Your Right of Rescission – Powerful Foreclosure Defense Strategy

Disclaimer: Nothing on this site can be construed as giving legal advice.  Your reliance on this information is purely at your own risk.  Please seek competent legal counsel.

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Those of you who are in foreclosure on your primary residence, then you might want to look at the Right of Rescission as another option for your foreclosure defense. Under the Truth in Lending Act (TILA) also known as FDIC Regulation Z: TITLE 15 > CHAPTER 41 > SUBCHAPTER I > Part B > § 1635, (Please read the law yourself by clicking on the link and come up with your own interpretation.) called The Right of Rescission, you have the right to rescind your loan. If you are within 3 years of the closing of your loan or if you have discovered new evidence of any TILA/RESPA violations, then you can notify your lender of your intention to rescind your loan. You can only do this if this is your primary residence.

Sorry, if you are an investor and these are rental properties, then this does not apply to you.

To qualify for a rescission, you have to meet the following conditions:

1) This must be your primary residence.

2) There must be at least $35 in discrepancy in your closing loans.

3) This was not a refinance from the same lender.

4) The lender/escrow officer did not disclose to you that you had the right to rescind your loan during closing.

5) It has to be within 3 years of the loan (automatic), or under “Equitable Tolling” upon newly discovered evidence of wrong doing. Here’s what Equitable Tolling means:

Arguments For Tolling The Statute Of Limitations

(1) The Doctrine Of Fraudulent Concealment – If a lender conceals wrongdoing,
thereby preventing a borrower from discovering a cause of action, the statute of limitation
will be tolled until the date the plaintiff, through due diligence, would have learned of the
existence of a claim. The doctrine of fraudulent concealment operates to toll the statute of
limitations when a plaintiff has been injured by fraud and remains in ignorance of it
without any fault or want of diligence or care on his part. Holmberg v. Armbrecht , 327
U.S. 392, 397 (1946) (quoting Bailey v. Glover , 88 U.S. (21 Wall.) 342, 348 (1874); see
Maggio v. Gerard Freezer & Ice Co. , 824 F.2d 123, 127 (1st Cir. 1987).

(2) Argumentum Theory – As in criminal codes, the District Attorney must bring
charges against a bank robber within 5 years. However, if the bank robber leaves the
State, the Statute Of Limitation stops to accrue until such time as the bank robber returns
to the jurisdiction. Same can be argued if the lender leaves the state, goes out of business, or the address and phone number disclosed on a document for communication purposes is no longer valid, time should stop running as of the date of the lender’s disappearance and not started again until a receiver of liabilities is notoriously identified.

(3) Fraud In The Factum – The misrepresentation must go to the essential nature or
existence of a contract, for example, a misrepresentation that an instrument is a
promissory note when in fact it is a mortgage. Or, a misleading statement by an
agent that a loan contains certain terms desirable to the consumer when it does not.

(4) Fraud In The Inducement – The use of deceit or trick to cause someone to act to
his/her disadvantage, such as signing an agreement or deeding away real property. The
heart of this type of fraud is misleading the other party as to the facts upon which he/she
will base his/her decision to act. Example: “there will be tax advantages to you if you let
me take title to your property,” or “you don’t have to read the rest of the contract, it is just
routine legal language” but actually includes a balloon payment or other features that left
undisclosed, induces the consumer into signing the documents.

In other words, within the limitations, you could not have known about the TILA violation until “just now”. .

Why would you want to rescind your loan? How is this a useful strategy for foreclosure defense?

Here’s the deal, if you are going to lose your home anyway to foreclosure…might as well rescind the loan.

Why?

Here are the benefits:

1) YOU GET ALL THE MONEY YOU’VE EVER PAID INTO THE LOAN BACK!!!! Of course, taxes and insurance does not count. If you are paying $2000 per month for the last 3 years, then that is $24,000 per year….which adds up to be a nice $73,000 in one lump sum check. Not bad…

2) You will not have a default on your credit report. You never had the loan. It was a faulty loan.

3) You don’t have to go to court to argue anything.  It is YOUR RIGHT as protected by law. On the down side, you will have to move out of your home. Look, let’s look at it this way. If you were going to lose your home anyway, why not force the bank to take your home back and give you all the money back. This means you will have lived in that house for X years…FOR FREE!!! And now you have a large lump sum CASH to move into your new home.

If you are interested in this process, simply write a letter to your “lender”. Title the letter “Notice of Rescission of Loan”. Just quote the loan number, and that you are entitled to the rescission under TITLE 15 > CHAPTER 41 > SUBCHAPTER I > Part B > § 1635.

Here’s the kicker. They are required to respond in 20 days. If you tender your home at the rescission and if they do not respond within 20 days of tender, then they lose their security. Don’t believe me? Check this out:

TITLE 15 > CHAPTER 41 > SUBCHAPTER I > Part B > § 1635 (b) Return of money or property following rescission When an obligor exercises his right to rescind under subsection (a) of this section, he is not liable for any finance or other charge, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, down payment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has delivered any property to the obligor, the obligor may retain possession of it. Upon the performance of the creditor’s obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value. Tender shall be made at the location of the property or at the residence of the obligor, at the option of the obligor. If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his part to pay for it. The procedures prescribed by this subsection shall apply except when otherwise ordered by a court.

Under Title 12: Banks and Banking (eCFR Title 12 226.23 )

PART 226—TRUTH IN LENDING (REGULATION Z)

§ 226.23   Right of rescission.

Please note that:

h) Special rules for foreclosures —(1) Right to rescind. After the initiation of foreclosure on the consumer’s principal dwelling that secures the credit obligation, the consumer shall have the right to rescind the transaction if:

(i) A mortgage broker fee that should have been included in the finance charge was not included; or

(ii) The creditor did not provide the properly completed appropriate model form in appendix H of this part, or a substantially similar notice of rescission.

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Check out the forms in Appendix “H” – which you have NEVER seen before:

H–8  Rescission Model Form (General) (§226.23)

H–9  Rescission Model Form (Refinancing (with Original Creditor)) (§226.23)

BOTH OF THESE FORMS must be presented to you at notice of foreclosure – if they are not the 72 hour clock does not start until you do receive them.

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If you like this part – and everyone should – you’ll like this part even more:

In your Deed of Trust “contract” –

section 3. PAYMENTS – read the stipulations in this paragraph regarding the option of allowing the “borrower” to pay any back payments or amounts in arrears at maturity of the instrument – i.e. it is not possible to foreclosure if you give notice of your election to pay all back payments at maturity.

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We have a comprehensive and legal letter template available in our membership area (It is in Module 0.1) that you can use should you wish to take advantage of this.  Otherwise, just write your lender directly. We highly recommend that you have forensic audit done before submitting this rescission.  You must find proof that your loan had a mistake of more than $35.

This is important news that can mean relief to millions of people facing foreclosure around the country.  If you care about people, then please forward this post to them.  Please put this post on Facebook.  Please spread the news.  Let your friends know about this.

Thank you.

Vince Khan