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. 

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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.

The Neil Garfield Radio Show LIVE at 6 pm Eastern: The Statute of Limitation

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Q and A: Statute of Limitations

In this episode I will be discuss two states with drastically different interpretations of Statute of Limitations.  In Florida the Bartram decision ruled that every time a homeowner misses a payment, the statute resets.  In stark contrast is a New York case called Costa v. Deutsche Bank that clarified that statute of limitations will be enforced.

The Bartram decision created a bad precedent where Pretender lenders (or any other Plaintiff) can look to Bartram as support for taking a pot luck shot at getting a foreclosure judgment and sale, followed by eviction. If they fail they can try again.

The application of res judicata, statute of limitations and Rooker Feldman don’t apply to the banks.

This creates a double standard.  The ambidextrous treatment of homeowners versus the financial sector is exactly what the equal protection clause of the U.S. Constitution (and, the Florida Constitution) says cannot occur under guarantees of equal protection under the law.

In stark contrast to Bartram was a New York decision last week called Costa v. Deutsche Bank.

The court was asked whether the statute of limitations applies. It did and according to NY Law it was too late for the pretend lender to take action.

Get a consult! 202-838-6345 or https://www.vcita.com/v/lendinglies

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

Contact Attorney Charles Marshall at:

Charles Marshall, Esq.
Law Office of Charles T. Marshall
415 Laurel St., #405
San Diego, CA 92101

Florida Supreme Court dismisses motion for rehearing in case concerning Florida Statute of Limitations

by K.K. MacKinstry

Last week a Manhattan court ruled in Costa v. Deutsche Bank that Deutsche Bank had failed to foreclose within the six year window and was therefore barred from collecting the debt.  In the same week, the Florida Supreme Court denied a motion for rehearing in Bartram v. U.S. Bank regarding the statute of limitations in foreclosure cases, therefore ruling that there is no statute of limitation on mortgage debt in Florida.

In the 2016 Bartram opinion the court ruled that if there is an involuntary dismissal of a foreclosure in a foreclosure case, a follow-up foreclosure action can be filed. This decision allows a lender to “correct” issues in litigation and refile until they can successfully foreclose on a homeowner and is likely unconstitutional.  Bartram ruled that a follow-up filing could be done to accelerate the debt involved in a mortgage foreclosure again and again.

The decision is an especially important one for lending institutions in Florida who fought tooth and nail for the decision.   Banks are allowed to file foreclosure even in circumstances when previous foreclosure actions have been attempted.  For exampl,e if a bank loses because they came to court with an unendorsed note, this decision tells the bank exactly what issue to cure before they file to foreclose again.  The banks have deep pockets and can file an unlimited number of lawsuits, while the homeowner will be forced to defend against foreclosure again and again until the bank can successfully foreclose.

This ruling affects all Floridians.  There is no other state in America where a bank receives a second, third, fourth, fifth or sixth time (or more) to successfully foreclose.  In theory, a homeowner could spend decades in litigation before the bank finally wears them down or bankrupts them while defending their home.

Statute of limitations are important in debt collection because people should not be pursued for decades of their lives- especially by a bank that can’t prove standing without forging and fabricating documents to “perfect” its illusion of being a holder.

This is likely a final decision and a terrible decision at that.  The Florida Supreme Court is no longer bothering to hide its bias for the banks.

A statute of limitations sets a time limit for initiating a legal claim. In the context of home foreclosure, the statute of limitations for written contracts (that is, mortgages) is usually the applicable statute or there may be a specific statute that addresses foreclosures, as is the case in New Jersey. If the foreclosure is initiated after the statute of limitations has expired, the lender’s claim is invalid and the lender is not entitled to foreclose.

Raising the Statute of Limitations as a Defense to Foreclosure

If the relevant time period for a foreclosure statute of limitations has run out, then this is an affirmative defense to foreclosure. The statute of limitations defense must be asserted by the homeowners to defeat the lender’s claim. If the homeowners do not assert the statute of limitations defense, then this defense is deemed waived. Therefore, it is extremely important for borrowers to be aware of the statute of limitations for foreclosures in their state because it could mean a quick end to a foreclosure if the time limit has expired.

On the other hand, if the statute of limitations runs out after the foreclosure process has already started, then the statute of limitations will not be a defense to the foreclosure. This means that even if a foreclosure takes years to complete and the time period under the statute of limitations covering foreclosures runs out while the foreclosure is in process, this will not prevent the foreclosure from going through. For instance, if the lender files a foreclosure lawsuit in January, 2017, but the statute of limitations runs out in June, 2017 while the foreclosure is pending, a statute of limitations defense is not available. In order to comply with a statute of limitations, the lender must simply begin the foreclosure before the time period expires.

However, in most states,  if the foreclosure is cancelled or dismissed (perhaps due to a procedural error by the lender), then the statute of limitations will still apply to any subsequent foreclosure. The lender could restart the foreclosure, but the restart would have to occur within the time period provided for in the statute of limitations. In the example above, if the foreclosure was dismissed in April, 2017, the lender would need to restart the action prior to June, 2017 to fall within the statute of limitations. It is important to note that if the borrower makes a payment in the interim, this will reset a statute of limitations in most cases.

