The Truth in Lending Act (TILA) gives home loan borrowers a three-day right to rescind, or cancel, a loan transaction. For these first three days, this right is unconditional, without any caveats. After the three days run out, there is a catch; the borrower has the right to rescind only if the lender has failed to satisfy TILA’s disclosure requirements. Even if the required disclosures are never made, the right of rescission will expire after three years; thus, straying from the pack.
In a unanimous, consumer-friendly decision on January 13, 2015, the United States Supreme Court clarified what it takes to exercise this right and made it easier for borrowers to assert it, straying from the pack in doing so. You can find a copy of the opinion here.
What the Supreme Court Did
In 2007, the Jesinoskis borrowed money from Countrywide Home Loans in a refinancing. Exactly three years later, they mailed Countrywide a letter seeking to rescind the loan. Their rescission was disregarded by Countrywide’s successor, Bank of America.
Four years after the refinancing, they filed a federal lawsuit asserting their right to rescission. Both the federal trial court and the federal appellate court sided with the bank and dismissed the lawsuit because the Jesinoskis did not sue within three years of the loan transaction, even though the TILA law unequivocally states a borrower “shall have the right to rescind . . . by notifying the creditor . . . of his intention to do so.” The Supreme Court brought the lawsuit back to life. Looking at the same TILA law, the Supreme Court found it to mean exactly what it states: all a borrower needs to do to exercise the right to rescind in the three year period is to provide written notice of rescission, which is exactly what the Jesinoskis did. The TILA law does not require the borrower to file a lawsuit within the three-year period, the Court ruled.
Why does this matter?
First, the Court’s ruling does not merely apply to the Jesinoskis. The Supreme Court has ruled that any borrower—including YOU—need only provide written notice to the lender in order to exercise the right to rescind.
Second, the Supreme Court UNANIMOUSLY ruled in favor of the borrowers despite the fact that the two courts below ruled against them. The Supreme Court strayed from the pack and made a consumer-friendly decision.
Third, the decision saves borrowers a ton of money, paper and time, as it replaces the lawsuit requirement with the written notice requirement, which is a lot less expensive and time-consuming.
Fourth, even if you file a lawsuit seeking to rescind under the TILA law years after the loan transaction, the court will not be able to dismiss your case for untimely exercise of the right to rescind provided you gave written notice within the three years after the transaction.
Fifth, if you gave written notice, and the lender has refused to honor it, do not be shy about suing the lender in federal court to obtain the rescission and whatever other damages you may have incurred at the hands of the lender. The TILA law allows recovery of court costs and a reasonable attorney’s fee award in an action in which a person is determined to have a right of rescission.
Right of Rescission
This is where we come in. At Oppenheim Law, we are available to evaluate your options, whether you are just considering rescinding a loan transaction or are looking to taking the bank to court. Contact us today.
About the author:
Roy Oppenheim, foreclosure and real estate defense attorney. Legal blogger and founder of the South Florida Law Blog.
Roy Oppenheim, Sr. partner at Oppenheim Law, founder of The South Florida Law Blog sets the record straight in real estate, foreclosure and homeowner related matters. For over 25 years, the Firm has successfully defended and protected clients in South Florida representing them as their advocates. They have closed over $1.5 billion in real estate transactions ranging from representing investors in buying and selling commercial property, homeowners buying and selling, refinancing or modifying their loans. The firm also has developed a national reputation defending homeowners in foreclosure and deficiency judgments. The firm also engages in the highest quality of sophisticated commercial litigation and serving as general counsel to real estate developers and closely held companies, coordinating all legal related matters. Watch and see Roy Oppenheim discuss how he built South Florida’s premier law firm. Subscribe to the award winning South Florida Law Blog to stay connected to the latest in real estate law by Roy Oppenheim. (954) 384-6114 Oppenheim Law. – See more at: http://southfloridalawblog.com/end-of-the-year-homeowner-defense-legal-news-oppenheim-law/#more-10472
The following article was published in the Daily Business Review and written by Samantha Joseph. The South Florida Law Blog has republished exerpts by Roy Oppenheim.
Will botched paperwork affect the outcome of foreclosure appeals? It depends on the judges.
