I apologize for the use of all CAPS. I am just tired of hearing the same story OVER and OVER and OVER.
Typical scenario, your Client has a refinance loan within the last three years, and they have equity in their house (we see this more with elders it seems) and yet you are facing foreclosure either due to an exploding option arm loan, or negative amortization loan, or simply run into hard financial times with work. Whatever the reason, the borrower goes into default and servicer wants to foreclose. Client either figures they have no rights and give up, or they hire a law firm, or "attorney-backed" modification company (where there is usually no attorney, or an attorney who does not provide any legal services), to help them. After several months of wrangling with the loan servicer, the final denial letter comes saying you do not qualify for any loan modification. IN A PANIC YOU CALLL AROUND CALLING FIRMS LIKE MINE ASKING WHAT CAN BE DONE.
After asking some basic questions we learn you may have "material" truth in lending rights that allow you to rescind your loan up to THREE YEARS AFTER THE LOAN IS CONSUMMATED. Yes, you read that right, you may be able to rescind your loan up to three years after consummation of the loan. What consummation is and when the clock starts running is the subject of a recent blog post you can read here http://tinyurl.com/45ppjf3.
However, that is not the point of this article. The point of this article is that TOO MANY PEOPLE (INCLUDING THE ATTORNEYS AND ATTORNEY BACKED MOD COMPANIES REPRESENTING HOMEOWNERS) ARE EITHER NOT LOOKING FOR TILA RESCISSION CLAIMS, OR THEY ARE NOT BEING ASSERTED OR EXERCISED IN A TIMELY MANNER. IN FACT, IT IS MY SUSPICION THAT MANY ATTORNEYS DON'T EVEN KNOW WHAT TRUTH IN LENDING LAW IS, WHAT IT MEANS, OR HOW TO EXERCISE ONES RIGHT TO RESCIND AND TREAT THE LOAN AS UNSECURED EITHER IN A CIVIL LAWSUIT SEEKING A TRO AGAINST INJUNCTION, OR IN BANKRUPTCY IN AN ADVERSARY PROCEEDING.
IT SEEMS TO ME IT IS LEGAL MALPRACTICE TO MISS THESE CLAIMS, ESPECIALLY WHERE A BORROWER HAS EQUITY IN THEIR PROPERTY AND AN ABILITY TO TENDER THE BALANCE OF THE LOAN.
I just got off a call with an elderly woman in her 80's who is losing her home to foreclosure, the three year right to rescind has arguably expired, and she wants to know how to avoid being thrown to the streets. On top of that, she was represented by a loan modification law firm that took a tidy sum to "save her from foreclosure." Now they are calling me.
Point is, as realtors, brokers and real estate professionals, it is your job to look out for people, understand the laws that affect your business even though you cannot practice law. In this foreclosure crunch, TILA is one of the most powerful weapons to try to turn the tables on the lender, rescind the loan, treat is as unsecured, seek attorney fees, and force them to return all funds they received over the last few years. TILA rescission applies to ALL loan assignees including those "back-room" lenders and trustees guarding the securitized loan pools.
If you know someone facing foreclosure, just ask them if they have a refinance loan within the last three years. If yes, good, if they have one of the several "material" TILA violations and equity in their property (or ability to obtain cash by selling other property, or some other legitimate argument that they can fulfill their tender obligation), then make sure you tell them to see a TILA attorney or otherwise consider sending in a rescission letter within three years of signing their loan documents. That is being a professional consultant and making a difference.
One easy way (and FREE) method of determining whether you have a "material" TILA violation is to look back in our most recent loan documents and see if EACH BORROWER OR PERSON WITH SECURITY INTEREST IN THE SUBJECT PROPERTY GOT TWO SIGNED AND COMPLETED NOTICES OF THEIR RIGHT TO CANCEL (FOR A HUSBAND AND WIFE THAT IS 4 TOTAL COPIES). ALTHOUGH THIS MAY SEEM TICKY TACK, OFTEN THERE ARE ONLY COPY LEFT FOR THE BORROWERS, OR NONE, OR THE DATES FOR RESCISSION ARE NOT FILLED IN, OR ARE FILLED IN BUT NOT ACCURATE. THESE ARE MATERIAL VIOLATIONS TRIGGERING AN EXTENDED THREE YEAR RIGHT TO RESCIND THE LOAN UNDER FEDERAL TILA LAW.
If your clients were neglected by their professional advisor, contact our office to discuss a potential malpractice claim.
Steve Vondran, ESQ. is a real estate, predatory lending, and bankruptcy lawyer licensed to practice law in Arizona and California. He is a former mortgage loan officer, and a real estate broker licensed in CA and AZ. He can be reached at (877) 276-5084. Visit us also on Foreclosure Defense Website at http:www.ForeclosureDefenseResourceCenter.com and our Foreclosure Radio Show at BlogTalkRadio