTA (Chain of Title Analysis, including a one page summary of Title History and Gaps).

THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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The “three year” limitation is an affirmative defense that only arises AFTER rescission is effective by operation of law. It is only an affirmative act resulting in a court order that can revoke or vacate a TIILA rescission. To state it more bluntly, merely raising a dispute does not mean (a) you have the standing to do so nor (b) that the matter is at issue. The error here is that the parties are usually already in court.
As soon as the court is apprised of the rescission having been sent (whether 10 minutes ago or 10 years ago) the case changes, to wit: any action based upon the note and mortgage must be struck or dismissed.
  • Any party who was pursuing a claim based upon the note and mortgage is out — they no longer have legal standing and the Court no longer has subject matter jurisdiction over their claims or defenses.
  • Any party who is the actual creditor could, within 20 days from notice of rescission, either comply with the statute or file a lawsuit invoking and standing or any other basis upon which they dispute that the rescission was properly sent.
  • Any party failing to invoke the remedy of repayment or the duty of compliance within one year from date of mailing is barred from pursuing any statutory claim.
  • Title stays unchanged as of the date of mailing, to wit: fee simple absolute with no encumbrance of mortgage or deed of trust.
Once the statutory scheme is invoked, everything changes. The statutory scheme replaces the loan agreement just as the statutory scheme for nonjudicial foreclosure replaces the constitutional requirement of due process PROVIDED that the homeowner may still invoke the right to due process. If not, the statutory nonjudicial scheme is all that remains. The same analysis applies when looking at the nonjudicial cancelation of the loan agreement. If the “lender” fails to object with a lawsuit to vacate or revoke the rescission, then the statutory nonjudicial scheme is all that remains.
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Once TILA rescission is sent, the note and mortgage no longer exist, by operation of law. The courts may not simply apply a note (new or old), much less an encumbrance (new or old) on land by fiat as this deprives the homeowner of his right to due process before his clear title can be taken away from him. Such an act must be preceded by formal application to a court by a party who has legal standing, and a trial occurs producing the court order. That application must be filed within 20 days of notice of rescission.
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People are pointing to the reference in Jesinoski to the three year limitation. That is dicta — i.e., there is no ruling or opinion on when or whether that defense can be invoked. That defense does not arise by operation of law like the effectiveness of the rescission notice. But we do know by definition that such defenses can only arise after notice of rescission is sent. The argument that SCOTUS said that a notice sent outside the three year period is void is wrong. There is no place in the opinion where the court says that. And it isn’t likely they they will issue such an opinion.
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The reason is that if SCOTUS were to say that rescission is NOT effective upon mailing if it was mailed beyond the three year limitation, then an added condition is being inserted into the statute. The option stands for exactly the opposite conclusion. No conditions may be added. Period. Any interpretation or ruling that adds a condition means that the rescission is not effective upon mailing by operation of law. Such a ruling inserts “unless….” into the wording of the statute and the ruling of SCOTUS.
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Lastly, within the context of 15  USC §1635 and Jesinoski, the rescission and simultaneous destruction of the note and mortgage does NOT start a clock on any statute of limitations any more than a Deed starts a clock on a statute of limitations as to the title. But for the same reason it is true that SCOTUS is unlikely to say both a 2008 and 2017 rescission were effective. Once the first rescission was sent (and assuming there is no doubt about that) the loan agreement was canceled; hence, there was nothing to rescind in 2017.

What is the effect of TILA Rescission on My title? Can I sue for damages?

I have been getting the same questions from multiple attorneys and homeowners. One of them is preparing a brief to the U.S. Supreme Court on rescission, but is wondering, as things stand whether she has any right to sue for damages. When our team prepares a complaint or other pleading for a lawyer or homeowner we concentrate on the elements of what needs to be present and the logic of what we are presenting. It must be very compelling or the judge will regard it as just another attempt to get out of justly due debt.

