Today a Federal Judge in South Florida granted motions to dismiss (with prejudice) filed by parties against whom a homeowner had filed suit claiming that those parties should be enjoined from using the notes and mortgages in his case. The claim was based upon allegations of a recent TILA rescission and that consummation of the loan contract was a question of fact. I am the attorney of record. No decisions have been made by the client as to the next steps of Rehearing and/or Appeal.
This decision underscores what I have been saying for months as judges across the country continue to resist the idea that rescission actually cancels the loan contract and voids the note and mortgage regardless of when or why it is sent. The various conditions for rescission are (a) questions of fact that should not be presumed and (b) can only be raised by a party who has legal standing without reference to the note and mortgage. The court in this case disagreed. Based upon what we are seeing across the country, most trial courts are looking at TILA rescission the same way. AND that means that relief will only come on appeal in most cases.
So the conclusion to be reached here is that those lawyers who reject this strategy are right most probably in a trial court. Whether they are right when we get to the appellate level is another story --- but, as I have repeatedly said over the last ten years, the trial judges don't like TILA and they hate TILA Rescission. It took about 10 years for the Jesinoski case to ripen into a decision favorable to borrowers. Trial judges are still resisting the direct instruction from the Supreme Court.
Even where rescissions are sent within the three years (starting from the date of signing, not necessarily the date of consummation), Judges are continuing to ignore TILA rescissions or enter orders that deny the homeowner's claim for relief based upon a valid, legal rescission. Even though the statute specifically provides how rescission becomes effective and when, courts don't like it and are refusing to use it even after Jesinoski v Countrywide was decided by SCOTUS.
So the long and short of this, for now, is that I want to repeat with emphasis that rescission ought to be the simple remedy that Congress passed in a very clear procedural administration of the disclosure requirements, but it still appears that the courts and the banks are going to make it as tough as they did before the Jesinoski decision.
My opinion remains the same as 10 years ago when I first looked at TILA rescission. This was meant to level the playing field. If Judges were not so intent on reading in "facts" and "law" into the TILA rescission statute, this remedy would have been extraordinarily effective at eliminating or curtailing the number of foreclosure sales. In the end, as I predicted ten years before when everyone was saying that my "theory" about rescission was completely wrong, my opinion will most likely be upheld --- AGAIN.
This is why each case must be carefully reviewed with a report that details the possible strategies and likely outcomes at the trial level, at the appellate level and ultimately at the highest level of the court system. TILA Rescission was obviously intended to be a "magic bullet" to force compliance with lending disclosures on the banks. The law did not fail. It is clear on its face. But Courts are clearly resistant to entering an order that could put other mortgage loans in doubt. Neil Garfield