We have been getting more and more questions about TILA (Truth in Lending Law) and the extended three year right of rescission. Here is one of our write-ups that discusses this concept in general terms. THE FOLLOWING IS NOT LEGAL ADVICE OR TO BE CONSTRUED AS LEGAL ADVICE OR A SUBSTITUTE FOR LEGAL ADVICE. FOR SPECIFIC INFORMATION ON YOUR CASE CONTACT A FORECLOSURE DEFENSE OR TILA LAWYER. DEFENDANTS (THAT'S THE LENDERS/LOAN SERVICERS AND THEIR "INVESTORS") SHOULD NOT BE PERMITTED TO FORECLOSE ON THE SUBJECT PROPERTY WHERE PLAINTIFF HAS EXERCISED ITS VALID RESCISSION RIGHTS UNDER FEDERAL TRUTH IN LENDING LAW. IN EXERCISING ITS RESCISSION RIGHTS, THE SECURITY INSTRUMENT ON THE PROPERTY IS NULL AND VOID AND THERE IS NOTHING TO FORECLOSE ON.
FEDERAL TRUTH IN LENDING LAW The Truth in Lending Act (TILA) is a cornerstone of consumer credit legislation. The Statute is Congress's effort to guarantee the the accurate and meaningful disclosure of the costs of consumer credit and thereby to enable consumers to make informed choices in the marketplace. See 15 U.S.C. § 1601(a). The Act is designed to protect borrowers who are not on an equal footing with creditors either in bargaining power or with respect to the knowledge of credit terms. In other words, TILA was passed to aid the unsophisticated consumer. SeeThomka v. A.Z. Chevrolet, Inc. 619 F.2d 246 (3d Cir. 1980). The Act is also remedial and must be liberally construed in favor of borrowers. See King v. California, 784 F.2d 910 (9th Cir. 1986). Except where Congress has relieved lenders of liability for noncompliance, it is a strict liability statute. Courts should continue to assure that consumers are accorded the full remedies available under the Act for violations found, even if they might seem technical. See Rodash v. AIB Mortgage Co., 16 F.3d 1142, 1145, 1149 (11th Cir. 1994). Although Congress permitted the Federal Reserve Board to issue regulations implementing TILA (Reg Z), and to issue interpretations and official staff commentary that the Courts consider to be persuasive authority, the FRB's authority is not without limits, and a regulation that conflicts with TILA cannot stand. See Fabricant v. Sears, Roebuck, Clearinghouse No. 54,563 (S.D. Fla. Mar. 5, 2002). NOTICE OF RIGHT TO CANCEL - DISCLOSURE REQUIREMENTS Under Federal Truth in Lending Law, each Borrower, or person with ownership interest in the property, (in a non-purchase loan or other exempt transaction) in which a security interest, including any such interest arising by operation of law, is or will be retained or acquired in any property which is used as the principal dwelling, shall be provided with TWO (2) COMPLETED copies EACH of a notice of right to rescind (cancel). It is the lender’s obligation to complete these forms and deliver TWO copies to each Borrower or person with Ownership interest in the Property. 15 U.S.C. § 1635(a), Reg. Z §§ 226.5(b), 226.23(b). If each borrower or person with ownership interest is not provided two adequate copies of this Notice, an extended three year right to rescind is permitted under the Federal Truth in Lending Law. The notice shall identify the transaction or occurrence and clearly and conspicuously disclose the following: (1) The retention or acquisition of a security interest in the consumer's principal dwelling. (2) The consumer's right to rescind, as described in paragraph (a)(1) of this section. (3) How to exercise the right to rescind, with a form for that purpose, designating the address of the creditor's place of business. (4) The effects of rescission, as described in paragraph (d) of this section. (5) The date the rescission period expires. (See Reg. Z §§ 226.15(b)(5) and 226.23(b)(5)) The plain-meaning implication of this statutory provision is clear (and therefore is controlling), the lender has the obligation to complete these forms, it is not the borrowers duty to determine what dates to insert into the forms, much less at the direction of a mobile notary. In fact, the escrow instructions and lender's instruction sheet for the notice of right to cancel form set forth the requirement that the dates be inserted before the borrower was to be asked to sign all copies. This reading of the law (that it is the lender's obligation to insert the dates, and not the borrowers) is also consistent with the requirement #5 (set forth above) that “the lender shall clearly and conspicuously identify the date the rescission period expires.” In fact, at least two courts have held in the First and Second circuit: “the complexity of business transactions under TILA means that the average consumer cannot figure out when TILA rights expire.....” See Bonney v. Wash. Mutual Bank, No. 08-30087 (D. Mass. July 30, 2008). (2) The Lender is required to provide TWO copies of the notice of right to cancel to EACH borrower along with a copy of all of the material TILA disclosures. Failure to meet these requirements also provides an extended three year right to rescind the loan transaction. See 15 U.S.C. § 1635(a); Reg. Z §§ 226.15(b), 226.23(b) and Webster v. Centex Home Equity Corp. (In re Webster), 300 B.R. 787 (Bankr. W.D. Okla. 2003). THREE YEAR EXTENDED RIGHT TO RESCIND (a) Consumer's right to rescind. (1) “In a credit transaction in which a security interest is or will be retained or acquired in a consumer's principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction….” (b) Exercising the right of Rescission: 226.23(3) – “The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first. In the case of certain administrative proceedings, the rescission period shall be extended in accordance with section 125(f) of the Act.” There is also legal precedence for “tolling” the statute beyond three years where fraudulent concealment is shown. See Bank of New York v. Waldon, 751 N.Y.S.2d 341 (Sup. Ct. 2002).