How to Determine the Statute of Limitations in Your State

Each state has its own set of statutes of limitations. Generally, for a written contract, including mortgages, the statute of limitations will vary from three years to 15 years, though this differs from state to state with most falling within the three-to-six-year range. Most states have a statute of limitations of six years covering foreclosures.

The statute of limitations clock for a mortgage foreclosure usually starts when the default occurs–that is, when the borrowers stop making mortgage payments. It is usually calculated from the date of the last payment or from the due date of the first missed mortgage payment. Again, this depends on your state’s particular statute.  If you have the misfortune of living in Florida, every time you miss a payment, the statute of limitations begins all over again.

New York Judge finds foreclosure time-barred and cancels Mortgage: Costa v. Deutsche Bank

Read Costa v. Deutsche Bank here: Costa v. Deutsche Bank 2017 03 29

Unlike Florida where there is no statute of limitations and every missed mortgage payment resets the clock, New York enforces the statute of limitations for debt collection including mortgages.

A federal judge has granted two New Rochelle, New York homeowners’ request to have their mortgage canceled, ending their nearly 10-year battle to keep their house after defaulting on a $544,000 mortgage loan they took out in 2006.

The decision on Thursday by U.S. District Judge Katherine Polk Failla in Manhattan was a defeat for Deutsche Bank National Trust Co, trustee for a trust that owned the mortgage loan, which had argued that the couple was getting a free house on a technicality. Under New York state law, Vito and Marion Costa have a right to the property mortgage-free because a six-year statute of limitations on foreclosing on it had passed, Failla said.

More information to follow in the next week when we obtain the case specifics.

This is excellent news for New York homeowners and will hopefully be applied in other states.

 

 

Lawsuit Seeking Disgorgement Might Not Be Barred by Statute of limitations

What is apparent here is that the Courts are coming to terms with the possibility that those relying upon a statute of limitation as a defense to various claims might NOT be protected by an otherwise applicable statute of limitations.

The premise enunciated in a decision that seeks affirmation from the U.S. Supreme Court, is that disgorgement is not monetary damages or a penalty. It is an equitable finding that a party has been unjustly enriched and therefore has no present right to hold onto ill-gotten gains. The decision could result in elimination of the statute of limitations as a defense for the banks.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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This is a potential thrust to the heart of the bank strategy to create a vacuum, fill it with illusory claims on behalf of complete strangers to the transactions, and walk away with a free house after submitting an utterly fraudulent “credit bid.”.
The SEC is asking the Supreme Court to affirm the Tenth Circuit’s decision in SEC v. Kokesh, which held that “disgorgement is not a penalty under [28 U.S.C.] § 2462 because it is remedial” and, therefore, is not subject to the five-year federal statute of limitations in § 2462. see https://www.findknowdo.com/news/01/04/2017/sec-urges-supreme-court-affirm-disgorgement-not-subject-statute-limitations?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original
A favorable SCOTUS decision would have the effect of recasting the suits for damages as instead suits for disgorgement because neither the servicers nor anyone they represent had any right to collect or enforce the putative loan by an undisclosed and probably unknown creditor. This would have the same ultimate effect as TILA rescission which the courts have steadfastly resisted despite the clear language of 15 USC §1635 and SCOTUS in Jesinoski v Countrywide.

Bartram: The Missing Links

Why did the Plaintiff lose in its “standard foreclosure”?

The decision on acceleration is essentially this: If the banks do it, it doesn’t count.

