If Lenders Don't Respond To Rescission?

[Social Apocalypse]

My question: We rescinded both of our mortgages in May due to extensive TILA/RESPA and other violations after getting professional legal advice. These were violations regarding disclosures and those items that extend the rescission period to three years. (I learned that from THIS forum!)

We receive only one (non-certified) letter from one of our lenders which said, "Thank you for your inquiry. We are looking into it."

That's it. No 20-day results, nothing. So here we are, three months later.

What now? What is the penalty to a mortgage servicer for not responding to a rescission?

Thanks very much; ~t.

[tanja53]

My lawyer resinded my loan with T,B&W back in dec. 2008.

That after fighting them and before that Indymacback over my loan.

A lot of wrong doings and ignorens and lies form their part.

They answered by foreclosing my home. Totally ignoring the law, my lawyer and me.

I am still in my home fighting them.

Now T,B&W. have proven what I have known for years to be crocks.

And now I dont know what can happen to you.

I do no that they have to answer to you and there is a law paragraf that makes it illegal for them to act wrongly on it.

I would try to find out now what since they have shut down.

Good luck.

[Social Apocalypse]

I now have the answer to my own question!
Apparently, lenders fail to respond MOST of the time. They are gambling that you won't know what to do, or in my case, will be coerced into thinking that everything is legit with the loan.

NOT THE CASE!

After submitting a rescission, the lender must respond in 20 days by reversing the lein on your note, and not only that, taking adequate steps to assure that you KNOW this.

IF they do not, they simply are in violation of yet another TILA law.

YOU stop paying your mortgage payment immediately upon filing a rescission (believe me, this will definitely get their attention). If your lender is pretending that you didn't rescind the loan (as mine is) then you will almost assuredly go into foreclosure and be harrassed for late payments and get reported to the credit bureaus. ALL of these are violations. Add them to the list, because each one of them is worth cash to you when your attorney takes your lender to court. The amount of violations will stack up and be added to what is deducted from the amount of tender you must produce upon rescission of the loan.

That is what happens.

[Nathan Fransen Esq.]

SOME GENERAL INFO ON TILA - RESCISSION:
Rescission claims are written in a way that appears to be self-executing (15 U.S.C. 1635). As is the case with many statutes, case law fills in some blanks and effectively modifies many provisions. For example, TILA ends the rescission section with a statement that "courts may modify..." This allows equity to play a role in the enforcement of such statutes.

A borrower's claim for rescission is, in many jurisdictions, a conditional effort. The borrower must demonstrate the ability to tender, that is payoff the amount owed the bank after offsetting for fees and interest paid. In California for example, the Yamamoto case has been followed by Courts and it has made it difficult to Plaintiffs to bring such actions for rescission in the present housing market. Yamamoto v. Bank of New York, 329 F.3d 1167 (9th Cir. Hawaii).

This is a general response to the discussion on this section and not meant to encourage or discourage any actions. As always, i suggest consutling with an attorney practicing in this area prior to any actions taken with regard to rescission claims.

Sincerely,

[jinksy]

Originally Posted by TB98629

I now have the answer to my own question!
Apparently, lenders fail to respond MOST of the time. They are gambling that you won't know what to do, or in my case, will be coerced into thinking that everything is legit with the loan.

NOT THE CASE!

After submitting a rescission, the lender must respond in 20 days by reversing the lein on your note, and not only that, taking adequate steps to assure that you KNOW this.

IF they do not, they simply are in violation of yet another TILA law.

YOU stop paying your mortgage payment immediately upon filing a rescission (believe me, this will definitely get their attention). If your lender is pretending that you didn't rescind the loan (as mine is) then you will almost assuredly go into foreclosure and be harrassed for late payments and get reported to the credit bureaus. ALL of these are violations. Add them to the list, because each one of them is worth cash to you when your attorney takes your lender to court. The amount of violations will stack up and be added to what is deducted from the amount of tender you must produce upon rescission of the loan.

That is what happens.

How do you submit a rescission?

[jinksy]

I have another question. I've been reading the book "Mortgage Wars" and it says to investigate whether my loan was "securitized". It directed me to study TBW securities and exchange commission 10K filing and 8K filing for the year of my loan. The only problem is I don't understand what I am looking at. Does anyone know anything about this?

[Social Apocalypse]

Thank you Mr. M, great advice, as always, and yes I have read that case regarding the court using it's ability for "equitable outcome" of the rescission. I agree with it too.

