SCOTUS: NO 3-year right of rescission without a TILA violation – Eat Crow, Garfield

Crow to eat
Time to Eat Some Crow

Dear Neil Garfield:

You’ll find a serving serving of crow in the 8th Circuit’s post-Jesinoski Keiran v Home Capital, Inc., F. 3d 1127 opinion. After reading it, I imagine you will craft a huge apology to your LivingLies blog readers for misleading them for years about the proper understanding of TILA rescission AND of the Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790 opinion.

Keirans propounded the same lame excuse as the Jesinoskis. They signed an acknowledgment of receipt of Right to Cancel disclosures, and later gave the court an affidavit claiming they only received one copy, instead of two, each. They appealed the judgment against them to the 8th circuit, then to SCOTUS which granted cert and remanded for consideration in light of Jesinoski. After trial and appeal, the 8th circuit affirmed the trial court’s denial of rescission and damages.

Keiran relied on the same false legal theory that you have espoused for years about TILA rescission, and yet, in the wake of Jesinoski, SCOTUS, the 8th Circuit, and USDC all agree that TILA rescission does NOT work the way you wish it did. The borrow gets NO 3-year right of rescission UNLESS a TILA violation occurred.

The SCOTUS instructs you from the Jesinoski opinion:

Jesinoski TILA Scribble Photo
Whatever did Scalia Mean?

“The Truth in Lending Act gives borrowers the right to rescind certain loans for up to three years after the transaction is consummated. The question presented is whether a borrower exercises this right by providing written notice to his lender, or whether he must also file a lawsuit before the 3-year period elapses.”

There you have the question before the court: does conditional TILA rescission written notice or notice plus lawsuit within 3 years after consummation? Now the fun part, where SCOTUS explains TILA’s extended, conditional right to rescind requiring a TILA violation:

“Congress passed the Truth in Lending Act, 82 Stat. 146, as amended, to help consumers “avoid the uninformed use of 792*792 credit, and to protect the consumer against inaccurate and unfair credit billing.” 15 U.S.C. § 1601(a). To this end, the Act grants borrowers the right to rescind a loan “until midnight of the third business day following the consummation of the transaction or the delivery of the [disclosures required by the Act], whichever is later, by notifying the creditor, in accordance with regulations of the [Federal Reserve] Board, of his intention to do so.” § 1635(a) (2006 ed.).[*] This regime grants borrowers an unconditional right to rescind for three days, after which they may rescind only if the lender failed to satisfy the Act’s disclosure requirements. But this conditional right to rescind does not last forever. Even if a lender never makes the required disclosures, the “right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever comes first.” § 1635(f).”

garfield photo
Neil Garfield of LivingLies

My point: Neil Garfield, you have bloviated that SCOTUS, when it gets a case like Jesinoski back, will agree with YOUR interpretation of TILA rescission law, that a TILA violation is not a condition of the extended right to rescind. Well, SCOTUS did get precisely such a case in 2015 (Keiran), and the justices and the 8th Circuit panel made it clear that NO 3- year right of rescission exists in the absence of a TILA violation.

But who needs the Keiran opinion when Justice Scalia explained conditional TILA rescission PERFECTLY in the Jesinoski opinion?

Eat some crow. I’ll do you good.


8th Circuit Finally Puts Jesinoski TILA Case to Rest

The Jesinoskis might finally understand that TILA rescission does not work the way Neil Garfield claims. They spent upwards of $750,000 on trial and appeals, and never bothered purchasing a Mortgage Examination so they could go on the attack.  Instead, the case yo-yo’d between trial appellate courts, and the Jesinoskis ended up losing, badly.  Here’s the summary from the most recent opinion at JESINOSKI v. Countrywide Home Loans, Inc., Court of Appeals, 8th Circuit 2018 :

Mortgage loan borrowers Larry and Cheryle Jesinoski received Truth in Lending Act (“TILA”) disclosure documents at their loan closing. Pursuant to TILA and its regulations, borrowers may rescind their loan within three days of closing, but the rescission period extends to three years if the lender fails to deliver “the required notice or material disclosures.” 12 C.F.R. 1026.23(a)(3)(i); see also 15 U.S.C. § 1635(a), (f). Admitting that the lender delivered the required notice (the “Notice”) and material disclosures, but arguing that the lender did not provide the required number of copies, the Jesinoskis sought to rescind their loan on a date just shy of the three-year anniversary of loan execution.

