Homeowners across the country who refinanced their mortgage with a predatory lender may be able to receive a refund of all of their closing costs and the interest they paid, provided that they act within three years of the closing of their mortgage loan.

Thousands of homeowners who refinanced their mortgage with an out of state mortgage lender where the mortgage loan was closed by a "Mobile Closer" of the mortgage lender have been found committing a very serious breach of the Truth In Lending Act of 1968, with regard to failing to properly disclose the borrower's right to cancel the loan, otherwise known as the Right of Rescission.

Under the law, the Truth in Lending Act (also known as Regulation Z) clearly states a borrower's right to cancel a mortgage loan within three business days of the closing of the mortgage loan, which allows the borrower the opportunity to clearly think through whether or not they still want to go through with the mortgage loan that they just signed.  If they choose to cancel the mortgage loan, they must inform the mortgage lender of their intent to cancel the loan by signing one of the Right to Cancel forms and submitting directly the mortgage lender by facsimile (fax) or by returning a copy to the closing agent.  Once the Right to Cancel is received by the mortgage lender within the three business days, the borrower is no longer obligated to the terms of the note and mortgage that they signed with that particular mortgage lender.

Thousands of mortgage loans that were originated by out of state mortgage lenders were actually closed by a Mobile Closer, a certified ‘signer' who closes mortgage loans in the homes of the borrowers.  These ‘Mobile Closers' are typically commissioned by their state as a Notary Public, which allows them to notarize and verify the signatures of the borrowers for the mortgage documents needed to close the mortgage loan.  Often times these ‘Mobile Closers' lack the experience necessary to properly discuss and disclose the many documents contained within the closing package they are given by the mortgage lender.  The ‘Mobile Closer' will typically put the borrowers mind at ease by letting the borrower know that they will receive a copy of their loan documents and that they can review the loan documents during the rescission period. 

For most borrowers, the process of refinancing a mortgage is difficult enough, but the actual loan closing can be even more difficult to understand. The typical loan closing package is nearly two inches thick, with nearly 100 individual documents requiring review and signature by the borrower.  Although most of the ‘Mobile Closers' are very capable and professional, the required knowledge to properly close a mortgage loan is missing, putting them at a disadvantage as well as the borrower.  It is this lack of knowledge that is creating a whirlwind of lawsuits across the country.

Many of the actual loan closings that took place were missing key elements of the typical loan closing, especially when it comes to the borrower's Right to Cancel.  The failure to disclose and provide these crucial disclosures is what makes these mortgage loans rescindable up to three years from the date of the loan, which likely would refund to the borrower ALL of the closing costs and the interest paid to the mortgage lender.

What makes a loan rescindable for more than three days?

For a mortgage loan to qualify, it must be a refinance, or a non-purchase mortgage loan, secured by a principal dwelling.  This would be your principal place of residence, which does not include second homes or other investment properties.  Second mortgages and home equity lines of credit qualify provided that it is secured by your principal residence.  Additionally, your mortgage lender must have failed to provide you with accurate material disclosures or the Notice of Right to Cancel as required by Federal law.   These material disclosures include the Truth in Lending statement, which must accurately disclose the Annual Percentage Rate or APR, the Finance Charge, the amount Financed, The Total of Payments, the payment schedule, and other disclosures pertaining to late charges and other pertinent information.  The failure to provide and disclose the Notice of Right to Cancel appears to be the most common violation of the Truth in Lending Act, especially with Predatory Lenders.

The discovery of these discrepancies and violations have led several financial services companies and law firms across the country to offer forensic services to analyze mortgage disclosures for violations of the Truth in lending Act, Real Estate & Settlement Procedures Act (RESPA) and other state and Federal laws that can easily uncover these discrepancies that allow borrowers to provide the proof they need to properly file a complaint against their mortgage lender.  These firms can be found advertising on television as well as the Internet.

Tens of thousands of high interest mortgages originated nationwide in the last several years were closed in violation of the Truth in Lending Act, many of which are currently in serious delinquency or foreclosure status.  Federal regulatory agencies are stepping up efforts to investigate these violations, which could cost mortgage lenders millions of dollars in fines and penalties as well as the refunding of all closing costs and interest paid by borrowers.

If you think you are a victim and would like more information, you can go to www.Hud.gov, the web site for the Department of Housing and Urban Development. There you will find helpful information about your rights as a borrower and how to go about filing a complaint against your mortgage lender.

For a free copy of "How to Avoid Predatory Lending" call (941) 206-6000.

Mike Sikorski, MBA, GRI

Licensed Real Estate Broker

Licensed Mortgage Broker

Loss Mitigation Specialist

Florida Realty Network LLC

22079 Kimble Avenue

Port Charlotte, Florida 33952