Let us help you plan your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult

PLEASE FILL OUT AND SUBMIT OUR FREE REGISTRATION FORM WITHOUT ANY OBLIGATION. OUR PRIVACY POLICY IS THAT WE DON’T USE THE FORM EXCEPT TO SPEAK WITH YOU OR PERFORM WORK FOR YOU. THE INFORMATION ON THE FORMS IS NOT SOLD NOR LICENSED IN ANY MANNER, SHAPE OR FORM. NO EXCEPTIONS.

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).

THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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Combining fact patterns from multiple inquiries we start with a homeowner who actually sent two notices of rescission (2010 and 2017). Questions vary from who do I sue for damages to how do I get my title back?

Note that the biggest and most common error in rescission litigation is that the homeowner attempts to (a) have the court declare the rescission effective contrary to their own argument that it is already effective by operation of law, 15 USC §1635, and (b) seek to enforce the TILA rescission statutory duties beyond one year after rescission.

Whether you can sue for damages is one question. Whether the rescission had the effect of removing the jurisdiction, right or authority to dispossess you of title is another. And whether title ever changed is yet another. Yes you can sue for damages if not barred by a statute of limitations. Yes authority is vitiated by operation of law regardless of the status of litigation. And NO, title never changed and you probably own your house unless state law restricts your right to claim such ownership.

All three questions are related.
Taking the last question (did title actually change?) first, my opinion is that the rescission was effective when mailed. Therefore the note and mortgage were void. The failure of the alleged “lender” to comply with the rescission duties and then pursue repayment within one year from the date of rescission bars them from pursuing the debt. So at this point in time (equally applicable to the 2017 rescission notice) there is no note, mortgage or enforceable debt.
  • Hence any further activities to enforce the note and mortgage were legally void. And that means that any change of title wherein a party received title via any instrument executed by anyone other than you is equally legally void. In fact, that would be the very definition of a wild deed.
  • The grantor did not have any right, title or interest to convey even if it was a Sheriff, Clerk or Trustee in a deed of trust.
  • Any other interpretation offered by the banks would in substance boil down to arguments about why the rescission notice should not be effective upon mailing, like the statute says and like SCOTUS said 9-0 in Jesinoski.
  • CAUSES OF ACTION would definitely include
    • the equitable remedy of mandatory and prohibitive injunctions to prevent anyone from clouding your title or harassing you for an unenforceable debt would apply. But as we have seen, the trial courts and even the appellate courts refuse to concede that the rescission notice is effective upon mailing by operation of law, voiding the note and mortgage.
    • such a petition could also seek supplemental relief (i.e., monetary damages) and could be pursued as long as the statute of limitations does not bar your claim for damages. This is where it gets academically interesting. You are more likely to be barred if you use the 20010 rescission than you are if you use the 2016 rescission.
    • a lawsuit for misrepresentation (intentional and/or negligent) might also produce a verdict for damages — compensatory and punitive. It can be shown that bank lawyers were publishing all over the internet warning the banks to stop ignoring rescission. They knew. And they did it anyway. Add that to the fact that the foreclosing party was most often a nonexistent trust with no substance to its claim as administrator of the loan, and the case becomes stronger and potentially more lucrative.
    • CLASS ACTION: Mass joinder would probably be the better vehicle but the FTC and AG’s (and other agencies) have bowed to bank pressure and made mass joinder a dirty word. It is the one vehicle that cannot be stopped for failure to certify a class because there is not class — just a group of people who have the same cause fo action with varying damages. The rules for class actions have become increasingly restrictive but it certainly appears that technically the legal elements for certification fo the class are present. It is very expensive for the lawyers, often exceeding $1 million in costs and expenses other than fees.
    • Bottom line is that you legally still own your property but it may take a court to legally unwind all of the wrongful actions undertaken by previous courts at the behest of banks misrepresenting the facts. Legally title never changed, in my opinion.