The lender denied rescission, asserting the Jesinoskis had signed an acknowledgment indicating receipt of the required disclosures. The Jesinoskis sued more than three years after closing, alleging TILA violations. The district court dismissed the action as untimely, holding that, even if the three-year limitation period applied, borrowers must file suit and not merely provide notice within the three-year time period. On appeal, our court affirmed, recognizing that our circuit had already taken a position on this issue within an existing circuit split. Jesinoski v. Countrywide Home Loans, Inc., 729 F.3d 1092, 1093 (8th Cir. 2013) (per curiam). The Supreme Court granted certiorari and reversed, holding the three-year limitation period applied to the provision of notice rather than the filing of suit. Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 792 (2015).

On remand, the district court[1] granted summary judgment, concluding the signed acknowledgment created a rebuttable presumption that the Jesinoskis had received the required number of copies. The court also concluded the Jesinoskis failed to generate a triable question of fact rebutting the presumption. We affirm.

Fraudsters Radio

Storm Bradford & Laurie Z’s new radio program exposing frauds and scammers will launch in April. The maiden show will deal with foreclosure, and expose known scammers like Neil Garfield, “stall” attorneys, forensic/securitization auditor companies, and others who are lying and misleading homeowners to their detriment. This maiden show will air April 5th 2018.

Neil Garfield’s Qixotic TILA Rescission Theory Can Lead Borrowers into HELL

Dear Neil Garfield:

I write in response to your comments at your blog article TILA RESCISSION: The Bottom Line for Now and to correct some of your misapprehensions about the Truth in Lending Act.  First of all, your enumerations made some good points,  But then it made some not so good.  Your main baseless contention is that a borrower has the right to rescind under TILA for any reason or no reason at all after 3 days after consummation of the loan. That is dead wrong, for very good reason – it violates the stated purpose of TILA, AND it abuses honest lenders

Your first problem is myopia.  You said TILA was enacted “to prevent unscrupulous banks from screwing consumer borrowers.”  That is only partly true.  Congress stated the purpose of TILA in 15 USC 1601:

“It is the purpose of this subchapter to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.”

  1. The first purpose of TILA is to enable consumers to compare credit terms.
  2. The second purpose of TILA is to protect consumers from inaccurate and unfair billing and credit card practices.

Let us review 15 USC 1635, Rescission.  (a) explains the borrower’s 3-day right to cancel and the creditor’s obligation to provide disclosures of that right and rescission forms to each borrower. (b) explains the loan unwinding or rescission process of lien release and mutual tender. (c) acknowledges the rebuttable presumption of disclosures in the event the borrower signed a receipt. (d) empowers the CFPB to modify or waive rights in a borrower financial emergency. (e) exempts  purchase money and certain other loan activities from TILA rescission.  (f) extends the rescission window to 3 years after loan consummation, or until sale of property or one year after final disposition of a rescission dispute by the court. (g) empowers the courts to award the borrower with relief in addition to rescission for creditor violations of TILA. (h) limits rescission on the basis that creditor supplied imperfect forms that still comply with regulations. (i) allows the borrower to rescind in connection with foreclosure.

It is just plain common sense that the 15 USC 1635(a)(b) TILA 3-day right to cancel a consumer loan that puts the family home at risk does not presume that the creditor is trying to screw the borrower.  Rather, it allows the borrower to change his mind if he finds a more attractive loan deal or just gets “buyer remorse.” That comports with and fulfills the first purpose of TILA above.

The 3-year right to rescind fulfills purpose #2 above.  Thus, the right to rescind under 15 USC 1635(f) gets triggered ONLY by a creditor breach of TILA through failure to give the borrower the requisite, timely, and accurate disclosures.  The regulation at 12 CFR 1026.23(a)(3)i cements the principle in the following language:

“The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer‘s interest in the property, or upon sale of the property, whichever occurs first. In the case of certain administrative proceedings, the rescission period shall be extended in accordance with section 125(f) of the Act.”

