Rescission and Res Judicata

A little pressed for time writing briefs and pleadings BUT I wanted to address something that is coming up with increasing frequency.

Rescission removes jurisdiction of the court. If there is no subject matter jurisdiction, no court can confer jurisdiction on itself by denying a claim or defense based upon lack of jurisdiction over the mortgage and note which are by definition void under REG Z pursuant to 15 USC §1635. There cannot be foreclosure after rescission for the simple reason that all foreclosures are empowered by either a mortgage or deed of trust.

Rescission cancels and voids the mortgage or  deed of trust. Unless the claimants are actually the creditor(s) the case is dead because there is no subject matter to adjudicate — and even then the claim must be changed from foreclosure to enforcement of the borrower’s duty to tender because the creditor complied with the statutory duties imposed by the Rescission Statute.

And the current rising bank practice of claiming res judicata on the issue of rescission is as worthless as the loan they seek to enforce. Jurisdiction can be brought up at any time, even on appeal. Res judicata is being used as a vehicle to create the illusion of jurisdiction. No matter how many times courts have ruled that the claim of lack of jurisdiction and standing is wrong, they cannot create jurisdiction by denying the claim or defense.

BUT THAT depends upon you NOT boxing yourself into a corner by filing a lawsuit asking for rescission in which you are undermining your own position. Rescission either happened or it did not. Nothing can happen in court that will make rescission effective. The statute already did that. Hence any foreclosure action is void along with the mortgage on which it is based, if there has been a rescission under TILA.

Pleading otherwise reduces your claim for injunction (against foreclosure of mortgage) to a “claim” of rescission rather than an event that bars action by the defendants or respondents. You are opening the door to a counterargument that otherwise would not be present. You are inviting the court to consider your complaint as a waiver of the event of rescission and to consider it now to be a claim, which is probably now probably barred by the statute of limitations and perhaps even res judicata.

The mistake is to not understand the difference between rescission as a claim (which it is under common law rescission) and an event (which it is under statutory law). It is also to not understand that the note and mortgage are contracts that are expressly replaced by a statutory “agreement” 15 USC §1635 i.e. a new agreement that is mandated by the statute. That is the event. The note and mortgage are no longer existing in any meaningful factual or legal way. After rescission, nobody has standing if they are claiming any rights from the loan contract.

Thus TILA rescission is both procedural and jurisdictional.

Approaching it any other way waives defenses to foreclosure and undercuts defenses to the debt itself. Because after rescission the right to collect the debt emanates from the statute, not the contract. And if the creditor fails to (1) obey the statute and (2) ignore its claim for the debt, it is then barred from collecting on either the contract (by rescission) or barred from ever collecting the statutory debt by the statute of limitations on claim based upon TILA duties and liabilities.

When investors finally understand this they will understand that not only did they buy worthless paper, but that the worthless paper they bought was also based on worthless paper. And THAT is when TBTF banks will fail.

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