Our legal history has many examples of enormous errors committed by the Courts that were obvious to some but justified by many. The result is usually mayhem. The cause is a bias toward some underlying fact that was untrue at the time. Some examples include
  1.  the infamous Dred Scott decision where the Supreme Court ruled that a black man is not a person within the meaning of the constitution and therefore could not sue to protect his rights because he was not a citizen by virtue of the FACT that his ancestors had been brought to America as slaves. The underlying bias was considered axiomatically true: that “negroes” were fundamentally subhuman. It took a civil war that took 500,000 casualties and a constitutional amendment to change the results of that decision. We are still dealing with lingering thoughts about whether the color of one’s skin is in any way related to our status as humans, persons and citizens.
  2. the internment of Japanese Americans during World War II. The Supreme Court upheld that decision on the basis of national security. The underlying bias was considered axiomatically true: that people of Japanese descent would have loyalty to the Empire of Japan and not the United States. People of German descent were not interred, probably because they looked more like other Americans. As the war progressed and the military realized that people of Japanese descent were resources rather than enemies, the government came to realize that acknowledging these people as citizens with civil rights was more important than the perception of a nonexistent threat to national security. Americans of Japanese descent proved invaluable in the war effort against Japan.
  3. the Citizens United decision in which the Supreme Court gave the management of corporations a “Second vote” in the court of public opinion. The underlying bias was considered axiomatically true: that entities created on paper were no less important than the rights of real people as citizens. The additional underlying bias was that corporations are better than people.
  4. the hundreds of thousands of decisions from thousands of courts that relied on the fictitious power of the court to rewrite legislation that Judge(s) didn’t like. A current perfect example was reading common law (inferior, legally speaking) precedent to override express statutory procedures for the exercise and effect of statutory rescission under the Federal Truth in Lending Act. Over many years and many courts at the trial and appellate level the Judges didn’t like TILA rescission so they changed the wording of the statute to mean that common law procedures and principles apply — thus requiring the homeowner to file suit in order to make rescission effective, and requiring the tender of money or property to even have standing to rescind. This was contrary to the express provisions of the TILA rescission statute. Approximately 8 million+ people were displaced from their homes because of those decisions and the property records of thousands of counties have been forever debauched, likely requiring some legislative action to clear title on some 80+ million transactions involving tens of trillions of dollars. The underlying bias was considered axiomatically true: that the legislature could not have meant that individuals have as much power as big corporation and they should not have such power. Then the short Supreme Court decision from a unanimous court in Jesinoski v Countrywide made the correction, effectively overturning hundreds of thousands of incorrect decisions. A court may not interpret a statute that is clear on its face. A court may not MAKE the law.
  5. the millions of foreclosures that have been allowed on the premise that the “holder” of a note should get the same treatment as a “holder in due course.” More than 16 million people have been displaced from their homes as a result of an underlying bias that was and often remains axiomatically true: decisions in favor of homeowners would give them a free house and decisions that allow foreclosure protect legitimate creditors. Both “axioms” are as completely wrong as the decisions about TILA Rescission.
It is the last item that I address in this article. A holder in due course is allowed to both plead and prove only the elements of Article 3 of the UCC. Article 3 of the UCC states that a party who purchases negotiable paper in good faith without knowledge of the maker’s defenses and before the terms are breached is presumed to be entitled to relief upon making their prima facie case — which are the elements already listed here. Even if there were irregularities or even fraud at the time of the origination of the loan or at a later time but before the HDC purchased the paper, the HDC will get judgment for the relief demanded. A “holder” (on the other hand) comes in many flavors under Article 3 but they all have one thing in common: they are not holders in due course.
The fundamental error of the courts has been to treat the “holder” as a “holder in due course” at the time of trial. It is true that the holder may survive a motion to dismiss merely by alleging that it is a holder — but fundamental error is being committed at trial where the holder must prove its underlying prima facie case. It should be noted that the requirement of consideration is repeated in Article 9 where it states that a security instrument must be purchased by a successor not merely transferred. So regardless of whether one is proceeding under Article 3 or Article 9, no foreclosure can be allowed without paying real money to a party who actually owned the mortgage. The Courts universally have ignored these provisions under the bias that it is axiomatically true that the party seeking to enforce the paper is so sophisticated and trustworthy that their mere request for relief should result in the relief demanded. This bias is “supported” by an additional bias: that failure to enforce such documents would undermine the entire economy of the country — a policy decision that is not within the province of the courts. And deeper still the bias is that it is axiomatically true that the paper would not exist without the actual existence of monetary transactions for origination and transfer of the paper. These “axioms” are not true.
As a result, courts have regularly rubber-stamped the extreme equitable remedy of foreclosure in favor of a party who has no financial interest in the alleged paper, nor any risk of loss or actual loss. The foreclosures are part of a scheme to make money at the expense of the actual people who are losing money. If this was not true, there would have been thousands of instances in which the “holder” presented the money trail that supposedly was the foundation for the paper that was executed and delivered, destroyed or lost. They never do. If they did, the volume of litigated foreclosure cases would drop to a drizzle. And these parties fight successfully to avoid not only the burden of proof but even the ability of the homeowner to inquire (discovery) about the “transactions” about which the paper is referring — either at origination or in purported transfers. Backdating assignments and endorsements would be unnecessary. “Robo-signing” would also be unnecessary. And the constant flux of new servicer and new trustees would also be unnecessary. Many of these events consist of illegal acts that are routinely ignored by the courts for reasons of bias rather than judicial interpretation.
A holder in due course proves their prima facie case by
a) proffering a witness with personal knowledge
b) proffering testimony that allows the commercial paper to be admitted as evidence (the note). This evidence need only be to the effect that the witness, or his company, physically has possession of the original note and presents it in court.
c) proffering testimony and records showing that the paper (the note) was purchased for good and valuable consideration by the party seeking to enforce it. This means showing proof of payment for the paper like a wire transfer receipt or a cancelled check.
d) proffering testimony and records showing that the mortgage, which is not a negotiable instrument, was purchased withe the note.
e) proffering testimony and records that the transactions were real and in good faith
f) proffering testimony that the purchaser of the paper had no knowledge of the maker’s defenses
g) proffering testimony that no default existed at the time of purchase of the paper.
Because of bias, the Courts, just as they did with TILA rescission, have mostly committed fundamental error by allowing to alleged “holders” a lesser standard of proof than the party who is legitimately in a superior position of being a holder in due course. It starts with a correct decision denying the homeowner’s motion to dismiss but ends up in fundamental error when the court “forgets” that the enforcing party has a factual case to prove beyond mere possession of an instrument they say is the original note.
The holder, in contrast to the holder in due course, is not entitled to any such presumptions at trial, except that they hold with rights to enforce. They don’t hold with automatic rights to win the case however.
A holder proves its prima facie case by
a) proffering a witness with personal knowledge
b) proffering testimony and records that allow the commercial paper to be admitted as evidence (the note). This evidence need only be to the effect that the witness, or his company, physically has possession of the original note and presents it in court.
c) proffering testimony and evidence as to the chain of custody of the paper the party seeks to enforce.
d) proffering testimony and records together with proof of payment of the original transaction (a requirement generally ignored by the courts). This means proof that the original party in the “chain” relied upon by the party seeking to enforce actually funded the alleged “loan” with funds of its own or for which it is responsible (e.g., a real warehouse credit arrangements where the originator bears the risk of loss).
e) proffering testimony and records showing that the paper (note) was purchased for good and valuable consideration by the creditor on whose behalf the party is seeking to enforce it. This means showing proof of payment for the paper like a wire transfer receipt or a cancelled check.
f) proffering testimony and records showing that the mortgage was also purchased by the creditor for good and valuable consideration. This means showing proof of payment for the paper like a wire transfer receipt or a cancelled check.
g) proffering testimony and records that the transactions was real and in good faith
h) proffering testimony that no default existed at the time of purchase of the paper. Otherwise, it wouldn’t be commercial paper and the party seeking to enforce would need to allege and prove  its standing and its prima facie case without benefit of the note or mortgage.
It should be added here that the non-judicial foreclosure states essentially make it even easier for an unrelated party to force the sale of property. Those statutory procedures are wrongly applied leaving the burden of proof as to UCC rights to enforce squarely on the homeowner who in most cases is not even a “borrower” in the technical sense. Such states are allowing parties to obtain a forced sale of property in cases where they would not or should not prevail in a judicial foreclosure. The reason is simple: the procedure for realignment of the parties has been ignored. When a homeowner files an action against the “new trustee” (substituted by virtue of the self proclaimed and unverified status of a third party beneficiary under the note and mortgage), the homeowner is somehow seen as the party who must prove that the prima facie case is untrue (giving the holder the rights of a holder in due course); the homeowner is being required to defend a case that was never filed or alleged. Instead of immediately shifting the burden of proof to the only party that says it has the rights and paperwork to justify the forced sale. This is an unconstitutional aberration of the rights of due process. The analogy would be that a defendant accused of murder must prove he did not commit the crime before the State had any burden to accuse the defendant or put on evidence. Realignment of the parties would comply with the constitution without changing the non-judicial statutes. It would require the challenged party to prove it should be allowed to enforce the forced sale of the property. Any other interpretation requires the the homeowner to disprove a case not yet alleged, much less proven in a prima facie case.