INTERESTING development: Met with another attorney, in my quest to get busy with this... (remember the one I had, who was LISTED ON NACA website was fired by her firm for incompetence.)

In a preliminary consultation last week, I presented the new attorney, (who professes to be experienced in TILA/Bankruptcy, etc.) with a printed timeline of my case and some pertinent facts, and what I was trying to do. She told me everything looked great and that our plan would be to file bankruptcy and include both mortgages in the "unsecured debt" we were discharging. I was cautiously elated.

Again, I was incredulous at this news, and yet, I have been through SO much, (as we all have) and at this point it's getting harder and harder to surprise me.

I received an email from her yesterday, delivering the sad news that I would be unable to rescind my loans because even though I had done it correctly, and filed on time (days before my deadline) with certified mail and postal mail delivery, my window to force my lenders to comply had closed ON THE DEADLINE OF FILING THE RESCISSION!!!

I kept scratching my head... this could NOT be right.

For those who are curious, I have included the emailed conversation (minus names, because certainly my intent is not to cast any ill-intention on anyone, but to help us all become better educated, including myself.) and if you can get through it's length, you will hopefully be able to advise me on the plausibility of my reply to her.

Thanks again SO much for your cherished help... I will NOT give up. I will not. I am one of those annoying people who always asks, "But why?" Maybe I should have been an attorney!

Here is the email (I reversed the chronology of the conversation, for your reading convenience, I had to read it on a pda, and it was tricky!)


Attorney:

I've done a quick scan of TILA and I believe I have answers to two questions. The first question is whether you waived your right to rescission by continuing payments. The answer is no. Under TILA, the borrower is normally required to "tender" the amount of the loan after deducting all the fees, costs, etc. that were included. Thus, you would still have an unsecured debt for the tender amount upon which the creditor could sue if you don't pay it. So continuing to make payments is a good idea in that situation.

The second question concerns the 3 year statute of limitations. It appears that, although you did send your notice of rescission within the 3 year period, any action to enforce that action would necessarily have to be filed outside of the three year limit. In the 9th circuit (where we are) the 3 year deadline includes filing an action to enforce the rescission.

Here's some language from a recent 9th circuit case:

" However, if the borrower files his or her suit over three years from the date of a loan's consummation, a court is powerless to grant rescission. Id. at 1164 (“[S]ection 1635(f) represents an ‘absolute limitation on rescission actions' which bars any claims filed more than three years after the consummation of the transaction. (quoting King v. California, 784 F.2d 910, 913 (9th Cir.1986)); accord Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998) (“[Section] 1635(f) completely extinguishes the right of rescission at the end of the 3-year period.”); see also Cazares v. Household Fin. Corp., 2005 U.S. Dist. LEXIS 39222, at *24-25 (C.D.Cal.2005) (concluding that “[i]f certain Plaintiffs did exercise their rights to rescind[ ] prior to the expiration of the three-year limitation period,” such facts “would only entitle Plaintiffs to damages, not rescission” (citing 15 U.S.C. § 1640(a); Belini v. Wash. Mut. Bank, FA, 412 F.3d 17 (1st Cir.2005)))."

I have attached the entire case as a Word file for your review.

Reading your event summary, it appears that you did not engage counsel until the 3 year time limit had passed, so I doubt there would have been anything she could have done to enforce your rescission right. The possibility of statutory damages, however, may still be alive (up to one year after the 3 year rescission right expires). I did not research that thoroughly, however.

I wish I had better news since I know you have been through a very difficult time with this. At this point, your options may be down to getting a loan modification, or filing a bankruptcy to relieve you of your other debts so you can keep your house.

Please let us know if we can help you with either of these.

My reply :

My deadline to cancel (literally postmarked on or before) was June 3rd. The lender then has 20 days to remove the lein and refund the money we have paid to them. How could i possibly bring suit before june 23rd???

Attorney Reply:

I agree that it's unfair. But that's what the courts have ruled so we're stuck with it. My guess is the court reasoned that since there is a 3 year window, that's sufficient time to investigate whether there is a violation, rescind, wait for a response, and sue if need be within that window. The US Supreme Court case is Beach v. Ocwen. I haven't read it, because the 9th circuit decisions have followed it.

My Reply:
Just doing a preliminary look through Beach v. Ocwen. that you sent yesterday. Your conclusion on our inability to do a simple, quick and easy rescission because of the cases that you sent me and that "we are stuck with it" was completely deflating and disappointing, as you predicted, and yet I was in disbelief that this could be true. Above all else, I think the law is there to protect us, and I think it does in this case. It goes against my common sense to expect that I was misreading that simple document (the notice of right to rescind). It's written in 4th grade English!