226.23(2): (2) “To exercise the right to rescind, the consumer shall notify the creditor of the rescission by mail, telegram or other means of written communication. Notice is considered given when mailed, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor's designated place of business.” EFFECTS OF RESCISSION (d) Effects of rescission. (1) When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer shall not be liable for any amount, including any finance charge. ASSIGNEE LIABILTY FOR RESCSSION While assignees are only liable for TILA “statutory damages” that are “apparent on the face of the loan documents” assignees are subject to the rescission right to the same extent as the original creditor. 15 U.S.C. §1641(c) states: “Any consumer who has the right to rescind a transaction under section 1635 of this title may rescind the transaction as against any assignee of the obligation. See also the case of Ocwen Fed. Bank v. Russell, 53 P.3d 312 (Haw Ct. App. 2002) which rejected the assignees holder in due course argument as being no defense to rescission. As other courts have held: “without such protection for the consumer the right of rescission would provide little or no effective remedy.” See Stone v. Mehlberg, 728 F. Supp. 1341, 1348, (W.D. Mich 1989). A loan servicer is deemed an assignee if it “is or was the holder of the obligation.” ___________________________________________________________________________________________________________________________________________________________________________ WHAT DOES ALL THIS MEAN IN RAL LIFE WHEN FACED WITH FORECLOSURE? (1) IF YOU HAVE A REFINANCE LOAN WITHIN THE LAST THREE YEARS YOU SHOULD HAVE YOUR LOAN FILE AUDITED TO SEE IF THERE IS A "MATERIAL" TRUTH IN LENDING VIOLATION THAT MAY ALLOW YOU TO RESCIND YOUR LOAN UP TO THREE YEARS AFTER THE LOAN OBLIGATION. THERE ARE SEVERAL DIFFERENT WAYS TO FIND A "MATERIAL" VIOLATION. (2) DO NOT COUNT ON YOUR ATTORNEY OR ATTORNEY-BACKED COMPANY (LAW CENTER ETC.) TO CATCH THIS AS WE HAVE SEEN FAR TOO MANY INSTANCES OF NEGLECT IN THIS AREA (3) IF YOU HAVE A RESCISSION CASE, YOU NEED TO MAKE SURE YOU SEND IN YOUR RESCISSION LETTER. CONTACT AN ATTORNEY TO DISCUSS THIS REQUIREMENT. (4) YOU NEED TO START THINKING ABOUT A TENDER PLAN AND A LITIGATION STRATEGY. IF YOU DO NOT HAVE A TENDER PLAN, THEN TILA MAY NOT BE THE BEST WAY TO GO. AGAIN, CONSULT A FORECLOSURE OR TRUTH IN LENDING LAWYER TO ASSIST YOU AND EVALUATE YOUR CASE. (5) ONCE YOU RESIND THE LOAN, THE SECURITY INSTRUMENT IS VOID AS A MATTER OF LAW, BUT BE PREPARED, YOU WILL NORMALLY HAVE TO ENFORCE THIS RIGHT BY GOING TO COURT. UNFORTUNATELY, CREDITORS FORCE YOUR HAND TO FILE A CIVIL LAWSUIT SEEKING A TRO AND INJUNCTION BEFORE THEY WILL CONCEDE. (6) IF YOU ARE SUCCESSFUL IN YOUR TILA RESCISSION CASE, THE JUDGE IS SUPPOSED TO AWARD ATTORNEY FEES WHICH WILL HELP YOU RECOUP THE COSTS OF LITIGATION. (7) EVEN IF YOU CANNOT EXERCISE TILA WITHIN THREE YEARS, YOU MAY BE ABLE TO ASSERT TILA AS A "DEFENSIVE" ACTION IN A RECOUPMENT CASE. WE WILL BE TALKING ABOUT THIS CONCEPT IN A FUTURE BLOG. (8) FOLKS, IN THIS WAR ON FORECLOSURE, IT IS UP TO YOU TO IDENTIFY, ASSERT AND STAND UP FOR YOUR LEGAL RIGHTS. ALTHOUGH THE LENDERS WILL RARELY ADMIT TO A TILA VIOLATION, YOUR DOCUMENTATION FOLLOWING AN AUDIT WILL NORMALLY TELL THE STORY THEY WOULD RATHER NOT