Procedure vs Substance in Rescission

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The prime mistake amongst foreclosure defense attorneys is that (a) they are looking at substantive law only without studying procedural law and (b) they still can’t get over the “free house” myth.

If you are confronted by a court order signed by a real judge that you are absolutely convinced is wrong, what happens. ANSWER: Nothing. The order stands unless you do something about it. The “Something” is filing a pleading that establishes who you are, why you have a right to complain about the order and then what is wrong with the order. It might be motion to vacate or any number of other pleadings. If you think that the court violated your civil rights, you would probably bring a new lawsuit in Federal Court asking the Federal District Judge to vacate the state court order perhaps because the law denied due process or the way it was applied violated due process. The signed order (regardless of how offensive it is), at all times, during the contest, remains in full force and effect. Even if everyone is convinced you will win and get the order vacated, you must wait until the end of litigation to get it vacated — if the Judge agrees with you. The only exception is an emergency application for temporary restraining order, which has another whole set of procedural rules.

When a consumer sends a notice of rescission on a debt, it may have all kinds of things wrong on its face and in the circumstances under which it was sent. But the basic fact is that it was sent. That is all that is needed to make it the equivalent of the court order in the preceding paragraph. It is effective BY OPERATION OF LAW. Why is the court order effective? It is effective BY OPERATION OF LAW. AT THAT POINT IN TIME WHEN THE NOTICE OF RESCISSION WAS SENT, THE LOAN CONTRACT IS CANCELED, THE NOTE IS VOID AND THE MORTGAGE IS VOID — BY OPERATION OF LAW.

The banks and servicers are mounting a challenge to the inevitable and only ruling allowed regarding TILA rescissions. They don’t want to file a lawsuit or a petition for temporary restraining order to relieve the creditor of the duty to (a) cancel the note and return it to the borrower, (b) file the satisfaction of mortgage and (c) pay all money ever collected from the borrower and ever paid to third parties as compensation arising out of the origination (i.e., execution of loan documents). Execution of loan documents is NOT the same time as consummation.

Ask any closing agent. They get the funds after the documents are sent to the underwriting department where it is are reviewed again before the funds are released — hours, days and even months later. . The question is what underwriting department? It is the automated computerized set of standards maintained by LPS/Black Night and others who are distancing themselves from the table funded transaction in which the “lender” has engaged in behavioral that is “predatory per se” and which therefore does not entitle them to equitable relief (foreclosure) since they come to court with unclean hands. By layering the stack with multiple parties, none of whom have any interest in the loan, they create the illusion of a transaction with an originator who never spent a dime lending money to the borrower.