While Bartram didn’t turn out the way we want, there are two paths that nobody is talking about — logistics and res judicata.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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The Florida Supreme Court decision in Bartram reinforces the absurd — that after losing in trial court, the pretender lender can sue over and over again for “new defaults.” The court has re-written the alleged “loan contract” to mean that a loss in court means that their acceleration of the entire loan becomes de-accelerated, meaning that acceleration is merely an option hanging in the wind that doesn’t really mean anything. The decision might have consequences when the same logic is applied to other actions taken pursuant to contract. The decision on acceleration is essentially this: If the banks do it, it doesn’t count.
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But two things remain outstanding, one of which the court mentioned in its opinion. Why did the Plaintiff lose in its “standard foreclosure”? The issues that were litigated as to the money and/or documentary trail have been litigated and are subject to res judicata. The Plaintiff, if it is the same Plaintiff, is barred from relitigating them.
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If Plaintiff failed to prove ownership of the loan and was using fabricated void assignments and endorsements, the lifting of the statute of limitations should not help them in attempting to bring future litigation. Many other such issues were undoubtedly raised in the original case. The Plaintiff would be forced to argue that while the issues were raised, they were not actually litigated and a judgment was not entered based upon those issues.
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The Florida Supremes took away the Statute of Limitations, up to a point (see below) but gave us the right remedy — res judicata. Even if a new Plaintiff appears, the questions remain as to how the alleged loan papers got to them remain open, as well as whether the paper represented any actual loan contract absent an actual lender.
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And then there are the logistics that I don’t think were considered in its decision. According to the Bartram decision the act of acceleration vanishes if the Plaintiff loses. The statute of limitations does apply for past due payments that are more than 5 years old. That means, starting with the date of the lawsuit (not the demand), you count back 5 years and all payments due before that are barred by the SOL.
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So if a Plaintiff loses the foreclosure, it can bring the action again based upon missed payments that were due within the SOL period. Of course if the Defendant won because the Plaintiff had no right or authority to collect on the DEBT, the action should be barred by res judicata. But putting that issue aside, there are other problems.
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“Servicing” of a designated “loan account” is actually done by multiple IT platforms. The one used for foreclosure comes out of LPS/Black Knight in Jacksonville, Florida. This is the entity that  fabricates documents and business records for foreclosure. It is not the the actual system used for servicing that deals in reality with the alleged borrower and accepts payments and posts them. It is incomplete. This system intentionally does not have all the documents and all the “business records” relating to the loan. For example there is no document or report that shows who was and probably still is receiving payments as though the loan were performing perfectly.
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The decision on when and if to foreclose is always performed by LPS/Black Knight in order to prevent multiple servicers, trustees, banks and “lenders” from suing on the same loan, which has happened in the past. LPS assigns the loan to a specific party who is then named by Plaintiff. And LPS creates all the fabricated paperwork to make it look like that party is the right Plaintiff and that the business records produced by LPS can be presented as the business records of the party whose name was rented for the purpose of foreclosure. It is LPS documents that are produced in court, not the records of the named Plaintiff.
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So here is a sample simple scenario that will illustrate the logistical problem created by the Florida Supremes: LPS issues a notice of default letter naming the claimant as XYZ, as trustee for XYZ series 2006-19B Pass Through Trust Certificates. Previously XYZ lost the foreclosure action by failing to prove that it had any relationship with the loan. The Notice of Default and right to reinstate issued by LPS on behalf of XYZ must be for payment that was within the SOL. This action of course waives the payments, fees etc that are barred by the SOL. It also assumes that the date of the letter AND THE LAWSUIT will be within the SOL period. So for example, if the last payment was on December 1, 2006 and the letter refers to a missed payment starting with January 1, 2012, the letter is proper. But if suit is not commenced until January 2, 2017, the letter is defective and the lawsuit is barred by the SOL. Further the doctrine of res judicata bars any cause of action that was litigated previously.
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All of this leads to a court determination of what issues were previously raised, when they were raised and whether the Final Judgment in favor of the homeowner means anything.

Renewing the Statute of Limitations Accidentally: Modifications and Payments

It seems apparent to me that the banks are sidestepping the statute of limitations issue by getting homeowners to renew payments after the statute has run. Given the confusion in Florida courts it is difficult to determine with certainty how the statute will be applied. But the execution of a modification agreement would, in my opinion, almost certainly waive the statute of limitations, particularly since it refers to the part of the alleged debt that was previously barred by the statute. It would also, in my opinion, reaffirm a discharged debt in bankruptcy.

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

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There are several reasons why servicers are offering modifications and several other reasons why they don’t.

My perception is that the main reason for offering the modification is that the servicer is converting the ownership of the debt from the investors to the servicer and by reference to an empty trust with no assets. HAMP modifications are virtually nonexistent statistically. “In house” modifications are what they are offering; that is code for “it’s our loan now.” That scenario leaves the servicer with rights to the debt that didn’t legally exist before — but subject to separate, private agreements with the Master Servicer who is willing to pay the servicer for their apparent “services” but not willing to share in the windfall profits made by a party who now owns a loan in which they had no financial interest before the execution of the modification.

This is a good alternative to stealing from the investors by way of false claims for “Servicer advances” where the money, like all other deals in the false securitization chain, comes from “investments” that the investors thought they were making into individual trusts. And by the way this part explains why they don’t offer modifications — the Master Servicer can only apply is false claim for “recovery” of servicer advances when the property is liquidated.

A second reason for applying pressure to a homeowner to sign more papers they don’t understand is to get the homeowner to (1) agree or reaffirm the debt, thus restarting the statute of limitations from where it had originally left off and (2) to get the homeowner to make at least some payments, thus reaffirming the debt for purposes of both bankruptcy and the statute of limitations. This explains why they take three “trial” payments and then deny the “permanent” modification after they already announced the homeowner was “approved.”

In this sense there is no underwriting done. There is only an evaluation of how the Master Servicer can make the most money. This also is an example of why I say that the interests of servicers are adverse to the investors who have already been screwed. Forced sale doesn’t just artificially limit the recovery, it virtually eliminates recovery for the investor while the servicers take the money and run.

And a third reason for coercing the homeowner into a modification agreement that is guaranteed to fail is that the homeowner has either waived defenses and claims or has created the conditions where waiver could be asserted.

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