Taking the second question (the right to dispossess your title) my answer would obviously be in the negative (i.e., NO). Since there was no right to even attempt changing title without the homeowner’s consent and signature, petitions to vacate such actions and for damages would most likely apply.

  • This question is added because the courts are almost certainly going to confuse (intentionally or not) the difference between unauthorized actions and void actions.
  • The proper analysis is obviously that the rescission is effective upon mailing by operation of law.
  • Being effective by operation of law means that the action constitutes an event that has already happened at the moment that the law says it is effective. If a court views this simply as “unauthorized” actions then it will most likely slip back into its original “sin”, to wit: treating rescission as a claim rather than an event that has already transpired.

And lastly the issue of claims for damages. There are different elements to each potential cause of action for damages or supplemental relief. I would group them as negligence, fraud, and breach of statutory duty.

  • As to the last you are barred from enforcing statutory duties in the TILA rescission statute if you are seeking such relief more than one year after rescission. But there are other statutes — RESPA, FDCPA and state statutes that are intended to provide for consumer protection or redress when the statutes are violated. There are statutory limits on the amount of damages that can be awarded to a consumer borrower.
  • Fraud requires specific allegations of misrepresentations — not just an argument that the position taken by the banks and servicers was wrong or even wrongful. It also requires knowledge and intent to deceive. It is harder to prove first because fraud must be proven by clear and convincing evidence which is close to beyond a reasonable doubt. Second it is harder to prove because you must go into “state of mind” of a business entity. The reward for proving fraud is that it might open the door to punitive damages and such awards have been in the millions of dollars.
  • Negligence is the easier to prove that it is more likely than not that the Defendant violated a statutory or common law duty — a duty of care. So the elements are simple — duty, breach of that duty, proximate cause of injury, and the actual injury. Negligent misrepresentation and negligent super vision and gross negligence are popular.

Tonight! Open Rebellion By Inferior Courts Threatens Authority of SCOTUS!

Lecturing Courts on Their Duty to Comply with SCOTUS Decisions

Thursdays LIVE! Click in to the The Neil Garfield Show

Or call in at (347) 850-1260, 6pm Eastern Thursdays

While the Supreme Court of the United States (SCOTUS)  unanimously (9-0) put to bed all of the arguments against the effectiveness of a notice of rescission under 15 U.S.C. §1635, Jesinoski v. Countrywide Home Loans, 135 S. Ct. 790 (2015), all inferior and lower courts have been ruling the other way. Any dispute raised by anyone, even if they have no legal standing to do so, is taken as an excuse for the lower courts to impose conditions not included in the TILA Rescission statute and banned or barred by SCOTUS.

Join me tonight as we discuss what to do about rebellious judges and how to preserve your interest in real property despite a negative ruling from a trial judge, even if it is affirmed by an appellate court other than SCOTUS, the highest court in the land.

Why Everyone (except SCOTUS) is Wrong About TILA Rescission

All contrary arguments are erroneous since they would insert a contingency where the statute contains no room for any contingency. The language of the statute bars any such contingency when it says that the TILA Rescission is effective upon delivery, by operation of law. If anyone wants the statute to say or mean anything different they must get their remedy from the legislature, not the courts, who have no authority whatsoever to interpret the statute otherwise. The status of any case involving foreclosure is that it does not exist. Hence the court is left ONLY with the power to perform the ministerial act of dismissing the case for lack of jurisdiction.

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

Purchase now Neil Garfield’s Mastering Discovery and Evidence in Foreclosure Defense webinar including 3.5 hours of lecture, questions and answers, plus course materials that include PowerPoint Presentations. Presenters: Attorney and Expert Neil Garfield, Forensic Auditor Dan Edstrom, Attorney Charles Marshall and and Private Investigator Bill Paatalo. The webinar and materials are all downloadable.

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).

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments. It’s better than calling!

THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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So in answer to questions about putative “modifications”, eviction or unlawful detainer, bankruptcy, and TILA Rescission this is what I have written in response to some inquiries.

