“Mortgage War on the Home Front”

I found this to be very interesting, considering the play of action with the legal system and its Lawyers. It was quite a performance of Law in my humble opinion. The TILA stuff intrigues me greatly, I always get overexcited about TILA, but as informed people my Lawyer has always told me that there are many other great manners to rescind a loan, at first I did put up a fuss as I am such a TILA goon, but in the end the common scene factor mixed with the logic concluded or caused to be concluded the actual truth and this was that there are many ways to deal with this Home Owners to be continued

effectively

by Lane Houk

TILA Rescission Case – Bankruptcy Judge Finds in Favor of Borrower

May 5, 2009 · No Comments

The Little Guy (David) vs. the Big Guy (Goliath). These classic battles are being waged in the “Mortgage War on the Home Front” every single day. The subject of this post is a case that goes to the win column for the Little Guy. We are fighting for our freedom, our country, democracy… we are fighting against corporate and political corruption. I hope you are fighting too. This is a war for our rights and our homes and our American way of life. It’s all under siege folks. Don’t be fooled into complacency.

This is one of the most powerful cases I have read in a long time. CLICK HERE to read the actual case order from the Judge in the Adversary Proceeding. The borrower in this case rescinded the loan transaction because an audit of their closing documents revealed a “material disclosure” violation as is defined in 15 U.S.C. §§ 1601 et seq. (“TILA”) and its implementing regulations at 12 C.F.R. § 226 et seq. (“Reg. Z”).

Once the Consumer rescinds, the security interest arising by operation of law becomes void automatically. The promissory note is also voided since it is part of the same “transaction.”

The borrower in this case had foreclosure filed against them. After retaining an attorney for the foreclosure, the attorney advised them to have an audit of their loan closing file which revealed a material disclosure violation. It is important to note that a loan can ONLY be rescinded when:

1. The loan is a refinance transaction;
2. Funded in the last three years
3. On the borrower’s primary residence;
4. When a “material disclosure violation” is found

The term “material disclosure violation” is a very important component. Many people (including self-proclaimed experts in loan auditing) think that “any” violation of the Truth in Lending Act gives someone the right to rescind. That is patently wrong. The four conditions above must be true in order for the borrower to have the possible “extended right to rescind” the loan transaction. There are only 4 potential “material disclosure violations.”

The borrower in this case was given an insufficient amount of the Notice of Right to Cancel. A borrower should receive two (2) copies of the Notice.

If a married couple is identifiable on a Universal Residential Application, then each consumer is entitled to rescind and must be given a copy of the TILA Disclosure Statement with all material information accurately and correctly disclosed, 15 U.S.C. § 1602(u); Reg. Z § 226.23(a)(3) n.48, and two (2) copies each of the rescission notice, 15 U.S.C. § 1635(a); Reg. Z § 226.23(b), irrespective of whether both are obligated on the note (or either, for that matter).

In this case, the borrowers were married and received only 2 copies total. Material disclosure violation. Thus they rescinded. The lender Option One obviously contested the matter.

Once the Consumer rescinds, the security interest arising by operation of law becomes void automatically. The promissory note is also voided since it is part of the same “transaction,” see i.e., 15 U.S.C. § 1635(b) and Reg. Z § 226.23(d)(1).]

This is powerful folks. This is a complete remedy to foreclosure. The mortgage is the security interest and it is the mortgage (and the mortgage only) that gives the lender the right to foreclose. In a rescission, the lender must void the mortgage within 20 days. If it does not, it is another violation of TILA.

After rescinding the loan the borrowers also filed a Chapter 13 bankruptcy. The lender refused to rescind the loan. The borrowers filed an Adversary Proceeding in the Bankruptcy Court. Bottom line: The judge heard all arguments from both Plaintiff (borrower) and the Defendant (Option One). The judge found in favor of the borrower/plaintiff and determined that they had the right to rescind. Victory number one.

But a BIG ruling in this case was that since they had rescinded the loan, the loan became an “unsecured” debt since the mortgage was automatically voided as per TILA. Since the debt became “unsecured” it was able to be discharged through bankruptcy like any other type of unsecured debt such as a credit card debt.

The moral of the story: TILA Rescission is the most powerful remedy to foreclosure if/when the borrower has this remedy afforded to them. The key is to obtain a loan audit by a real expert. Call/email me if this is something you want to do. I encourage you to read the Adversary Proceeding Case. It is highly enlightening.
Court Cases, Truth in Lending
Loan Rescission and TILA Violations
Posted by admin On January – 10 – 2009

I recently started a blog post about TILA Violations and what these violations can mean for the financial institutions. This is a BIG can of worms for them because a large percentage of home loans were funded in violation of the federal TILA statute and its implementing regulations found in Regulation Z.

In short, if a TILA violation is found within 3 years of closing on a refinance transaction of the borrower’s primary residence, the debtor/borrower can “rescind the loan.” By serving notice to the lender of the debtor’s action to rescind the loan, the lender has “20 days to return all finance charges, downpayment monies, etc.” to the borrower and must also “remove all security interests on the property” in 20 days.

If the lender fails to do so, it is in violation of TILA requirements, mainly 15 USC §1635 and, according to paragraph “b” of this section, there are some huge implications for both debtor and creditor if the creditor does not comply with these requirements.

Here’s a sample case that you can read as evidence of how powerful this remedy can be: Belini v. WAMU
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