You see, ONLY failure to deliver the required notice of material disclosures TRIGGERS the right to rescind within a repose window of 3 years following loan consummation, as above.

THIS is where Neil Garfield’s humbug TILA rescission theory blows a gasket and hits the skids.  HE thinks the borrower may rescind after 3 days even if the creditor perfectly complied with TILA disclosure requirements.

Thus, Neil Garfield is DEAD WRONG in his assessment of TILA rescission law.  Every court in the land that has ruled in a related TILA rescission case has allowed post-3-day rescission ONLY in the face of a TILA breach.

Don Quixote Tilting
Garfield’s Supreme Battle

Neil Garfield confesses to that reality, of course.  But he says all of those judges got it wrong, and that some day the SCOTUS will vindicate him with an opinion that supports Garfield’s Don Quixote Windmill Tilting Theory of TILA Rescission against creditors who did no wrong.

I have to burst your bubble here, Neil.  THAT will NEVER HAPPEN. NOT EVER. Only a BOZO judge would ever agree with your Don Quixote Windmill Tilting TILA Rescission Theory.

Neil Garfield doesn’t stop there.  He seems to think that TILA rescission applies to purchase money loans, and that borrowers get the right to rescind by mailing a rescission notice way after the 3 year repose window slammed shut, such as 8 years after consummation.  Why?  Because, he asserts that nobody really knows when the loan was consummated because nobody really knows who the lender was, and consummation can happen months or years after the borrower signed the loan documents.

To make it worse, he maintains that the outside-the-window, unjustified rescission deprived the court of jurisdiction because it voided the note and security instrument.

I’m bursting your bubble again, Neil, so take note.  A controversy over a rescission gives the court jurisdiction. Furthermore, TILA rescission statutes 15 USC 1635(b) and (g) BOTH mention court involvement:

“(b) Return of money or property following rescission. …The procedures prescribed by this subsection shall apply except when otherwise ordered by a court.”

“(g) Additional relief.  In any action in which it is determined that a creditor has violated this section, in addition to rescission the court may award relief under section 1640 of this title for violations of this subchapter not relating to the right to rescind.”

And so does Regulation Z at 12 CFR 1026.23(d)(4):

“The procedures outlined in paragraphs (d)(2) and (3) of this section may be modified by court order.”

Quite apparently, the lawyers of Congress and the Executive Branch both anticipated that controversies will arise when a borrower tries to rescind without justification well into the loan period.

Neil Garfield seems to think that the creditor bears the onus of suing to prevent the rescission.  That is not true either. If, after the borrower mails a rescission notice, the creditor who did no wrong refuses to release the lien or tender, the borrower has no choice but to sue or wait till the creditor forecloses to raise the rescission issue.  And the borrower must do that timely, within a year after mailing rescission notice or initiation of foreclosure.  Usually, the borrower stops making payments after mailing the rescission notice, and in due course the creditor forecloses, giving the borrower a chance to bring the rescission to a head.

If the creditor breached TILA and balks at releasing the lien after receiving the borrower’s rescission notice, the borrower can sue for statutory and actual damages.  That is just, for a failure to release the lien prevents the borrower from refinancing in order to tender.  Neil Garfield gets that part right.  And enabling the borrower to refinance for tender constitutes the reason that Congress, in crafting TILA rescission law, reversed the common law tradition requiring the borrower to tender first in a rescission.

Take note, Neil Garfield.  The courts do not punish creditors who can prove perfect compliance with TILA and yet refused to release the lien or tender upon receipt of the notice of rescission more than 3 days after consummation.  The courts punish borrowers, just as the trial court punished the Jesinoskis, by denying their rescission effort because the creditor proved compliance with TILA.