Should the rescission be recorded? Not necessarily but

YES. I would like to see it recorded. You need to check with the clerk in the recording office or an attorney who understands recording procedure. Generally recording a document with an old date must be attached to an affidavit that is recorded with the notice of rescission attached. The affidavit explains that the attachment was inadvertently not recorded at the time it was created.

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Should a copy of the notice of rescission be filed in the court record also?

YES. If there is any way to get the recorded document into the court record, it should be pursued.

This presents title issues because if you are recording this long after events have transpired, some of which are also recorded as memorializing transactions, fake or real. Any recorded instruments that purports to be a memorialization of a transaction before the rescission was recorded would generally be given priority.
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The lawyer sent me an answer to my notice of rescission. Now what?
Either file to enforce the duties to be performed (if you are within one year of the date of delivery of the notice of rescission), or file a quiet title action if the one year has expired. There are several different scenarios actually, but this is the one I would focus upon.
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I am getting kicked out of bankruptcy court. Now what?
Getting “kicked out” of BKR court probably means that you are back in the state court system which might open some opportunities for you to get more into the court record. (Like an old rescission).
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My property is being sold. Does that mean that I have to get out?
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They can’t get you out without filing an unlawful detainer (eviction in some jurisdictions) based upon an asserted change of title. There might be a period of time between the sale and the attempt to get you out of the home (eviction or unlawful detainer). If the property is sold to a “third party” they want want rent from you, which could allow you to stay.
The unlawful detainer action presents another opportunity to raise the issue of rescission, since the entire action is based upon a valid change of title. It also sets off potentially another round for appeal, especially on the issue of rescission. Res Judicata and Collateral Estoppel do not apply to jurisdictional issues. If the rescission was mailed then by operation of the law the note and mortgage are void.
The defense is ordinarily that the “sale” was a fabrication based upon fictional claims and was contrary to the notice of rescission, which voided the note and mortgage upon which they were relying. The time for challenging the rescission has long passed. Hence all enforcement actions after the date of the 2009 rescission are void since they were based upon various claims attendant to paper instruments that were void, effective the day of delivery of the rescission.
Note that delivery of TILA Rescission notice is complete when dropped in a USPS mailbox and your testimony that it was sent via US Postal Service is all that is necessary as foundation.
I sent 2 notices of rescissions. Is that better or worse for me?
If I was defending against your claim of rescission I would argue that sending the 2016 rescission was either an admission that the earlier one had not been sent or that it was a concession that, for whatever reason, the 2009 rescission notice had been abandoned.
Hence I suggest you put very little emphasis on the new rescission and maximum emphasis on the old rescission.
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I sent the rescission less than 3 years after the modification but more than 3 years since the alleged consummation. Hoes my rescission affect my loan in that instance?
In most cases “modifications” are not treated as new loans. But the fact that something is called a modification and it really changes everything including the “lender” it may be possible to characterize it as a new loan subject to TILA Rescission. TILA Rescission hinges on whether the “modification” was a new loan — a fact, we would argue — that must be determined by trial. Since intent is part of the analysis of a contract, this could present another opportunity to force them to admit they don’t know the identity or intent of the creditor and whether said creditor had given them authority to make a new contract.
And the underlying narrative for this approach is that as a new contract, the “lender” was required to comply with disclosure requirements at the time of the new contract, thus triggering the three day right of rescission and the the three year limitation. Under my theory, based on Jesinoski, it doesn’t matter whether the three years has expired or not.
We know for certain that the notice of rescission is effective upon mailing; it is not based upon some contingent event or claim or court order. The date of consummation is itself a factual issue that can be in the pleading of the creditor (who is the only one with standing, the note and mortgage having been rendered void) claiming that the notice of rescission should be vacated based upon the three years, the date of consummation etc. 
Any alternative theory that puts the burden on the property owner would be contrary to the express wording of the statute and the SCOTUS ruling in Jesinoski. The statute 15 USC §1635 and SCOTUS are in complete agreement: there is no law suit required to make rescission effective. It would make the statutorily defined TILA Rescission event indefinite, requiring a court ruling before any rescission would be treated seriously. In other words, the opposite of what the statute says and the opposite of what SCOTUS said in Jesinoski. 
All contrary arguments are erroneous since they would insert a contingency where the statute contains no room for any contingency. The language of the statute bars any such contingency when it says that the TILA Rescission is effective upon delivery, by operation of law. If anyone wants the statute to say or mean anything different they must get their remedy from the legislature, not the courts, who have no authority whatsoever to interpret the statute otherwise. The status of any case involving foreclosure is that it does not exist. Hence the court is left ONLY with the power to perform the ministerial act of dismissing the case for lack of jurisdiction.
All this is important because we ought to be heading toward any defensive strategy that reveals the absence of a creditor. We are betting that the fight to conceal the name of the creditor is a cover for not knowing the the identity of the creditor, hence fatally undermining the authority as holder, servicer, trustee or anything else.
*
What if consummation never occurred?
It may turn out that consummation between the parties to the note and mortgage never occurred. It’s important to remember that would mean the rescission is irrelevant since the loan contract does not exist. But such a finding by a court of competent jurisdiction would negate the legal effect of the note and mortgage; this is true as long as the note was not purchased for value in good faith by a buyer without knowledge of the borrower’s defenses.
In that case, the burden does shift to the homeowner and it is entirely possible that under that scenario there could be no consummation but nevertheless homeowner liability would continue on the falsely procured note and potentially the mortgage as well. The reason is simple: that is what the State statute says under Article 3 and Article 9 of the UCC, as adopted by all 50 states. The homeowner’s remedy in such a scenario would be limited to actions for damages against the intermediaries who perpetrated the the fraudulent and fictitious “transaction” in which the named lender failed to loan anything.