So we know that the identity is not going to be made available by the banks and servicers. That much is assured. The trusts are empty shells of trusts that exist on paper only, never did business and were never registered with any state or the federal government. They can’t get away from the simple truth that the ONLY parties entitled to payment are the investors whose money was used to fund or acquire loans — even though they didn’t know and would never have approved of the violation of the terms of the offer contained in the MBS prospectus, the Pooling and Servicing agreement, or anything else.

they are dancing around The issue. If this is handled correctly, the issue of when consummation occurred Will be a factual issue in dispute. That means they will have to raise it in a lawsuit against the borrower. And that means they are going to have to plead and prove standing. Since the rescission is effective as of the date of mailing, and effective means that the loan contract has been canceled (if it ever existed), the note and mortgage are void and the party who is actually the creditor has a duty to return the canceled note, file the satisfaction of mortgage, and pay the money to the borrower that was paid by the borrower and that was paid to third parties as compensation for the origination of the loan.

If these loans were actually legitimate, the strategy which I am suggesting would have little merit. The real creditor would allege that they were the lender to the borrower or that they had purchased alone from a party that owned the loan. They would be able to show Proof of that purchase in the form of a canceled check, a wire transfer receipt that could be verified or some other indication of the movement of money. But if the banks and servicers actually could produce the real creditor, there would be virtually no foreclosure litigation, As most of the defenses and attacks by the borrower would be moot.

The truth is that the loan contract probably never existed because the party on the note and mortgage was not the lender. This is a table funded loan which is predatory per se, under Reg Z. So you get them coming and going — either there was no consummation with any of the parties in the chain of people and entities that are relied upon by the collector or foreclosing party, or the transaction IS RESCINDED as of the date of mailing. and THAT means they can’t use the same arguments on standing as they do in foreclosure actions. In actions to vacate the rescission, the suing party cannot allege standing much less prove it by using the note and mortgage because those are now void instruments according to TILA, REG Z, and the Supreme Court in Jesinoski. Either way the remedy is the same, more or less, to wit: return of the canceled note, filing of satisfaction of mortgage (or having it nullified by a court) and payment of all money ever paid by borrower plus potential damages under consumer protection statutes.

It might be suspected that the three years has run, that the three days have run or that the rescission is faulty because of other restrictions in TILA. But it is nevertheless effective and requires no judge to rule upon its effectiveness. That puts the burden of pleading and the burden of proof completely on the party seeking to vacate the rescission. If they do nothing, the rescission stands. And as pointed out by Justice Scalia TILA rescission makes no distinction between disputed and undisputed recessions. So even if a faulty rescission is nonetheless effective, Which means that the creditor has 20 days in which to satisfy the three duties under TILA rescission. If nobody files a lawsuit to vacate the rescission within 20 days of receipt of the notice of rescission (and remember that under Dodd Frank notice to one is notice to all), then the rescission is final and any of the factual issues that you would have expected to arrive on a faulty rescission would have been waved. This is a procedural argument but there is no doubt that it is correct, especially with the wording of the opinion in Jesinoski.

The important thing to remember is that the rescission is effective upon mailing which means that it is the same as a court order bearing the date of mailing of the notice of precision. If you think of it that way it may be easier to understand the strategy that I am suggesting here. Since there does not appear to ever have been a lawsuit by any bank seeking to vacate a TILA rescission, I am assuming that they cannot come up with a creditor who actually has standing. And that is because they stole the money in the first place from investors who are the ONLY parties entitles to be paid — but ONLY under some equitable theory of unjust enrichment, most assuredly not secured in their claim.


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SEE 2015-08-10-0001


On February 25, 2015 the Minnesota Supreme Court considered several of the conventional theories advanced by the banks in favor of their right to foreclose. And the Court also considered the procedural and substantive issues surrounding rescission in Minnesota whose statutes closely resemble rescission under the Federal Truth in Lending Act.

The court rejected the bank’s arguments and points out that even the dissent on the court made the same mistakes as the lower courts, which were obviously in a state of utter confusion. It should be noted that this decision was rendered approximately 1 month after the Jesinoski v. Countrywide decision. It is apparent that the Supreme Court of Minnesota was heavily influenced by the unanimous Supreme Court decision governing rescission under the Truth in Lending Act.

In the nearly 8 million foreclosures that have been allowed by the judicial system using deeply flawed reasoning, the banks have convinced the courts that piling up paperwork essentially creates rights even if none existed before. The Minnesota Supreme Court simply stated that nothing plus nothing equals nothing. If you start with nothing then any successor to any paperwork that was executed also gets nothing. This is well settled law.

The court also considered the issue of cancellation or rescission of a transaction in the light of a statute that is clear on its face. Since there are few appellate decisions since the Jesinoski was rendered in January, we must refer to the Supreme Court of Minnesota in this case as at least a starting point.

Starting with the fact that the statute was clear, the court concludes that no court had the authority or jurisdiction to “interpret” the statute. For at least 8 years before Jesinoski the banks convinced thousands of judges in hundreds of thousands of decisions to ignore a rescission or cancellation of the loan documents that was, according to the statute, effective upon mailing.

The banks convinced the courts to read into that statute the rules governing common law rescission, which clearly conflict with the statute. If the statute is clear then it is by definition not ambiguous. And if there is no finding of ambiguity in the statute, the court has established, whether it likes it or not, that it has no power or jurisdiction to change the outcome based upon the opinion of the judge as to which party should win. If the judge proceeds to interpret the statute anyway, it is a nullity. Here again we have the application of the simple formula proposed by the Supreme Court of Minnesota, to wit: nothing plus nothing equals nothing. In the case of TILA Rescission the issue is closed, to wit: the unanimous decision of the US Supreme Court in Jesinoski was that the statute is not ambiguous and thus not subject to interpretation by ANY judge.