Remember the SCOTUS Jesinoski opinion.  The trial court had not reached the question of a TILA violation because it heeded 8th Circuit precedent that the borrower had to sue within 3 years after consummation, and more than 3 years had passed.  THAT was the question for SCOTUS:  must the borrower sue within 3 years IN ADDITION to mailing notice of intent to rescind within 3 years?  SCOTUS answered NO, and remanded with this language:

“The Jesinoskis mailed respondents written notice of their intention to rescind within three years of their loan’s consummation. Because this is all that a borrower must do in order to exercise his right to rescind under the Act, the court below erred in dismissing the complaint. Accordingly, we reverse the judgment of the Eighth Circuit and remand the case for further proceedings consistent with this opinion. It is so ordered. “

The 8th Circuit and Michigan District courts complied. The trial court explained:

“The United States Supreme Court reversed, holding that a borrower exercising a right to TILA rescission need only provide his lender written notice, rather than file suit, within the 3-year period. Jesinoski v. Countrywide Home Loans, Inc.,___ U.S. ___, 135 S.Ct. 790, 792, 190 L.Ed.2d 650 (2015). The Eighth Circuit then reversed and remanded the case for further proceedings. (Doc. No. 38.) After engaging in discovery, Defendants 959*959 now move for summary judgment.”

The bank filed a motion for summary judgment, and the court opined:

“Because Plaintiffs have failed to point to evidence creating a genuine issue of fact that they could tender the unpaid balance of the loan in the event the Court granted them rescission, their TILA rescission claim fails as a matter of law on this additional ground… For the reasons discussed above, Plaintiffs’ TILA claim fails as a matter of law. Without a TILA violation, Plaintiffs cannot recover statutory damages based Defendants refusal to rescind the loan. 1. Defendants’ Motion for Summary Judgment (Doc. No. [51]) is GRANTED. 2. Plaintiffs’ Amended Complaint (Doc. No. [7]) is DISMISSED WITH PREJUDICE.”

You see, Neil, courts have very good REASON for disagreeing with your Quixotic theory of rescission: it makes no sense to allow borrowers to rescind loans after disbursement of funds in the absence of a TILA violation or fraud in the transaction.  Anyone understands this who has read the TILA opening statement of purpose which I recited above.

Let’s get to the real bone of contention here.  I flat don’t care whether you ballyhoo foolish, frivolous, and failing legal theories such as your notions about unjustified TILA rescission.  If you were an old farmer yakking about it with other farmers over a game of dominoes as you pass around a jug of cider, it wouldn’t matter at all.

But, Neil, YOU are not ME!  I could get away with such nonsense, but YOU CANNOT!

You pass yourself off as an authority in the LAW, a learned man, someone whose legal opinions people should heed.  And yet you know that because courts rule against your quixotic idea of TILA rescission, anybody who propounds your delusional theory will LOSE, at the cost of many thousands of dollars in fees (his own and his adversaries’), and then will lose his house to foreclosure if he tried to rescind wrongfully, such as after 8 years or in the face of no TILA violation.

Here’s the shame of your method.  You shamelessly promote your TILA Rescission Package for $3000 or thereabout.  After reading your theory a person would have to be an idiot to pay 25 cents for it, much less three grand.  Sadly, such idiots abound, I guess.  Otherwise, why do you continue to promote the package.

Don’t you worry that someone might report you to the Florida Bar for knowingly violating competence, diligence, and candor requirements?

Bob Hurt
Mortgage Attack

On 2018-02-14 08:25, Livinglies’s Weblog wrote:

Garfield Thinks the Busets got Abused by Florida’s 3DC

Dear Neil Garfield:

Please pass my comments below on to J. Guggenheim, author of the recent screed at the LivingLies blog complaining about the Florida’s 3rd DCA opinion ordering the foreclosure in HSBC v Buset.

Florida’s 3rd Circuit panel echoed similar rulings all over the country as it trounced the specious arguments of the amateur litigators of HSBC v Buset.

“Amateur?” you ask. “Really? You mean Florida attorney Bruce Jacobs, and his muse attorney Neil Garfield?”

Yes, I mean EXACTLY THAT. Those attorneys are AMATEURS. Why? Because they lodged arguments that foreclosure pretense defense attorneys across the land have lodged in their failing efforts to buck against a rightful foreclosure of a mortgage loan that the borrower breached by failing to make timely payments. Only amateurs do something so stupid that has such predictable results.