The decisions in three cases came down to paperwork and procedure Wednesday before the Fourth District Court of Appeal.
Roy Oppenheim: “There are many areas of inconsistency with foreclosure law right now,” he said. “The judges themselves are coming up with different rationale based on the same facts, which makes for wildly different outcomes.”
For BAC Home Loans Servicing LP, botched documentation at the height of the robo-signing scandal cost it a foreclosure judgment when the court ruled the lender failed to prove standing to sue homeowner Rosanie Joseph.
The appeals court reversed a foreclosure judgment issued by Palm Beach Circuit Judge Diana Lewis since there was no evidence to show Taylor Bean & Whitaker Mortgage Corp. owned the mortgage when filing to foreclose on Joseph in July 2009.
The 2008 mortgage issued by Key Mortgage Associates was attached to the lawsuit, but no note or assignments accompanied the filing by Ocala-based Taylor Bean, a leading wholesale mortgage lender. The company reported the note was lost or stolen.
Taylor Bean, one of the spectacular bankruptcies of the housing crash, later assigned the note to BAC, which picked up the foreclosure ball.
In trial, BAC produced the original note and mortgage. The note offered two endorsements by the same person, Erica Carter-Shaw as a Key Mortgage attorney and Taylor Bean “E.V.P.” Neither endorsement was dated.
“A party must establish its standing to bring a mortgage foreclosure complaint by establishing an assignment or equitable transfer of the note and mortgage prior to instituting the complaint,” Judge Martha Warner wrote for the unanimous panel. Judges Carole Taylor and Mark Klingensmith concurred.
No File Review
A different panel split in similar litigation: Gafoor Jaffer and Nina Jaffer v. Chase Home Finance.
The homeowners claimed Chase attached a mortgage note payable to a third party without any proof of transfer and used an amended foreclosure complaint that failed to state a cause of action. However, the Jaffers waived the question of Chase’s standing by failing to respond to the lawsuit before default was entered.
Chase conceded some of its employees signed affidavits about the loan documents without first reviewing the loan file.
But the Fourth DCA upheld summary judgment issued by Broward Circuit Judge Sandra Perlman.
In the 2-1 unsigned decision, Judges Spencer Levine and Klingensmith concurred. Judge Burton Conner dissented, citing Chase’s failure to file an accurate copy of the mortgage note.
Deutsche Bank National Trust Co. wasn’t as lucky when it moved to overturn Broward Circuit Judge Kathleen Ireland’s ruling in favor of homeowner Theresa Boglioli.
The lender came out on the losing end after Boglioli argued Deutsche Bank executed the mortgage transfer after filing its foreclosure complaint against her and included a blank, undated endorsement among its documentation.
Judges Cory Ciklin, Jonathan Gerber and Levine issued the unsigned opinion.
Attorneys say the decisions may further complicate already-lengthy and expensive foreclosure litigation.
“Normally you see discrepancies of this nature within different circuits. But what we’re seeing in the Fourth is discrepancies among themselves,” said foreclosure defense attorney Roy Oppenheim of Weston. “It just makes this more complex. When there is cloudiness, it just creates more ambiguity and delays the conclusion of the foreclosure mess. In the end it doesn’t help anybody when you have inconsistent rules.”
With varying opinions coming for appellate panels, Oppenheim expects a rise in requests for full court review.
“There are many areas of inconsistency with foreclosure law right now,” he said. “The judges themselves are coming up with different rationale based on the same facts, which makes for wildly different outcomes.”
A heartfelt Happy New Year to you from Oppenheim Law, “In the Trenches” featuring Roy Oppenheim. A prognostication on the Florida 5 Year Statute of Limitations and why we are waiting on the Florida Supreme Court to sort out the real estate mess.
Massachusetts’ Senator Elizabeth Warren gave a series of resounding speeches in opposition to a recent provision passed in the 2015 federal budget “Cromnibus” spending bill. The contested provision weakened the Dodd-Frank law, thereby allowing big banks like CitiGroup to gamble on risky investments with taxpayers’ money. Such a provision is not unique to the 2015 “Cromnibus” spending bill, in fact it’s identical to those “Too Big to Fail” provisions which lead to the 2008 financial crisis.