The third line of defense by the banks slight of hand — they make the transaction so complex and convoluted that it is impossible for the judge or even the homeowner or his attorney to follow it. The judge then relies upon the more sophisticated party (the bank) to clear up the complexity. But as we have recently seen in several Florida cases, and now as we see in the Minnesota Supreme Court, the judicial system has made an about-face and is now questioning whether there is any substance behind the paperwork and the complexity raised by claims of securitization which have been revealed in most cases to be false. Like the unanimous US Supreme, there is unanimity of findings and conclusions by regulators, legal scholars, economists, financial experts, and litigators, with tens of billions of dollars in settlements that were made public and hundreds of billions of dollars in private settlements. The conclusion is that the securitization failed — i.e., that it never really happened.

The Minnesota Supreme Court plunged into the midst of the complexity offered up by the various transactions involved in this particular case. The court succeeded in simplifying the matter by applying well settled law with no need to interpret anything or redefine anything.

While the facts of this case vary from the usual rescission issues under the Federal Truth in Lending Act, the principles applied remain the same.

However, the court places heavy emphasis on the time limits imposed by the statute for the exercise of the cancellation or rescission of a transaction. It may be expected that most courts will do the same. But it is also true that both the majority and the dissent seem to be in agreement that if the rescission was recorded the issue would have been less in doubt than it appeared in the court record.

Because it wasn’t in issue. this court has not addressed procedural issues, to wit: who has the burden of proof on the issue of timeliness? Under TILA Rescission it is the real creditor (the only one with standing). How do we know that? We know it because the borrower is not required to prove or allege timeliness. The rescission is effective when mailed. Practice Hint: In an action to enforce the rescission, the grounds for rescission need not and should not be in the allegations — the issue is limited to the sending of the rescission letter and the fact that the party being sued is attempting to use the void note and mortgage.

Perhaps counter-intuitively, the party being sued (servicer, Trustee etc) for permanent injunction from using the void note and void mortgage may NOT raise issues of timeliness of the rescission because they have no standing to do so. The actual creditor, if there is one, would be the only party able to do that. That would be an action for wrongful rescission. Note that in Jesinoski, Justice Scalia makes the point that the statute makes no distinction between disputed and undisputed rescissions. Hence “effective when mailed” means exactly that and the loan contract, note and mortgage are all canceled and void. If the issue of timeliness was still “out there”, then the rescission would not be effective upon mailing — which is exactly the point Justice Scalia was making. He didn’t say that the creditor could not file a lawsuit to vacate the rescission based upon timeliness. But that lawsuit would need to allege, first and foremost that the pleader had standing as a party who is being financially injured by the rescission. As I see it, no other party could raise those issues because they lack standing.

The most interesting point about this is that the lawsuit for enforcement of the rescission will not likely be against the creditor because the creditor is unknown. We only have access to the information given to us by self-appointed intermediaries who are claiming a right to enforce the note and mortgage. But since the rescission is effective upon mailing by operation of law, the effect is to make the note and mortgage void (as well as canceling the loan contract — if there is one). So the only defense from intermediary parties sued (to prevent them from using the note and mortgage) to the lawsuit for injunction or enforcement of the rescission is that the rescission was already vacated by a court of competent jurisdiction, which is essentially never the case. This is why rescission is such an effective discovery tool as well, to wit: in order to challenge the “wrongful” rescission the challenge must be made by the party who has something to lose — like the current liability to disgorge all the money paid by the borrower, deduct all finance charges, and pay to the borrower all the money paid to third parties as compensation for origination of the loan.

Hence the lesson drawn from this case is that the rescission should probably be recorded in the county property records as quickly as possible. In Florida it would appear that this would be done by attaching a copy of the rescission letter to the notice of interest in real property and then recording the entire instrument with the exhibit. Combining the two issues of timing and recording, it would appear that if anything in the notice of rescission or cancellation of the transaction refers to the date of consummation of the transaction, that the rescission could be void on its face for not complying with the statutory time periods for action by the borrower. A reference to the date of consummation in the letter giving notice of the rescission or cancellation of the transaction would also appear to be an admission that the transaction was in fact consummated.

The lesson to take away from that analysis is that the date on which the documents were signed is not necessarily the date of consummation. The date of consummation would be when the loan was funded and the liability of the borrower first arose as a result of the funding. IN our first year of law school we are taught that the liability of the borrower does not commence when he signs paperwork; the liability arises when the borrower gets the money. If the funding didn’t come from the party claiming to have rights to enforce the loan by virtue of what was written on the note or the mortgage or deed of trust, then we go back to nothing plus nothing equals nothing. No loan plus assignment of loan equals no successor, no servicer and no owner of the loan.

That would mean that the borrower would prevail under either one of two theories, which you see developed in this case in Minnesota. It is either No Consummation or Rescission. Either the borrower is entitled to nullification of the entire transaction and nullification of the instruments that should never have been released from the closing table and were procured by at best a failure to disclose and at worst an intentional misrepresentation, or the borrower would prevail for having cancelled or rescinded the transaction.

The forth line of defense from the banks has always been that the borrower is seeking a “free house.” No such thing occurs in the event of either nullification of the original instruments or cancellation of rescission of the original instruments. The party to whom the money is actually owed still has claims and might even have claims for an equitable interest in the mortgage that was recorded. But it does not have claims to simply exercise the rights of the creditor as expressed in the note and mortgage because the actual creditor has no legal interest in the note or in the mortgage. AND THAT would require a court order AFTER a party enters the picture and alleges that it is the actual creditor and can prove it.

No money plus note plus mortgage equals no valid lien and no foreclosure. It is positively astounding that after 8 million foreclosures we are still arguing about a well settled principle of law, fairness, equity and justice — in order for the paper to be used there had to be an actual transaction with the parties IN THAT CHAIN.


The banks have bootstrapped their misuse of investor money together with false claims of securitization to create the illusion that some or all of them had some actual rights; but nowhere have they ever come forward and done what any creditor would do when challenged about the transactions: “here they are, with canceled checks and wire transfer receipts. Next question?”