HEAR. ________________________________________________________________________________________________________________________________________________________________________ KEYWORDS: TRUTH IN LENDING RESCISSION / INJUNCTION / TRO / LIS PENDENS / PHOENIX TRUTH IN LENDING LAWYER / SCOTTSDALE TRUTH IN LENDING LAW / ARIZONA TRUTH IN LENDING LAWYER / CALIFORNIA TRUTH IN LENDING LAWYER / ORANGE COUNTY TRUTH IN LENDING LAWYER / THREE YEAR RIGHT OF RESCISSION UNDER TILA / TILA TENDER PLAN / SCOTTSDALE LOAN MODIFICATION / PHOENIX LOAN MODIFICATION / SECURITY INSTRUMENT VOID UNDER TILA FOLLOWING RESCISSION / TILA RESCISSION LETTER / RESCIND YOUR LOAN IN BANKRUPTCY / TILA FORENSIC LOAN AUDIT ________________________________________________________________________________________________________________________________________________________________________ Atorney Steve Vondran is licensed to practice law in the State of California and Arizona. WE HANDLE ONLY LITIGATION CASES IN CALIFORNIA POST SB-94, AND STILL HANDLE LOAN MODIFICATIONS FOR ARIZONA CLIENTS. WE SERVE THE FOLLOWING CITIES IN CALIFORNIA AND ARIZONA. California: Agoura Hills, Alameda, Albany, Alhambra, Aliso Viejo, Alturas, American Canyon, Anaheim, Anderson, Angels Camp, Antioch, Apple Valley, Arcadia, Arcata, Arroyo Grande, Atascadero, Atherton, Atwater, Auburn, Avalon, Avila Beach, Azusa, Bakersfield, Baldwin Park,Banning, Barstow, Beaumont, Bell Gardens, Bellflower, Belmont, Benicia, Berkeley, Beverly Hills, Big Bear Lake, Bradbury, Brawley, Brea, Brentwood, Brisbane, Buena Park, Burbank, Burlingame, Calabasas, Calexico, California City, Calimesa, Calipatria, Calistoga, Camarillo,Campbell, Capitola, Carlsbad, Carpinteria, Carson, Cathedral City, Ceres, Cerritos, Chico, Chino, Chino Hills, Chowchilla, Chula Vista, Citrus Heights, Claremont, Clayton, Clearlake, Cloverdale, Clovis, Coalinga, Colton, Commerce, Concord, Corcoran, Corning, Corona,Coronado, Costa Mesa, Cotati, Covina, Crescent City, Culver City, Cupertino, Cypress, Daly City, Dana Point, Danville, Davis, Del Mar, Desert Hot Springs, Diamond Bar, Dixon, Downey, Duarte, DublinEast Palo Alto, El Cajon, El Centro, El Cerrito, El Monte, El Segundo, Elk Grove, Emeryville, Encinitas, Escondido, Eureka, ExeterFairfield, Fillmore, Folsom, Fontana, Fort Bragg, Foster City, Fountain Valley, Fowler, Fremont, Fresno, Fullerton, Garden Grove, Gardena, Gilroy, Glendale, Glendora, Goleta, Gonzales, Grand Terrace, Grass Valley,Gridley, Grover Beach, Hanford, Hawthorne, Hayward, Healdsburg, Hemet, Hercules, Hermosa Beach, Hesperia, Highland, HillsboroughHollister, Holtville, Hughson, Huntington Beach, Huntington Park, Imperial, Imperial Beach, Indio, Industry, Inglewood, Ione, Irvine,Jackson, King City, La Canada Flintridge, La Habra, La Mesa, La Mirada, La Palma, La Puente, La Quinta, La Verne, Lafayette, Laguna Beach, Laguna Hills, Laguna Niguel, Laguna Woods, Lake Elsinore, Lake Forest, Lakeport, Lakewood, Lancaster, Larkspur, Lathrop, Lemon Grove, Lemoore, Lincoln, Littlerock, Livermore, Livingston, Lodi, Loma Linda, Lomita, Lompoc, Long Beach, Loomis, Los Alamitos, Los Altos, Los Altos Hills, Los Angeles, Los Banos, Los Gatos, Lynwood, Madera, Malibu, Manhattan Beach, Manteca, Marina, Martinez,Marysville, Maywood, Menlo Park, Merced, Mill Valley, Millbrae, Milpitas, Mission