Too Big To Fail Still Lives
On December 12th, Warren delivered her signature scorning speech, accusing CitiGroup of becoming too powerful and influential to a point where they can “hold the entire country hostage.” Her speech can been seen here.
Warren’s accusations were well founded, as CitiGroup’s web of influence (depicted below) shows the “shocking” amount of high-level government officials with connections to CitiGroup:
Bunkered Down For Nearly A Decade
Since Warren’s recent blitzkrieg on big banks, the Internet has exploded with YouTube links to her speech appearing across social media, news sites, and the like. Warren is an adorned on Twitter as well, tweeting “Citigroup is holding government funding hostage to ram through its government bailout provision. Join me in opposing the #CitigroupShutdown,” and “Congress proved tonight [Dec. 13th] that if you’re a Wall Street bank, Washington works great for you. We lost this time but we keep fighting,” from her account (@SenWarren). Warren’s recent outcry, while paramount, was just too little too late, as the much lobbied pro-bank provision passed.
But for those of you who have followed the SouthFlordaLawBlog.com since its inception, Warren’s message is one that has been boisterously blogged about in countless entries outing Wallstreet, the banks, and the Government for their Too Big to Fail policies. From predatory lending to robo-signing, we have bunkered down in the trenches to shine light on the banks’ misdeeds and transgressions. Warren’s recent speech calling for the breaking up of Too Big to Fail banks was not just a breath of fresh air for consumer rights activists, but also a gust of wind which lifted the sails on a potential Presidential campaign for Warren in 2016.
And while talks of her run at the White House may be a little premature in December of 2014, she has certainly earned the attention and respect of many who have battled with the banks and Too Big to Fail policies.
From The Trenches
As very few probably know, including myself until recently, the House of Representatives has passed an early holiday gift for taxpayers concerning real estate. It is also expected that the Senate and President will follow suit in the near future. Ironically; however, it is too little, too late.
What the Bill Covers
As George Bush was leaving the presidency and the economy near collapse, the former President signed a bill providing an exemption to loan forgiveness income to those homeowners who had received any kind of loan forgiveness income. Said “loan forgiveness income” would include money derived by way of short sale, principle reduction, loan modification, or in a foreclosure where the deficiency was waived on their primary residence. When one receives income from such an exemption one would receive a 1099, meaning that the income received would need to be declared on your tax return and thus taxed. Of course, there are alternatives to paying such taxes, such as pleading with the IRS that you are insolvent and, in fact, many accountants are quite savvy at doing that and therefore possibly removing said income from taxation.
Christmas Coal for Responsible Homeowners?
However, in most circumstances people end up paying the loan forgiveness income if in fact they receive a 1099. As we approach the end of 2014 and reflect on the year in real estate, this past year a substantial portion of the population were put in the stressful situation of deciding how to handle their distressed property. Decisions needed to be made whether to engage in short sales, modifications, or battle foreclosure. Many homeowners acted in a manner that they, and most others, believed to be prudent in their property management as the tax benefit(s) had seemingly run out at the stroke of midnight the previous year. But to everyone’s surprise, Congress is now retroactively stating that any transaction involving the primary residence that occurred in the past year where there was in fact loan forgiveness income will be waived. Now this of course is a delightful holiday carol to the ears of those who were involved in such transactions, but it is an unexpected giant lump of Christma coal in the stocking for others.
Those who attempted to be prudent, opting not to engage in loan forgiveness transactions out of the fear of tax ramifications, have been retroactively moved from the Good List to the Naughty List. In fact statistically we will see that the number of short sales fell off precipitously this past year holding back the entire economy.
Unanticipated (That Should Have Been Anticipated) Consequences
Realtors, lawyers, title companies, architects, engineers, surveyors, homebuilders, as well as banks all were harmed by the fact that there was a substantial decline in short sales. Further, it probably hurt the real estate market by reducing the amount of actual transactions that occurred.
So here we have it: Congress is passing a law that is retroactive that provides no guidance whatsoever to the future conduct of an individual.
In fact, the law again is supposed to expire at midnight 2014. Isn’t that once again too little, too late?
I say Merry Christmas & Happy Holidays to all.
From the trenches,