RESCISSION: Reviewing Wells Fargo v Frazee, NJ App.

At what point does a final decision of SCOTUS actually mean anything? When confronted with TILA rescission, virtually all lower courts, state and federal, have taken up legislating from the bench, essentially over-ruling the Supreme Court of the United States (literally legally impossible).

Agree or disagree — everyone has that right. But to obey or not obey a SCOTUS decision attacks the foundation of our democratic and judicial institutions and makes the U.S. Constitution into a optional guide to the universe of disputes, delegating the real power to lower courts and removing the power and finality of SCOTUS as delineated in our Constitution.

Opinions like the one reviewed in this article are thus both irrelevant and irreverent — unless we amend or abandon our Constitution as the highest law of the land.

see Wells Fargo v Frazee

This case is just another example of a judicial tantrum defying the ultimate authority of SCOTUS. Unless the Supreme Court itself reverses the Jesinoski decision, it is quite obvious what the next SCOTUS decision is likely to be on the issue of TILA (Truth in Lending Act) rescission 15 USC §1635. Here is what I expect and hope for:

  1. Any court entering a decision or opinion after a notice of notice of TILA Rescission has been delivered must vacate such orders and must dismiss any pending foreclosure.
  2. Failure to dismiss the foreclosure is acting ultra vires — outside their authority.
  3. Dismissal of foreclosure is mandatory inasmuch as notice of TILA rescission removes the operative documents — note and mortgage — from consideration, rendering them void, by operation of law.
  4. As to all prior decisions, judgments and orders that ignored TILA rescission, all such decisions are void, the title consequences of which are left to state legislatures to decide, so long as the Federal Statute is obeyed and the law does not nullify the effect of delivery of a notice of TILA rescission.
  5. Any claims to vacate the effect of the TILA Rescission must be brought within one year from date of delivery.
  6. Neither tender nor a lawsuit is required for TILA rescission to become effective. An Aggrieved party with standing has adequate remedies at law to vacate a notice of TILA rescission, that must be raised as a new claim for relief from TILA rescission  based upon the pleading that the homeowner was wrong in sending the notice.
  7. TILA Rescission is an event, not a claim that a trial or appellate court can grant or deny. The legislature (Congress) has already granted the remedy. As stated in the Jesinoski SCOTUS decision, the statute is clear and unambiguous on its face, thus barring interpretation by a court. That is the difference between the rule of law vs. the rule of man.
  8. The Courts may neither overrule legislative action nor overrule a decision from the U.S. Supreme Court. Legislative action may not be overruled by a court unless there are clear violations of constitutional provisions and restrictions.