A fifth issue emerges which the court could have avoided but instead met the issue head on. “It is of course elementary that delivery of a deed is essential to a transfer of title…Delivery of a deed is complete only when the grantor has put it beyond his power to revoke or reclaim it…An undelivered deed cannot transfer legal title even to a bona fide purchaser, because lack of delivery renders the deed void…In this case, although Graves physically transferred a quick claim deed to Wayman, delivery did not occur because Graves never put the deed beyond his power to revoke or reclaim it.”

The court concluded that since “Graves retained the power to revoke or reclaim the deed during the statutory cancellation period…which made deliver impossible during the cancellation period,” that delivery was never completed. The court concluded “without delivery of the deed to Wayman, the common law treats the quick claim deed as void.”


The reason this is important is that it is a hidden issue in all of the closings that have occurred, especially over the last 10 years, where loans were ostensibly approved and funded. The note is released for anyone to do anything they want to do with it usually within a few days or a few weeks from the date that the borrower executed the mortgage instruments. The mortgage itself is not only released but it is recorded. The problem with that is that it is incontestable that the borrower retains a right to rescind for the first 3 days on any grounds at all, and that the 3 days starts to run from the date of consummation.

If the party on the note as payee and on the mortgage as mortgagee did not consummate the transaction with the borrower and instead was a sham nominee or party to a table funded loan, then it would follow that the 3‑day period under the Truth in Lending Act had not commenced running. It would also follow that the 3‑year limitations in the Truth in Lending Act had also not commenced running. And the reason is the Minnesota court’s statement that “nothing plus nothing equals nothing.” It is obvious to the Minnesota Supreme Court, and should be obvious to the rest of us, that it would be completely inappropriate for a third party to the transaction to act as though the endorsements and assignments of improperly executed and improperly drafted instruments would somehow create rights that did not exist before.

If the banks would want to assert rights in connection with the meeting at which the borrower executed the usual pile of documents it would first need to acknowledge the fact that it was the real party in interest and to prove that fact. This would amount to an admission of a pattern of conduct that is described by Regulation Z as predatory per se. Anything that is predatory per se, is obviously against public policy. Anything that is against public policy is obviously evidence of unclean hands. A party with unclean hands may not obtain equitable relief. Since foreclosure is the most extreme remedy under civil law, and is a remedy generally considered to be equitable in nature, then it follows that no party with unclean hands should be allowed to foreclose.

The idea that any of this produces a free house for the borrower is wrong. In the first place, the borrower has invested a great deal of money usually in connection with the property on which there is a claim of an encumbrance. In many cases the property has been in the family for generations and would not be subject to mortgage but for the knock on the door from one of the tens of thousands of loan agents that were selling loan products from door to door. But assuming that the current system of foreclosures becomes subject to the conclusions of the courts in the judicial system that foreclosure is impossible, that does not mean that the source of funding may not make a claim upon the homeowner for repayment of the money that was used to fund the origination or acquisition of the loan.

In fact it is quite obvious now that we know that at least half of all the people who went into foreclosure were asking for modifications, that the losses attendant to the actual loans could have been minimized at the same time as keeping homeowners in the homes and enabling them to recapture over time their equity. In fact the evidence is clear that most homeowners would be happy to execute entirely new and valid paperwork with a party who was in fact the real creditor.

The Minnesota court decides that even if you are a bona fide purchaser because you paid valuable consideration for the mortgage in reliance on what appeared to be the facts, you still get nothing if you paid for something where the grantor did not possess an interest that could be conveyed. This is bad news for the banks. They introduce undated endorsements and undated assignments and powers of attorney and various other instruments in court laying paper upon paper upon paper making it appear, that the greater weight of the evidence shows that they are in fact possessed of the claim to enforce the note and mortgage.

Nothing could be further from the truth. If their chain upon which they are relying in their foreclosure is based on a non‑existent transaction or an incomplete transaction, then they have no power to do anything anymore than the original party did. The only exception to this might be in the event that a party was introduced as a holder in due course. But that would mean that the party described as a holder in due course paid real value for the rights expressed in the note, under circumstances where it was acting in good faith and without knowledge of the borrower’s defenses. Such an allegation might be made, but appears impossible for the banks to prove.

Recording the Rescission

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This is not legal advice on your case. Consult a lawyer who is licensed in the jurisdiction in which the transaction and /or property is located.

