I have denigrated Neil Garfield’s legal conclusions for years, ever since I realized that foreclosure defense amounts to little more than a scam lawyers use to bilk their clients out of monthly fees for the privilege of leading them by the hand into the jaws of loss of the mortgaged property.
Most recently, since the SCOTUS Jesinoski opinion a year ago, Garfield has claimed that the creditor must sue in order to avoid serious consequences for failing to remove the lien and tender money upon receipt of a notice of rescission. Naturally, I disagreed vehemently with that nonsense, and you can read it in other posts on this blog.
Well, yesterday, Garfield finally admitted that he had not understood TILA Rescission, and that it operates the way Mortgage Examiner Storm Bradford and I said it did. That is, the borrower must tender after the creditor tenders, but the creditor will NEVER tender if he believes he did not breach TILA or the borrower did not send him timely and proper notice of rescission, or if the borrower cannot tender (which most cannot because most have underwater loans so they cannot refinance or sell the property to raise the tender money).
A court in foreclosure issue may order debt setoffs for TILA violations, even though the borrower cannot tender. I know of only one reason the court will order a rescission when the borrower cannot tender: if the lender or creditor cheated or deceived the borrower. And Garfield has not discussed that as far as I know.
Read Garfield’s explanation below, and realize that Garfield seemed to suggest to his readers that almost everyone with a home loan should try to rescind. He did that to sell his rescission packages, which I considered a big scam to bilk confused borrowers out of more money.
By the way, I don’t necessarily endorse anything in Garfield’s article below other than that he made a horrifying mistake in explaining TILA rescission to others, all while pretending to be an expert in the law.
This article corrects prior articles in which I stated that there is a one year statute of limitations on filing claims under the Truth in Lending Act (TILA). After reviewing the new statutory scheme (post Dodd-Frank) it appears that the limitation language upon which I had based my prior opinions no longer exists. There still is a one year statute of limitations, but as you can see, it is now a little more complex.
There is still language to the effect that there is a one year limitation starting with the date of the occurrence of the violation. BUT then there is a provision that states the limitation is 3 years IF the violation occurs as set forth in 15 USC 1639 (disclosures in mortgage loans). But then the TILA statute (§1640) returns to the one year period, stating that as a defense, one can still bring the claim for TILA violation after one year (apparently without limitation).
Perhaps I didn’t notice before that the wording below was unruly. But upon my review now, it seems to me that to be on the safe side, one should bring an action to enforce a rescission notice, within one year of sending the notice, although the more accurate way to interpret this would be one year after the “violation occurred” which is the day after the party fails to comply with the TILA rescission duties. This would be approximately 1 year plus 25 days from the date that the TILA rescission notice was mailed.
The counterpart for this lies in 15 USC 1635 wherein those duties under TILA statutory rescission are set forth. It appears to me that the alleged creditor also has no right to bring an action to collect what is left of the debt after the expiration of one year. I reach this conclusion because the right of the creditor to claim any money from the borrower is entirely dependent upon FIRST fulfilling ALL of the duties under the statute — return canceled note, release encumbrance and pay borrower all money paid by borrower and paid to third parties as compensation arising out the origination of the loan. Those duties are conditions precedent to making a claim for anything against the “borrower.”
THIS MAKES TOTAL SENSE ONCE YOU THINK ABOUT IT. If the creditor has been unable or unwilling to comply with the TILA Rescission Statute, and has elected NOT to file a lawsuit within the twenty day period to challenge the rescission and demand that it be vacated, then it follows that the rescission was completely justified, to wit: all the disclosure violations that the TILA Rescission Statute was meant to punish banks for violating are and must be deemed true. Since the banks violated statute, public policy and probably some criminal laws, they should get the punishment that Congress decided was appropriate.
Starting with the date that the “creditor” started violating the TILA Rescission statutory duties, at the end of one year, it would appear that the entire transaction is dead. The loan contract, note and mortgage are rendered void at the time the notice of rescission is dropped in the mailbox (USPS). That happens by operation of law regardless of what anyone does.
The debt lives on but it is cut down to the principal since no finance charges or fees can be claimed by the alleged creditor. But, if at the end of one year, the “borrower” has not brought an action to enforce the rescission, it would seem that the borrower is at least subject to a defense that he/she is time-barred from bringing the enforcement action after one year. After 3 years, that is certainly true — as long as we are talking about the date of the violation.