It’s possible that we will see the above menu in more than one decision from SCOTUS. The essential focus is going to be this: The rule, as stated repeatedly over decades by SCOTUS in admonishments to lower trial and appellate courts is that if it isn’t broken you can’t “fix” it to suit your personal views. 

Now we turn to the unlawful, ultra vires decision of the Superior Court of New Jersey, appellate division in Frazee (See link above).

The Court starts its analysis on page 6.

The opinion of the court is that Wells Fargo had standing because of its possession of the note and mortgage. But the note and mortgage are and were void at the time of this decision. So there is no standing to enforce except by the actual creditor, i.e., the owner of the debt.

This court recognized a potential “issue” (invented by the court, in opposition to the final decision that no court has any authority to interpret the TILA rescission statute). So it creates its own quagmire and falls deeper and deeper into trouble.

The panel obviously recognized that there could be no standing for Wells Fargo unless the TILA rescission could somehow be ignored without a claim to vacate the rescission from a party who owned the debt where the claim was that the rescission was unwarranted because all necessary disclosures had been made.

Diving right in this appellate court immediately misquotes and totally ignores the 2015 Jesinoski decision. It is only by mangling both the statute and the SCOTUS decision that this court can arrive at its predetermined destination. It intentionally misstates the law and effect of Jesinoski. If TILA Rescission was not effective without tender, there would be no TILA rescission.

The whole purpose and methodology of the statutory procedure was to first void the loan contract, second void the encumbrance by operation of law, third void the note, thus allowing the borrower to obtain refinancing from another institution. The key points of the Truth in Lending Act were (1) make certain the borrower knew who he/she was dealing with and (2) make certain the borrower had a fighting chance of understanding the enormously complex loan products being sold, dating back to the 1960’s when TILA was first passed.

In order to be certain these two disclosures were made, Congress had a choice. They could either greatly enlarge an existing agency to enforce these goals, laws and rules, or they could create a new administrative agency. Neither of those choices were remotely acceptable by most legislators. So they agreed on a plan that would force the banks to comply with TILA with consequences so horrendous that no bank in their right mind would transgress.

Enter TILA Rescission. By putting enormous power in the hands of borrowers that shifted the entire burden of pleading and proof to the banks it was thought that banks would comply. The statute provides for an order of things (a statutory scheme not unlike nonjudicial foreclosure) after notice of rescission is delivered. Like nonjudicial foreclosures it is a form of extrajudicial relief for homeowners who believe they were not protected at closing.

Within 20 days they must either comply or seek relief from a court of competent jurisdiction. The statute was designed to completely bar stonewalling. But like any law, if nobody enforces it, the statute does not enforce compliance with the two main goals of disclosure requirements — the identity of the lender and the breakdown of the main characteristics of the proposed loan.

Failing to seek relief puts them in violation of the statute, and enables a borrower to sue to enforce the three statutory duties under TILA rescission: return of the cancelled note, release of encumbrance and return of moneys paid by the borrower. If the borrower does not bring such suit within 1 year he/she loses the right to enforce compliance with those three duties.

THIS DOES NOT CHANGE THE EFFECT OF RESCISSION. THE MORTGAGE AND NOTE ARE STILL VOID BY OPERATION OF LAW.