LAWYERS AND JUDGES TAKE NOTE: “Section 1635(a) nowhere suggests a distinction between disputed and undisputed rescissions, much less that a lawsuit would be required for the latter.” Justice Scalia, Jesinoski v Countrywide. [EDITOR’S NOTE: The only possible meaning to this is that the homeowner can use a letter and then, if it is disputed, it must BE BROUGHT to A COURT OF COMPETENT JURISDICTION to vacate the rescission. An order that denies a motion to dismiss for lack of jurisdiction based upon the fact that the rescission was sent does nothing to change the fact that the rescission was effective as of the date it was mailed and still is effective by operation of law. The only way it can be removed is with another operation of law that is properly brought by the real party in interest. An order vacating the rescission without any pleading requesting that relief does absolutely nothing except assure that the judge’s order will be reversed. And if the rescission is recorded before the foreclosure judgment (judicial states) or sale (nonjudicial states) the judgment and sale are void respectively.]
 Every state has its own forms and requirements and fees for filing anything in the public records. It is wise to record any rescission that was sent regardless of the timing, in my opinion, but that would be subject to advice from a lawyer in your jurisdiction. Litigation is expected on numerous issues after the nonjudicial cancellation of the loan contract, note and mortgage. Here are some of the issues that might be presented when the rescission is sent and/or recorded:
  1. Since the rescission is effective upon mailing, the loan contract, note, and mortgage are void (not voidable). This means in states whose recording statutes are either “notice” or “hybrid”, anything that transpired after that in which the note or mortgage were used for collection, enforcement or foreclosure are also void. Title would then stay with the homeowner if the homeowner does not know that he/she still has title. Any deed issued in foreclosure would accordingly be a wild deed.
  2. If the state recording statutes are purely “race” then if the notice of rescission was not recorded before the foreclosure, the foreclosure sale and deed might well be binding even if it was “fraudulent” or otherwise wrong or illegal.
  3. State statutes of limitation might effect (limit) the ability to collect damages for trespass or wrongful foreclosure, breach of contract or other common law or statutory remedies. The FDCPA might help depending upon how long it has been since the notice of rescission was sent.
  4. If the notice of rescission is sent and recorded before the foreclosure judgment in judicial states or before the sale in nonjudicial states, then in all states it would appear that the the loan contract, note and mortgage were rendered void at the moment of mailing, by operation of law, which is the same thing as a judge’s order declaring the note and mortgage void.
  5. There is no provision in the TILA rescission statutes that allows any lender, creditor or servicer to contest the rescission with a letter. That power is only given to the borrower. Their subsequent action in proceeding to foreclosure “judgment” should be subject to being vacated because they were obtaining relief based upon a void instrument — the mortgage (and the note).
  6. In a strictly “notice” state, as long as they knew about the rescission the foreclosure is automatically wrongful and actionable, in my opinion. “Notice” might need to include a third party purchaser, who often does know of the existence of the borrower’s defenses and does know about the rescission. The issue here is that at the time of the rescission it was widely and wrongly believed that a lawsuit was necessary to make the rescission effective (i.e., the borrower had to plead and prove a case for rescission under common law rules). TILA rescission is exactly the opposite. So everyone, including appellate courts (other than the Supreme Court of the United States) was proceeding under the wrong assumption.
  7. The action following rescission should not be to establish the effectiveness of the rescission. That is already complete by operation of law.
  8. The action could be enforcement of the rescission if filed within one year of the date of mailing of the rescission. At the end of that period, the borrower is barred from filing an enforcement action and the “lender” assuming they have done nothing, is barred from claiming the debt.
  9. After the expiration of one year from date of mailing of the notice of rescission, the action would be simply for quiet title and perhaps trespass (see above). This action could be brought during the one year period either in lieu of enforcement or with enforcement. An action for injunction preventing the banks, servicers or trustees from attempting to use the void note and mortgage might also be advisable.
  10. If an action for enforcement is brought during the one year period it is important not to plead as though the rescission might not be effective. it is a fact. See Jesinoski. The relief sought is NOT to have a declaration from the court that the rescission was valid. The pleading must assume that it is already legally binding as per 15 USC 1635 et seq and that the only issues remaining are the duties of the “lender” who should not be described as a lender but only someone who has asserted the rights of a lender, holder, mortgagee, beneficiary or servicer or trustee.
  11. An attack on standing is appropriate at every step when the “servicer” or Lender” seeks to challenge the rescission without filing an actual lawsuit or pleading. The banking side of the equation has NOT been granted the power to contest with anything other than some other recognized “operation of law.” The only such exercise would be a lawsuit seeking to vacate the rescission on the grounds that it was wrongful or deficient in some way.
  12. STANDING: This is where most cases will be won or lost. Since the note and mortgage were rendered VOID as of the date of mailing, the party seeking to vacate the rescission would need to plead that they are injured by the rescission, to wit: they are going to lose the ability to enforce a legally binding debt. And they would need to establish standing WITHOUT the note and mortgage, which are void (see above).
  13. Thus the pleader would need to establish themselves as a party who either funded the loan and is still the creditor, or who has purchased the loan from someone who owned the loan because they funded it. This we believe is going to be impossible for the lenders because their money trail leads straight to investors whose money was used improperly and whose money was never paid to the trust that issued the mortgage backed securities. The investors were left out in the cold without a mortgage backed security issued by any entity that had mortgages, without a note and without a mortgage. That leaves them with empty promises from the “Servicer” and no enforcement mechanism to collect from either the borrower or the investment bank. None of that is the fault of the borrower.

The Florida Statute below shows the intent of recording such notices. Using the form that is already approved by statute makes recording a lot easier:

712.05 Effect of filing notice.

(1) A person claiming an interest in land or a homeowners’ association desiring to preserve a covenant or restriction may preserve and protect the same from extinguishment by the operation of this act by filing for record, during the 30-year period immediately following the effective date of the root of title, a written notice in accordance with this chapter. Such notice preserves such claim of right or such covenant or restriction or portion of such covenant or restriction for up to 30 years after filing the notice unless the notice is filed again as required in this chapter. A person’s disability or lack of knowledge of any kind may not delay the commencement of or suspend the running of the 30-year period. Such notice may be filed for record by the claimant or by any other person acting on behalf of a claimant who is:

(a) Under a disability;
(b) Unable to assert a claim on his or her behalf; or
(c) One of a class, but whose identity cannot be established or is uncertain at the time of filing such notice of claim for record.

Such notice may be filed by a homeowners’ association only if the preservation of such covenant or restriction or portion of such covenant or restriction is approved by at least two-thirds of the members of the board of directors of an incorporated homeowners’ association at a meeting for which a notice, stating the meeting’s time and place and containing the statement of marketable title action described in s. 712.06(1)(b), was mailed or hand delivered to members of the homeowners’ association at least 7 days before such meeting. The homeowners’ association or clerk of the circuit court is not required to provide additional notice pursuant to s. 712.06(3). The preceding sentence is intended to clarify existing law.

(2) It shall not be necessary for the owner of the marketable record title, as herein defined, to file a notice to protect his or her marketable record title.
History.s. 5, ch. 63-133; s. 798, ch. 97-102; s. 3, ch. 97-202; s. 1, ch. 2003-79; s. 7, ch. 2014-133.

Bank Lawyer’s Seminar: Rescission Changes Everything

QUOTE FROM SEMINAR: “The bottom Line: Until 3 years have elapsed, a mortgage is only as secure as the lender’s proof of compliance with TILA.”