Oh yes, the amateur did a fake Easter Egg hunt and found the colorful, fake eggs in the form of robosigning, fake “legal” expertise from an out-of-state attorney witness, fake unclean hands, fake inadmissibility of legitimate business records, irrelevant violations of the PSA, irrelevant broken chain of note ownership during securitization, and fake application of UCC article 9 non-negotiability of the note. He somehow got the trial court judge to embrace those absurdities, and send HSBC forth without day, forgetting the 1872 SCOTUS opinion in Carpenter v Longan that the mortgage follows the note. But the 3rd district panel sent that judge back to foreclosure law school for a much needed lesson, and ordered her to deliver a final judgment of foreclosure.

And here’s the ultra-bad news for the borrowers, the Busets: HSBC will demand and get legal fees because the Florida uniform mortgage security instrument says the borrower must pay costs of collecting the debt, and those costs include legal fees.

Guggenheim complains, “The court is methodically eroding every resource and tool a homeowner has and interfering with due process… The court is basically telling loan servicers to perfect their crime before they file to foreclose and the court will facilitate their crime spree.”

No, the court is NOT doing that. It is explaining what was never a resource or tool to begin with, and is making these points:

  1. The note holder or his agent has the right to enforce the note;
  2. The convolutions of robosigning and securitization have no bearing on the foreclosure process, especially when the note was endorsed in blank; and
  3. If you want to beat the bank, show how the borrower got INJURED in the loan transaction.

One might mistakenly think that an attorney who specializes in foreclosure defense would become competent at item 3 above. In reality, such attorneys never develop that expertise because they prefer to bilk the client for a losing foreclosure defense than to do the study and work required to find and prove injuries in the appraising, mortgage brokering, lending, closing, and servicing processes.

For that, the borrower needs a competent MORTGAGE EXAMINER. And then maybe some adventurous attorney will develop the evidence of injuries from the examination report into cogent causes of action with which to hammer the injurious parties into a settlement, or competently argue them before a court of law and obtain monetary awards for the injured borrower.

THAT is what borrowers want from their foreclosure pretense defense attorneys. And strangely, that is what none of them seem inclined to deliver.

Meanwhile, let’s set the record straight. the 3rd District panel did not abuse the Busets. Their attorney did. He, in his blind and Quixotic arrogance, charged ahead with frivolous arguments and cost his clients a small fortune for the privilege of losing their home to foreclosure when, had he done as I recommend above, he might have won money damages for them.

Bob Hurt
Mortgage Attack


Dear Neil Garfield:

You recently complained that the Florida 4th DCA in Sabido v Bank of NY Mellon, the court denied recovery of attorney fees to the Sabidos even though they won at trial.

Clearly you don’t understand the American Rule, or you wouldn’t complain. That rule provides that each party is responsible for paying its own attorney fees unless specific authority granted by statute or contract allows assessment of fees against the other party.

The Florida uniform mortgage security instrument does provide the creditor with the right to recover from the borrower all costs of collecting the mortgage debt, including attorney fees. If Sabidos wanted the same right, they should have written it into the security instrument before signing it.

Florida Statute 57.105 provides for sanctions and recovery of attorney fees by a party that raised unsupported claims. You know about that law first hand because the appellate court awarded recovery of fees to the creditors you sued in the Maslanka case because you lodged unsupported (some might say delusional) claims on behalf of Zdzislaw Maslanka.

The Sabido court based its opinion on the following:

“The borrowers’ motion for fees is denied because the Bank of New York Mellon was not a party to the note and mortgage, and because the borrowers successfully argued that the Bank of New York Mellon was not entitled to enforce the instrument containing the attorney fee provision.”

Ooops.  Maybe the Sabidos should have asked the court to sanction Bank of New York Mellon for lodging an unsupportable claim.  In this case, the borrower stuck his hand in the wrong cookie jar.

Bob Hurt
Mortgage Attack

On 2018-02-13 10:39, Livinglies’s Weblog wrote:

HSBC v BUSET FLA 3rd DCA Remands for Final Judgment of Foreclosure

nuke going off
Sorry, Neil. Bad Idea.