If the bank does not comply with the three statutory TILA duties the bank has no right to demand tender or any relief. If the banks fails to comply within the same one year, they lose the right to demand the money under any scenario. The court goes off the tracks when it states

“nothing in the Supreme Court’s opinion . . .would override TILA’s tender requirement”. Jesinoski v. Countrywide Home Loans, Inc., 196 F. Supp. 3d 956, 962 (D. Minn. 2016), aff’d, Jesinoski v. Countrywide Home Loans, Inc., No. 16- 3385, 2018 U.S. App. LEXIS 4974 (8th Cir. Feb. 28, 2018).

 

That statement on its face is true. But ignores the content of TILA’s tender requirement. It only arises AFTER the “lender” fulfills the three statutory duties.

That is what Congress wrote. That is what they meant. And that was the substitute for an unwieldy bureaucracy.

The court confirms the content of the statute but repeats the tender “error” when it says

With regard to an alleged TILA violation, it is not enough to seek rescission and stop paying the mortgage to gain ownership of the home outright. Defendants argue they own the home outright because Wells Fargo failed to respond to the rescission notice within twenty days. Although failure to respond to a rescission notice within twenty days would constitute another TILA violation, TILA also explicitly states that if a “creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his [or her] part to pay for it.” 15 U.S.C. § 1635(b) (emphasis added).

The problem here is the term “own the home outright.” That’s another way of repeating the myth about the “free house.” More importantly it is contradicting the express wording and purpose of the statute — to force banks to comply with TILA disclosure requirements. The ultra vires interpretation of this court, like so many others, gives the banks a way out without ever being penalized for their lack of proper disclosure.

NOTE: THIS DOES NOT CREATE A FREE HOUSE. If the parties seeking foreclosures were not creditors, the actual creditor can still bring an action for legal and equitable relief. But in order to do so, they would need to show that the parties seeking relief were not in any way authorized to do so by the real creditor.

But the court nevertheless faults the homeowner for not tendering even though tender was not due.

 

The erroneous nature of the court’s decision becomes crystal clear when it says

Additionally, Jesinoski did not overturn Third Circuit precedent that “a notice of rescission is not effective if the obligor lacks either the intention or the ability to perform, i.e., repay the loan.” Sherzer v. Homestar Mortg. Servs., 707

F.3d 255, 265 n.7 (3d Cir. 2013). Jesinoski also did not take away a court’s discretion to modify the rescission procedures. See 15 U.S.C. § 1635(b) (stating that the rescission “procedures prescribed by this subsection shall apply except when otherwise ordered by a court”) (emphasis added); see also 12 C.F.R. 226.23(d)(4) (stating that the rescission “procedures outlined in paragraphs (d)(2) and (3) of [§ 226.23] may be modified by court order”) (emphasis added).

It is quoting yet another court who has put blinders on and is disregarding the intentionally punitive aspect of TILA rescission. In most cases the homeowner cannot perform unless the “lender” gives up the note and mortgage and returns money paid under the canceled loan contract. The homeowner can ONLY perform if the deck is cleared for them to get a new loan from a new lender and to apply the proceeds of disgorgement required by the statute.

And to add insult to injury the court is putting yet another constraint on the borrower that TILA does not mention, to wit: the intention of the borrower to perform (tender). Forget the logistics of “intention” which is ridiculous — any such requirement places TILA rescission in the position of a claim instead of the event that the statute says has occurred by operation of law at the moment of delivery of the note of rescission. In direct contradiction to the TILA rescission statute (and SCOTUS in Jesinoski), this requires the borrower to submit to a trial before the rescission is effective.

The bottom line is that it appears that all courts are only interested in treating rescission under common law in which the rescission would only be effective upon a court order after a trial. The fact that the TILA Rescission statute clearly and unquivocably says otherwise won’t stop them, because they have prejudged the case as presenting a choice to the courts that can only be made by the legislature — who pays the price for violation of disclosure requirements under the Truth in Lending Act.

 

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