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


see tila-right-of-recission-041415

From one of my readers, I received the Power Point Presentation given by a law firm representing the banks. It confirms everything I have been saying. It also offers a glimpse of some of the ways they will try to wiggle out of it. Suffice it to say that in addition to losing far more cases than what has been previously been reported, the banks are now stuck with a problem that they can’t fix, to wit: when they try to “securitize” a pool of new loans they cannot say that the deal is done because the borrower could assert a right to rescind triggering a nightmare of problems for all the parties starting with origination. The appetite for mortgage backed securities is almost certainly going to decline or vanish completely.

Key points from seminar: (You would think I was the presenter!)

  1. Mailing the notice is sufficient to cancel the loan, note and mortgage.
  2. No tender of money or property is required
  3. It is risky for lender to ignore notice of rescission
  4. Rescission is really a borrower’s remorse remedy
  5. Bringing suit immediately is the only way to end the issue — but only if you have absolute proof of the loan and the disclosures conforming to TILA. [Editor’s note: any failure to disclose compensation off the books of the “closing” would probably be evidence of non-disclosure on multiple levels]
  6. AFTER the lender has complied with 1635(b) (termination of security interest), after the lender has returned the canceled note and after the lender has complied with 12 CFR 1026.23(d)(2) (Return of any money or property that has been given to anyone) THEN the borrower must tender [Editor’s Note: This imposes a requirement that will put the trusts in immediate conflict with the investors and the facts. In order to “return” the money to borrower somebody has to pay it. The servicers, the banks sand the trusts don’t have any investment in these loans. They have been getting a free ride for years. They can’t go to the investors for the money and ask them so they can only advance the funds and hope they will get it back or just steal it from investors, which looks eerily like the start of mortgage securitizations]
  7. According to TILA the lien is void upon mailing of the notice.
  8. Banks better do their homework and identify all the loans that are not supported by TILA disclosures. [Editor’s note: My observation is that this is approximately 90%-96% of all alleged mortgage loans. As I said in 2007-2008: In my opinion the vast majority of all loans produced void notes and mortgages or were subject to rescission which results in the same thing — cancellation of the note, cancellation of the encumbrance, and disgorgement of all money paid.]

TILA Rescission in a Nutshell

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

NOTE: There are strategic nuances here on when to do what. That is included in our rescission package. Some things are better left unsaid in a public forum. This is not an opinion of law upon which you should rely. You should find an attorney who has studied this issue carefully and then rely on their advice.


On the one hand you have a bunch of lawyers and judges who have studied the remedy of TILA rescission and all of them have come up with a unanimous conclusion: the deal is canceled when a notice of rescission is put in the mail.
On the other hand you have a bunch of judges and lawyers who have not studied the situation and who have arrived at the mistaken conclusion that they may reinterpret the TILA rescission anyway they want and that the rules of common law rescission will be applied.
Who is right? Answer: group #1. How do I know? Because the Supreme Court in the Jesinoski decision has already ruled and there is no higher place to go. The ruling from the US Supreme Court was unanimous which in our highly polarized world is as unusual as the TILA rescission remedy which they affirmed. The Supreme Court is not always right, but it is always final — their ruling is the law of the land. People can differ on whether they were right or wrong in Jesinoski — but either way there is nothing anyone can do about it. Only Congress can change the law.

TILA Rescission is a strategy that should considered in virtually all consumer loan cases. This might involve an enforcement action in Federal Court or State Court. The sooner you send the rescission the sooner the 20 days will expire. It is ONLY after the 20 days that you can take the position that they are in violation of statute and that they have waived any objection to the rescission — unless they file a lawsuit against you seeking to vacate the rescission, which IS effective by operation of law, the moment you drop it in the mailbox.

There are three TILA RESCISSION duties that arise for every lender and one remedy to get out of it. The three duties are (a) return of canceled note (b) filing any papers necessary to remove the mortgage encumbrance from the homeowner’s chain of title and (c) return of all money ever paid by the borrower or to anyone in relation to the loan whether it be for fees, interest, principal or other compensation. If they want to stop these duties from being applied against any of the people in the chain that made allegations of ownership, balance, servicing or default, they must file suit, as a creditor, within 20 days from the date of the notice and get an order within that time that vacates the rescission.

The creditor has 20 days in which to comply. If they don’t comply ( or sue and get a court order) there are the following consequences: (a) they are in violation of statute, subject to an enforcement suit on their duties under rescission (b) they have waived any objection to the rescission that should have been brought as their own lawsuit within the 20 days and (c) if they continue to stonewall their obligations for one year, the creditor (if there is one) waives any right to demand any payment on the rescinded loan — the debt is extinguished along with the previously extinguished note and mortgage. Standing for the lawsuit can only be by way of allegations that they are the true creditor and cannot be based upon the void note and void mortgage because you can’t use a void instrument as the basis for any claim.

Note that the suit to enforce the rescission is NOT a suit to make the rescission effective by operation of law. The cancellation of the note and mortgage has already happened as the Jesinoski decision made abundantly clear. The note and mortgage are void as of the date of mailing of the notice of rescission.

This is a very unusual remedy for borrowers that both judges and lawyers have been misinterpreting for years. The idea that a borrower, on their own, could end a loan involving hundreds of thousands of dollars with a simple letter is NOT what the Judges or lawyers think is the right approach. It doesn’t matter what they think. Congress passed this law and it was signed into law by the President 50 years ago.

The Courts cannot reinterpret it to mean something else without violation of separation of powers between the judiciary and the legislative branches of government.What matters is that It was not until the Jesinoski decision that thousands of Judges and tens of thousands of lawyers were told that they were wrong for the last 15 years. The loan is cancelled by the mailing of the notice of rescission.

TILA Rescission is a specific statutory scheme that is different from common law rescission. What the Judges and lawyers failed to perceive when they started messing around with the interpretation of a perfectly clear statute is that if their approach was upheld, the entire system of nonjudicial foreclosure would be subject to the same reinterpretation. And for those of you who recall in nonjudicial states, the challenges to nonjudicial foreclosures were met by the banks arguing that the courts have no business interpreting a specific statutory scheme that is very clear on its face and can only be overturned if it is deemed unconstitutional on its face or in its application. The banks won, which means borrowers win on the issue of rescission.

