Rescission, Rescission and Rescission

See 15522201-Tila-Disclosure-Req-Viol-Remedies

Amongst the various emails, requests for assistance and comments on the blog there are some threads. Most people, even lawyers, mistake the remedy of rescission for something else. The first thing you need to know is that, no, you don’t give your house “back” to the lender because you never got your house from the lender (pretender lender) in the first place. You received money and you didn’t receive it from the “lender” if your loan was securitized.

There are several types of rescission and this list is by no means exhaustive:

1. Truth in Lending
2. Usury — see appraisal fraud
3. Common law fraud
4. Securities law violations
5. Statutory rescission based upon deceptive lending practices
6. Statutory Rescission based upon deceptive business practices

Each one carries its own unique set of characteristics. TILA rescission is interesting but is not being used successfully because people don’t understand it and then there is the problem of who you send the notice of rescission to if you already know you are not dealing with the “lender.” You can look up the details of TILA rescission in the search engine for this site. The important thing to remember is that in a TILA rescission the lender is required to either take it to court in a petition for declaratory action or comply and give you a satisfaction of mortgage, a canceled note and release. And the “lender” has a time limit to contest your notice of rescission. If they exceed the time limit you would argue that they have waived their right to refute it. And if they change position on you and claim they are not the lender and therefore your rescission notice is void, then they cannot foreclose. A midway position would be to allow them extra time to file the declaratory action, but that would violate the express words of the Federal Statute.

In TILA your “tender” is not due until AFTER the lender has either complied with the statute or complied with the court order when they lose the petition for declaratory relief. But you might find that the Judge agrees with you that they have no right to foreclose and that for the same reason you sent the notice to the wrong party. That would require you to file also a Petition to Quiet Title naming John Does 1-1000 among others, and anyone else you know that is involved on the creditor side.

The point is that by filing the notice of rescission you immediately create a powerful argument for saying the obligation was converted from a secured obligation to an unsecured obligation. And you have a strong argument to say that the note is no longer evidence of the obligation because it is BY OPERATION OF LAW extinguished along with the mortgage or deed of trust. So if you ever get up to the point where you must tender money or payment to the real lender, whoever that might be, you will tender only so much as the obligation, less the value of your claims, defenses, counterclaims etc. for all the causes of action discussed on this blog.

It probably will turn out that your “tender” will be a demand letter that says to the “lender” now you owe me damages on top of releasing the house from the encumbrance.

If the case proves out under usury because of predatory loan tactics, usury, securities violation or any combination, you could be entitled to treble damages (read that as three times the stated principal of your note). If you expand the claim to include a claim for all undisclosed profits and fees and all money paid at closing and purportedly under the loan, you probably have a claim that totals around twice the amount of your mortgage note.

If you further expand your claim for undisclosed profits in the form of payoff from credit default swaps, your claim could be up to thirty times the amount of the note — right that is “thirty” because that is the amount they got when your loan “defaulted”. Note that in order to score this windfall they had to do everything in their power to make sure the loan goes into default thus triggering the CDS insurance. So when they take money from you, and they are supposedly negotiating with you for modification, what they are REALLY doing is getting you past the point of no return so they can collect on the insurance and take your house too.

Many people are getting letters back from the pretender lender saying they have no right to rescind. Very interesting, but wrong. That statue says that if they think they have a legitimate claim to defer or eliminate your claim for rescission that must do it in the form of a declaratory action. They don’t want to do that because they would be required to reveal many details of the transaction that they never want the Judge to see. The statute does not say the lender can simply send a letter.

If they have failed to comply and they go forward with foreclosure then one strategy would be to bring an emergency action for permanent injunction plus attorney fees and costs, stating that there is no encumbrance BY OPERATION OF LAW (see exhibit “A” Notice of Rescission) plus the allegation that they neither complied nor filed the declaratory action.

And don’t take the narrow response that your loan is a purchase money first mortgage and is therefore excluded from TILA. That probably isn’t true even if it looks otherwise. There was nothing simple about this transaction. And even a cursory look at the snaked path of the transaction from the homeowner up to the investor who bought bonds (mortgage backed securities and was therefore the ultimate source of the funds) will show that if this was a purchase money first mortgage it did not resemble any other purchase money first mortgage before securitization. And then of course there are all those other grounds for rescission and damages.

Why do “lenders’ and “pretender lenders” say “no” and pull all these other tricks amounting to theft, trickery and deceit? Because they can if you let them. It works for them in 99% of the cases and they get the house and the insurance too. Nice deal for them, don’t you think?

Tags: borrower, disclosure, foreclosure defense, foreclosure offense, Lender Liability, predatory lending, rescission, securitization, trustee
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