I am still very certain that we are within our rights to rescind, and now to file a motion for discovery or even simpler, list the mortgages under unsecured debt as we originally discussed. If you wish to learn my process, I expand on my reason:

From the example you gave, "Beach vs. Ocwen":

Under §1635(f) of the statute, this right of rescission “shall expire” in the usual case three years after the loan closes or upon the sale of the secured property, whichever date is earlier. The question here is whether a borrower may assert this right to rescind as an affirmative defense in a collection action brought by the lender more than three years after the consummation of the transaction. We answer no and hold that §1635(f) completely extinguishes the right of rescission at the end of the 3-year period.


My comment would be: My case is NOT like this one at all. I am not "asserting my right to rescind as an affirmative defense in a collection action brought by the lender more than three years after the consummation of the transaction"... My rescission is completely pro-active, with a current account with the lender. So I read on....


The Act provides, however, that the borrower’s right of rescission “shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first,” even if the required disclosures have never been made. §1635(f).1 The Act gives a borrower no express permission to assert the right of rescission as an affirmative defense after the expiration of the 3-year period.


Again, apples and oranges here. My rescission is not being asserted as an affirmative defense in a law suit after the expiration of the three year period. Not at all. Once I rescinded, I am not in a "defensive" posture. My lender is. They did not respond within 20 days (which is an additional violation) and therefore they remain in a defensive posture. TILA clearly states that I have ONE YEAR to bring suit against my lender if they do not respond to the rescission. I read on...


The borrowers in this case, petitioners David and Linda Beach, built a house in Jupiter, Florida, in 1986 with a secured $85,000 construction loan from Fidelity Federal Savings Bank of Florida. In the same year, the Beaches refinanced the house with a loan from Great Western Bank.2 In 1991, the Beaches stopped making mortgage payments, and in 1992 the bank began this foreclosure proceeding. The Beaches acknowledged their default but raised affirmative defenses, alleging that the bank’s failure to make disclosures required by the Act3 gave them rights under §1635 and §1640 to rescind the mortgage agreement and to reduce the bank’s claim by the amount of their actual and statutory damages.


The Beaches stopped making their payments. They were in default. They did NOT rescind their loan within the three year statute, even though the judge affirmed that they could have, had they done their homework. They tried to "retroactively" rescind as a manner of defense in 1991, which was clearly outside of the statute of limitations, and so the rescission was disallowed. I agree with this, but it is nothing like my case. I read on...

In the word doc case you sent for example as to why my case is beyond rescission: "Belini v. Wash. Mut. Bank, FA, 412 F.3d 17 (1st Cir.2005)))."

2 Plaintiff filed his Complaint on September 24, 2008, alleging fraud, fraudulent concealment, breach of contract, unconscionability, breach of the implied covenant of good faith and fair dealing, and violations of TILA

Again, not like my case at all, because the Plaintiff acquired his loan on Sept 15th, 2005. The above action was not only too late to enact a rescission, but it was not a "rescission". He was using rescission as a defense, but did not actually RESCIND the loan. I read on in the same document:

To exercise the right to rescind, a borrower must “notify the creditor of the rescission by mail, telegram or other means of written communication.” 12 C.F.R. § 226.23(a)(2). Notice is deemed effective “when mailed, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor's designated place of business.” Id. If a creditor then refuses to cancel the loan, the borrower has one year from the refusal to file suit for damages pursuant to 15 U.S.C. § 1640. Miguel v. Country Funding Corp., 309 F.3d 1161, 1165 (9th Cir.2002) (citing 15 U.S.C. § 1640(e)). However, if the borrower files his or her suit over three years from the date of a loan's consummation, a court is powerless to grant rescission.


I think we are talking about an interpretation here. See underlined section: "However, if the borrower files his or her suit over three years from the date of a loan's consummation, a court is powerless to grant rescission. "
I believe they are referring not to a rescission, because this whole case was not a rescission but a LAWSUIT. I think they are referring to bringing suit for damages in general, and not being able to use rescission as a remedy if the suit was brought OVER three years from consummation of the loan. And this makes sense to me.

Let me know your thoughts on this, but I feel very strongly that it is impossible to expect a consumer to be given a Notice of Right To Rescission that says, "You must present this document before June 3rd, 2006" and have the consumer have to take under consideration that the lender will probably NOT comply and will have to be brought to discovery, and that the consumer must somehow "buffer in" that amount of time ahead of the cited deadline. That just does NOT make sense at all to me.
I think we are just fine, quite frankly, what do you think?


