Procedure vs Substance in Rescission

If you are confronted by a court order signed by a real judge that you are absolutely convinced is wrong, what happens. ANSWER: Nothing. The order stands unless you do something about it. The “Something” is filing a pleading that establishes who you are, why you have a right to complain about the order and then what is wrong with the order. It might be motion to vacate or any number of other pleadings. If you think that the court violated your civil rights, you would probably bring a new lawsuit in Federal Court asking the Federal District Judge to vacate the state court order perhaps because the law denied due process or the way it was applied violated due process. The signed order (regardless of how offensive it is), at all times, during the contest, remains in full force and effect. Even if everyone is convinced you will win and get the order vacated, you must wait until the end of litigation to get it vacated — if the Judge agrees with you. The only exception is an emergency application for temporary restraining order, which has another whole set of procedural rules.

When a consumer sends a notice of rescission on a debt, it may have all kinds of things wrong on its face and in the circumstances under which it was sent. But the basic fact is that it was sent. That is all that is needed to make it the equivalent of the court order in the preceding paragraph. It is effective BY OPERATION OF LAW. Why is the court order effective? It is effective BY OPERATION OF LAW. AT THAT POINT IN TIME WHEN THE NOTICE OF RESCISSION WAS SENT, THE LOAN CONTRACT IS CANCELED, THE NOTE IS VOID AND THE MORTGAGE IS VOID — BY OPERATION OF LAW.

The banks and servicers are mounting a challenge to the inevitable and only ruling allowed regarding TILA rescissions. They don’t want to file a lawsuit or a petition for temporary restraining order to relieve the creditor of the duty to (a) cancel the note and return it to the borrower, (b) file the satisfaction of mortgage and (c) pay all money ever collected from the borrower and ever paid to third parties as compensation arising out of the origination (i.e., execution of loan documents). Execution of loan documents is NOT the same time as consummation.

Ask any closing agent. They get the funds after the documents are sent to the underwriting department where it is are reviewed again before the funds are released — hours, days and even months later. . The question is what underwriting department? It is the automated computerized set of standards maintained by LPS/Black Night and others who are distancing themselves from the table funded transaction in which the “lender” has engaged in behavioral that is “predatory per se” and which therefore does not entitle them to equitable relief (foreclosure) since they come to court with unclean hands. By layering the stack with multiple parties, none of whom have any interest in the loan, they create the illusion of a transaction with an originator who never spent a dime lending money to the borrower.

So we know that the identity is not going to be made available by the banks and servicers. That much is assured. The trusts are empty shells of trusts that exist on paper only, never did business and were never registered with any state or the federal government. They can’t get away from the simple truth that the ONLY parties entitled to payment are the investors whose money was used to fund or acquire loans — even though they didn’t know and would never have approved of the violation of the terms of the offer contained in the MBS prospectus, the Pooling and Servicing agreement, or anything else.

It might be suspected that the three years has run, that the three days have run or that the rescission is faulty because of other restrictions in TILA. But it is nevertheless effective and requires no judge to rule upon its effectiveness. That puts the burden of pleading and the burden of proof completely on the party seeking to vacate the rescission. If they do nothing, the rescission stands. And as pointed out by Justice Scalia TILA rescission makes no distinction between disputed and undisputed recessions. So even if a faulty rescission is nonetheless effective, Which means that the creditor has 20 days in which to satisfy the three duties under TILA rescission. If nobody files a lawsuit to vacate the rescission within 20 days of receipt of the notice of rescission (and remember that under Dodd Frank notice to one is notice to all), then the rescission is final and any of the factual issues that you would have expected to arrive on a faulty rescission would have been waved. This is a procedural argument but there is no doubt that it is correct, especially with the wording of the opinion in Jesinoski.

The important thing to remember is that the rescission is effective upon mailing which means that it is the same as a court order bearing the date of mailing of the notice of precision. If you think of it that way it may be easier to understand the strategy that I am suggesting here. Since there does not appear to ever have been a lawsuit by any bank seeking to vacate a TILA rescission, I am assuming that they cannot come up with a creditor who actually has standing. And that is because they stole the money in the first place from investors who are the ONLY parties entitles to be paid — but ONLY under some equitable theory of unjust enrichment, most assuredly not secured in their claim.

Tags: rescission
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