The date of the violation is the 21st day after receipt of the notice of rescission. Thus the action to enforce the rescission matures on the date of violation of TILA. That is the date when the time expires for compliance (20 days after receipt of the notice of rescission) — unless the alleged creditor has, in accordance with the statute filed an action to change the “order” of things as they are set forth in the TILA rescission statute. With mailing times that might be as late as 25 days+ from the date the notice of rescission was sent. That doesn’t change when the rescission became effective (i.e. canceling the loan contract, voiding the note and voiding the mortgage); that date cannot be changed except by legislation, to wit: it is the date of mailing the rescission notice.
So I conclude that after one year starting with the 21st day after the notice of rescission was received, the borrower can no longer enforce the rescission duties. But before everyone gets wild about this, the rescission is still effective by operation of law, which is to say the note and mortgage are void. When such a homeowner files to quiet title he/she can appropriately assert that the mortgage is void by operation of law and should be removed from the public records. In my opinion it is only when the lien is void (not voidable or unenforceable) that it is appropriate for a court to quiet title to the petitioner.
At that point, the alleged creditor, if there is one, has no defense to quieting title, as I see it. And the creditor is barred from asserting any claim against the “borrower” because of the express wording of the TILA rescission statute 15 USC 1635, which says that no such claim can be made without complying with the three TILA Rescission duties under the statute.
Being in violation of those duties after 21 days from receipt, the creditor can make no claim for the underlying debt which has been trimmed by statute to only the principal AFTER releasing the lien, returning the canceled note and paying the borrower all the money set forth in the statute which is to say every penny ever paid by the borrower and every penny paid as compensation for the origination of the loan.
So the situation reaches a sort of equilibrium, to wit: the “borrower” can no longer make a claim for money to be paid under the third duty set forth in TILA rescission statute and the “creditor” can no longer make a claim for any part of the debt. The borrower is left to clear title on his/her own. (That is why I strongly recommend recording the rescission notice, since it would, by operation of law, effectively release the lien by self-help).
The creditor who failed to comply with the statute or contest the rescission loses everything, but is no longer liable for damages due to non compliance with the three duties under the TILA rescission statute — unless the “creditor” continued to wrongfully pursue foreclosure without complying with the TILA rescission statute. Thus the borrower cannot bring a claim against anyone to enforce the duties under the TILA Rescission statute, but the decision to ignore the notice of rescission is then met with a wrongful foreclosure action, since the rescission was effective by operation of law on the day it was mailed.
THIS IS WHY IT SO IMPORTANT TO RECOGNIZE THE DIFFERENCE BETWEEN A SUIT ENFORCING THE RESCISSION AND A SUIT FOR DAMAGES FOR WRONGFUL FORECLOSURE OR SUING TO QUIET TITLE BASED UPON THE EXISTENCE OF THE RESCISSION. ANY OTHER INTERPRETATION WOULD BE REWRITING THE TILA RESCISSION STATUTE. Such “interpretations” would render the text of the statute and the text of the SCOTUS opinion in Jesinoski as meaningless — because such an “interpretation” would again require a judicial act before the rescission could be effective at law. That outcome has specifically been eviscerated by all three branches of government plus the Federal Reserve.
AND this is a good time to remind the attorneys reading this that attorneys fees are recoverable as damages under the Wrongful Act Doctrine (see the Florida Bar Journal last month). So in the wrongful foreclosure claim which I assume exists in virtually every case where the notice of rescission was sent, foreclosure defense attorneys can turn the filings of opposing counsel on their head — using their rendition of billable hours as a guide to the claim for being required to defend an action that should never have been filed for foreclosure.
15 USC 1640(e) Jurisdiction of courts; limitations on actions; State attorney general enforcement. Except as provided in the subsequent sentence, any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation [e.s.] or, in the case of a violation involving a private education loan (as that term is defined in section 1650(a) of this title), 1 year from the date on which the first regular payment of principal is due under the loan. Any action under this section with respect to any violation of section 1639, 1639b, or 1639c of this title may be brought in any United States district court, or in any other court of competent jurisdiction, before the end of the 3-year period beginning on the date of the occurrence of the violation.[Editor’s note: This would appear to extend the statute of limitations regarding rescission enforcement to three years, but §1635 is not specifically mentioned].This subsection does not bar a person from asserting a violation of this subchapter in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action, except as otherwise provided by State law. [e.s.] An action to enforce a violation of section 1639, 1639b, 1639c, 1639d, 1639e, 1639f, 1639g, or 1639h of this title may also be brought by the appropriate State attorney general in any appropriate United States district court, or any other court of competent jurisdiction, not later than 3 years after the date on which the violation occurs.
One thought on “Garfield Admits He Didn’t Grok TILA Rescission”
Garfield is an incompetent, who not only should be disbarred, but belongs in jail for scamming tens of thousands of homeowners.