So, what do you think? Am I out in the cold? Do I need a new attorney? Thanks again everyone.

[Social Apocalypse]

Additional comment... I just looked up the statute in Regulation Z which addresses the timeline of rescission in the event that it is challenged.

the rescission period shall be extended in accordance with section 125(f) of the Act:

Section 125(f)

(f) An obligor's right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this chapter have not been delivered to the obligor,

***except that if ***

(1) any agency empowered to enforce the provisions of this title institutes a proceeding to enforce the provisions of this section within three years after the date of consummation of the transaction,(note: I take "provisions of this section within three years after the date of consummation of the transaction" to mean the details under which a loan may be rescinded, because that is what it contains. I hope it DOESN'T mean that the enforcement action itself doesn't have to be instituted within three years of consummation of the transaction, or I am in deeeeeep trouble.)
(2) such agency finds a violation of section 125, and
(3) the obligor's right to rescind is based in whole or in part on any matter involved in such proceeding, then the obligor's right of rescission shall expire three years after the date of consummation of the transaction or upon the earlier sale of the property, or upon the expiration of one year following the conclusion of the proceeding, or any judicial review or period for judicial review thereof, whichever is later.

[ManicMangaManiac]

Fortunately, due to TILA violations, my mortgage is rescindable with a three year period which ends this coming December. I understand that the lender/servicer has to respond within 20 days of receiving the rescission letter. Is that 20 business days, or 20 calendar days?

Another question: the foreclosure action was brought against me by Wells Fargo, the trustee on my mortgage. I'm confused as to whether I need to send the rescission letter to them, or to the servicer of the loan, which happens to be American Home Mortgage Servicing, Inc. (AHMSI). I'm thinking it's AHMSI but not 100% sure. I certainly don't want to tip off WF's attorney about what I'm doing....would rather catch them totally off guard

Sally

[Social Apocalypse]

I would rescind as soon as possible, tipping off the attorneys will not be a problem, because if your rescission is VALID, there will be NOTHING they can do. The violations either exist or they don't. No amount of "preparation" will change anything. Contracts are contracts.

A TILA/REG Z violation that causes a right to rescind to three years is actually VERY specific and limited. You must have ONLY a violation to your material disclosures (these are all listed on ONE page, your "Truth In Lending Disclosure Statement" that you signed at closing) and in the actual notices of right to rescind you recieved (or DIDN'T recieve) and their content. THAT'S IT, (unless you have a HOEPA LOAN, then there are a few other things).

If your numbers on your TILA Disc. don't compute within the margins outlined in regulation Z, then you have a valid rescission.

Here is the nightmare that is currently happening to me:
my rescission is valid. I rescinded properly for valid violations.
Yesterday, I consulted with a very good attorney in my state (I had to travel 200 miles to speak to her and it cost me a lot of money for just one hour)
She confirmed that tho my rescission IS valid, I won't be able to be successful if I cannot TENDER THE LOAN because IN THE 9th CIRCUIT COURT (where we are) there is a case referred to as the "Yamamoto case" (occurred in 2003) where the court upheld their rescission CONDITIONALLY on the borrower's ability to tender the loan. This is in direct opposition to what the TILA law states, and there has been MUCH controversy about it, but as yet, nobody has been successful in overturning this precedent in practice.

So the judge (I am told) will say, "Yes, you got hosed on this loan, they are laughing all the way to the bank on the glaring violations on your TILA Disclosure, but it doesn't matter, because now that the loan has BROKEN you finanancially, you can't qualify for a loan to tender the rescission because you are about to file bankruptcy to keep your house, and that will give you destroyed credit for the first time in your life, and nobody will give you a loan."

Make sense? Well, I cried for hours. I have worked so hard.

The law should make the crooked lender MAKE me a new loan.

I advise you to get GOOD legal advise early on, and insist on an attorney who practices in predatory lending litigation and KNOWS the judges they will be appearing before and what they will likely have happen.

I was also told in no uncertain terms that my mistakes might be there, but the judge would probably deny the rescission because I waited so long to do it, I mean, WHAT TOOK ME SO LONG? Why didn't I do it before?

I didn't know the decision to uphold the black-and-white evidence of a TILA/Reg Z violation was influenced by the judges opinion of whether or not I "deserved" to rescind based on my "reasons for doing it". I thought that my reasons for doing it were because it existed. Period.

Anyway, yesterday was a very bad day for me. Very bad. GOOD LUCK TO YOU.