Viejo, Modesto, Monrovia, Montclair, Monte Sereno, Montebello, Monterey, Monterey Park, Moorpark, Moraga, Moreno Valley, Morgan Hill, Morro Bay, Mountain View, Mt. Shasta, Murrieta, Napa,National City, Nevada City, Newark, Newman, Newport Beach, Norco, Norwalk, Novato, Oakdale, Oakland, Oakley, Oceanside, Ontario, Orange, Orinda, Oroville, Oxnard, Pacific Grove, Pacifica, Palm Desert, Palm Springs, Palmdale, Palo Alto, Paradise, Paramount, Pasadena,Paso Robles, Patterson, Perris, Petaluma, Pico Rivera, Pinole, Pismo Beach, Pittsburg, Placentia, Placerville, Pleasant Hill, Pleasanton, Pomona, Port Hueneme, Porterville, Portola, Poway, Rancho Cordova, Rancho Cucamonga, Rancho Mirage, Rancho Santa Margarita, Red Bluff, Redding, Redlands, Redondo Beach, Redwood City, Reedley, Rialto, Richmond, Ridgecrest, Ripon, Riverside, Rocklin, Rohnert Park, Rolling Hills Estates, Roseville, Sacramento, Salinas, San Anselmo, San Bernardino, San Bruno, San Carlos, San Clemente, San Diego,San Dimas, San Fernando, San Francisco, San Gabriel, San Jacinto, San Jose, San Juan Capistrano, San Leandro, San Luis Obispo, San Marcos, San Marino, San Mateo, San Pablo, San Rafael, San Ramon, Santa Ana, Santa Barbara, Santa Clara, Santa Clarita, Santa Cruz,Santa Fe Springs, Santa Maria, Santa Monica, Santa Paula, Santa Rosa, Santee, Saratoga, Sausalito, Scotts Valley, Seal Beach, Seaside, Sebastopol, Selma, Shafter, Signal Hill, Simi Valley, Solvang, Sonora, South El Monte, South Gate, South Pasadena, South San Francisco, St. Helena, Stanton, Stockton, Suisun City, Sunnyvale, Susanville, Taft, Temecula, Temple City, Thousand Oaks, Torrance, Tracy, Truckee, Tulare, Turlock, Tustin, Twentynine Palms, Ukiah, Union City, Upland, Vacaville, Vernon, Vallejo, Ventura, Villa Park, Vista,Victorville, Visalia, Walnut, Walnut Creek, Wasco, Watsonville, Weed, West Covina, West Hollywood, West Sacramento, Westlake Village, Westminster, Westmorland, Whittier, Windsor, Winters, Woodlake, Woodland, Woodside, Yorba Linda, Yuba City, Yucaipa, Yucca Valley,Yorba Linda, Yuba City, Yucaipa, Yucca Valley Arizona: Ajo – Pima County, Alpine – Apache County, Apache Junction – Pinal County, Arivaca – Pima County, Arizona City – Pinal County, Ashfork – Yavapai County, Avondale – Maricopa County, Bagdad – Yavapai County – Community Profile, Benson – Cochise County, Bisbee – Cochise County, Black Canyon City – Yavapai County, Bouse – La Paz County, Bowie – Cochise County, Buckeye – Maricopa County, Bullhead City – Mohave County, Camp Verde – Yavapai County, Carefree – Maricopa County, Casa Grande – Pinal County, Catalina – Pima County, Cave Creek – Maricopa County, Chandler – Maricopa County, Chino Valley – Yavapai County, Chloride – Mohave County, Clarkdale – Yavapai County, Clifton/Morenci – Greenlee County, Colorado City – Mohave County, Coolidge – Pinal County, Cottonwood – Yavapai County, Dewey-Humboldt – Yavapai County, Dolan Springs – Mohave County, Douglas – Cochise County, Duncan – Greenlee County, Eagar – Apache County, Ehrenberg – La Paz County, El Mirage – Maricopa County, Eloy – Pinal County, Flagstaff – Coconino County, Florence – Pinal County, Fountain Hills – Maricopa County, Fredonia – Coconino County, Gila Bend – Maricopa County, Gilbert – Maricopa County, Glendale – Maricopa County, Globe – Gila County, Goodyear – Maricopa County, Green Valley – Pima County, Greer – Apache County, Guadalupe – Maricopa County, Hayden – Gila County, Heber-Overgaard – Navajo County, Holbrook – Navajo County, Huachuca City – Cochise County, Jerome – Yavapai County, Joseph City – Navajo County, Kearny – Pinal County, Kingman – Mohave County, Lake Havasu City – Mohave County, Lake Montezuma/Rimrock/McGuireville – Yavapai County, Lakeside – Navajo County, Litchfield Park – Maricopa County, Mammoth – Pinal County, Marana – Pima County, Maricopa – Pinal County, Mayer – Yavapai County,McGuireville – Yavapai County, Mesa – Maricopa County, Miami – Gila County, Morenci – Greenlee County, Nogales – Santa Cruz County, Oak Creek Canyon, Oatman – Mohave County, Oracle – Pinal County, Oro Valley – Pima County, Overgaard – Navajo County, Page – Coconino County, Paradise Valley – Maricopa County, Parker – La Paz County, Patagonia – Santa Cruz County, Payson – Gila County, Pearce & Sunsite – Cochise County, Peeples Valley – Yavapai County, Peoria – Maricopa County, Phoenix – Maricopa County,Picacho/Picacho Peak/Red Rock – Pinal County, Pima – Graham County, Pine & Strawberry – Gila County, Pinetop-Lakeside – Navajo County, Prescott – Yavapai County, Prescott Valley – Yavapai County, Quartzsite – La Paz County, Queen Creek – Maricopa County, Red Rock – Pinal County, Rimrock – Yavapai County, Rio Rico – Santa Cruz County, Safford – Graham County, Sahuarita – Pima County, Saint Johns – Apache County, Salome & Wenden – La Paz County, San Luis – Yuma County, San Manuel – Pinal County, Scottsdale – Maricopa County, Sedona – Coconino County, Seligman – Yavapai County, Show Low – Navajo County, Sierra Vista – Cochise County, Snowflake – Navajo County, Somerton – Yuma County, Sonoita -, Santa Cruz County, South Tucson – Pima County, Springerville – Apache County, Star Valley – Gila County, Strawberry – Gila County, Sun City – Maricopa County, Sun City West – Maricopa County, Sun Lakes – Maricopa County, Sunsites – Cochise County, Superior – Pinal County, Surprise – Maricopa County, Taylor – Navajo County,Tempe – Maricopa County, Thatcher – Graham County, Tolleson – Maricopa County, Tombstone – Cochise County, Tonopah – Maricopa County, Tuba City – Coconino County, Tubac – Santa Cruz County, Tucson – Pima County, Verde Village – Yavapai County, Wellton – Yuma County, Wenden – La Paz County, Wickenburg – Maricopa County, Willcox – Cochise County, Williams – Coconino County, Winkelman – Gila County, Winslow – Navajo County, Yarnell Peeples Valley – Yavapa CountyYoung – Gila County, Youngtown – Maricopa County, Yuma – Yuma County ___________________________________________________________________________________________________________________________________________________________________________ OTHER LINKS OF INTEREST THIS IS AN ADVERTISEMENT AND COMMUNICATION PURSUANT TO STATE BAR RULES. WE ONLY SEEK TO SERVE CLIENTS IN CALIFORNIA AND ARIZONA WHERE ATTORNEY STEVE VONDRAN IS LICENSED TO PRACTICE LAW. HE ALSO HOLDS A REAL ESTATE BROKER'S LICENSE IN EACH STATE.
(2) Within 20 calendar days after receipt of a notice of rescission, the creditor shall return any money or property that has been given to anyone in connection with the transaction and shall take any action necessary to reflect the termination of the security interest.
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