The January ruling from a unanimous Supreme Court was unusual unto itself. The opinion written by Justice Scalia was terse and caustic — showing the court’s irritation at having to remind judges and lawyers that there is a basic rule of law that says that the court may not “interpret” a statute that is unambiguous. This statute is clear as it could be. So even if a Judge doesn’t like it or doesn’t believe it should be the law, or doesn’t like the result, the Judge has no choice but to follow the rule of law set forth in TILA, in Reg Z and in the Supreme Court decision issued in January. The only way this can change is if Congress passes a new law.

The key to your rescission strategy is going to be the answer to this question: under what circumstances is the effective date of the rescission delayed or contingent? The answer is none. That answer follows from the fact that the rescission IS effective on the date of mailing BY OPERATION OF LAW. So the issue has already been decided by Congress, the Federal Reserve (reg Z) and the US Supreme Court. Like any order or act that is effective by operation of law, rescission may be vacated — but not ignored. And like other orders or actions that are effective by operation of law, there are limits on the ability to sue for temporary or permanent injunction.
And THE bank or alleged servicer writing a letter to YOU saying that you have no right to rescind means nothing except that they received the notice — just like when you write a letter to them asking them to please not foreclose because you have in fact made all your payments. The banks and servicers ignore those letters and get foreclosure judgments and sale of the property no matter how many letters you write. If you don’t challenge them IN COURT it means nothing.

Once the 20 days has expired you need to consider whether to hire counsel to prosecute the enforcement of the rescission. Those allegations consist of reference to the note and mortgage, the fact that you did rescind the transaction and that the loan contract is canceled and then the fact that the creditors are in default of their obligations under TILA. The upside is that it should result in cancelling the foreclosure case because the mortgage and note will then be void by operation of law. The Court lacks jurisdiction to enter a judgment of foreclosure on a mortgage that is void at the time the court hears the case. The downside is that if you win the enforcement action it is going to result, if they comply, in them sending the canceled note, filing the satisfaction of mortgage and giving you the money that was paid. But THEN the creditor may, for the first time, demand payment on the old loan. [see our rescission package on further details and strategies on this]

Rescission enforcement actions are the next really big thing

For more information on rescission, our rescission package or any other topic, please call 954-495-9867 nor 520-405-1688.
Rescission enforcement actions are the next really big thing. Its effect is to immediately unencumber the property from any claims of lien or mortgage and any claim on the note which is void and must be returned marked “cancelled”. If the parties collecting or enforcing the loans really have a right to do so they may demonstrate that in court by filing a lawsuit to set aside the rescission based upon any factual grounds they wish to raise, applying the rules of the TILA statutory scheme for rescission. But if they don’t do that within 20 days they waive their defenses. AND if they don’t comply with TILA by returning the canceled note, filing a satisfaction of mortgage and returning all money paid by borrower, then they are barred from making even an unsecured claim for “damages.”
The action to enforce rescission would essentially consist of an allegation that the notice was sent, it has been more than 20 days since the notice was sent, and therefore the parties claiming to be creditors owe (1) return of canceled note, (2) filing a satisfaction of mortgage and (3) return of all money paid by borrower since the inception of the alleged loan contract. We will refuse to get into an argument about whether the rescission should have been sent. THAT is something that the parties would have had to allege in a lawsuit against the borrower(s) to set the rescission aside.

According to TILA, Reg Z and the US Supreme Court (Jesinowski decision) the rescission IS effective (by operation of law) the moment it is put in US Mail. The borrower does not have to be right to send it. THAT issue is left to the banks and servicers to allege in a lawsuit to vacate the rescission. And they must do so within 20 days. All issues that are confusing everyone — statute of limitations, purchase money first mortgage, etc. are questions of fact that need to be raised by the other side. They cannot do so after 20 days. We would move to strike those defenses when raised in our lawsuit to enforce rescission.

There are dozens of lawyers across the country that agree with my interpretation of the TILA rescission statutes and who are filing these rescission enforcement actions. In some cases, Ocwen has agreed that the rescission is effective and even agreed that the original payee was not the lender. That is an interesting juxtaposition of theories. Because if there was no funding by the payee on the note (“lender”) then there is no loan contract. If there is no loan contract, there is nothing to rescind. But the rescission under TILA might still apply as to the note and mortgage and the right to obtain disgorgement of money paid by borrower might be partially blocked by the standard statute of limitations governing contract disputes or the statute regarding tort actions.

It sounds weird, I know. But the fact is that Congress specifically decided that the act of the borrower in sending a notice of rescission cancels the loan and Reg Z (Federal Reserve) says that by operation of law that means the note and mortgage become void as of the date of mailing of the notice of rescission. Void means void, not voidable. It means that the the note and mortgage no longer exist and that is final. So even if the “lender” tries to bring a lawsuit to set aside the rescission they would need to establish standing presumably without the note and mortgage which can no longer be used because they are void. Standing could only be established by alleging that the pleading party is suffering actual damages — which is not really possible if they never paid anything for the loan and even if they did, is also not possible since they still could bring a claim against the borrower (unsecured) for the money that is due as the balance of the loan.

Congress specifically provided this method so that the old “lender” could not block the ability of the borrower to get another loan from a different (and presumably real) lender which would have first priority and would enable the borrower to either pay the old lender or not (if the old lender had not complied with TILA as to its duties in the event of rescission).

It was the specific intent to prevent the old “lender” from stonewalling and thus trap the borrower into a deal he or she didn’t want. And THAT is why the rule is that the note and mortgage are VOID by operation of law regardless of whether or not the “lender” returns the cancels note, satisfies the mortgage or pays the money to disgorge all funds paid by borrower starting with the origination fees, cost of closing and all interest and principal paid up to the date of the rescission.




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