A few months ago, attorney Neil Garfield wrote a glowing endorsement of the Florida 11th Circuit trial opinion in HSBC v Buset sending forth HSBC without day for a variety of reasons, none of them sensible. The Stop-Foreclosure blog echoed Garfield’s sentiment.  In due course the Florida 3rd District Court of Appeals overturned all of the holdings of the Buset opinion, and remanded the case back to trial court for a final judgment of foreclosure, holding the following:

  1. The trial court erred in accepting expert testimony on legal issues;
  2. The note is not merely a secured interest under UCC Article 9, but rather a negotiable instrument under UCC Article 3 and Florida law, in spite of its reference to the mortgage without incorporating it, and the definition of Note Holder does not destroy negotiability of the note;
  3. HSBC, as note holder and “PETE” (Person Entitled To Enforce the note under the UCC) or agent of the PETE, had standing to foreclose, irrespective of the incomplete or broken chain of ownership of the note during its securitization, and does not need to prove ownership or an unbroken chain of ownership of the note, AND the trial court erred by focusing on the irrelevant chain of ownership of the note instead of the relevant PETE;
  4.  Purported violations of the Pooling and Servicing Agreement (PSA) are irrelevant to the PETE status of the note holder and did not destroy HSBC’s standing to sue for foreclosure because borrowers are not parties to or beneficiaries of the PSA, and therefore borrowers may not raise PSA violations as defenses to foreclosure
  5. Assignment of the mortgage did not destroy HSBC’s standing to foreclose because the mortgage always follows the note and the PETE always has authority over the mortgage.
  6. The servicer’s business records were admissible, and the trial court erred by blocking admission of borrower payment history, default letters, and payoff printout.
  7. HSBC did not have unclean hands justifying dismissal

What does this prove?

Well, to begin with, borrowers facing foreclosure cannot trust attorneys like Bruce Jacobs and Neil Garfield to save them from foreclosure.  They will just make failing arguments, and waste a lot of money while leading their victim into the hungry jaws of foreclosure.

Second, it suggests that borrowers must find out how the creditor, servicer, lender, mortgage broker, loan officer, title company, or appraiser injured them in the loan transaction, and then GO ON THE ATTACK.

Where do we find such a strategy in action?

In foreclosure activities across the land every business day.  The borrower injures the creditor by breaching the loan agreement, so the creditor files a foreclosure lawsuit or takes the case to the trustee, and a foreclosure and sale of the property follow in due course.

Of course, creditors and their allies in the loan transaction make a host of errors in most loans, and if the borrower hires a competent examination firm like Mortgage Fraud Examiners to look for tortious conduct, legal errors, contract breaches, or violations of law, the examination will turn up injuries (typical of 95% of the loans in the past 15 years).  Some of the injuries might justify huge compensatory and punitive damages.

Don’t expect a foreclosure pretense defense attorney to look for causes of action in a loan transaction.  Such attorneys usually bilk their clients and withdraw from the case just in time for foreclosure.

Bob Hurt

Maven at MortgageAttack



Neil Garfield Still Scamming And Lying After All These Years

Almost on a daily basis Neil Garfield posts something on his blog that is factually and legally incorrect. He continues to tell homeowners or anyone else who’s dumb enough to listen, that a mortgage transaction borrower can send a Notice of Right to Cancel, to their bank, outside of the unconditional period (3 days), regardless if there actually was a TILA violation; regardless of the type of loan; regardless of the statute of limitations;  regardless of the unwinding process; regardless of “status quo ante;” that a homeowners mortgage transaction is void.

Moreover, he claims that a homeowner does not have to tender; the courts can’t interfere; the bank must acknowledge there is a rescission with 20 days; and if not the homeowner will get his home free and clear; the bank must file a lawsuit; the borrower NEVER has to file a lawsuit; rescission is not a claim; the mortgage transaction was not actually “consummated;” ad nauseum.

The facts are everyone of those claims of his is a known lie, backed by hundreds of cases.

It is clear that Garfield is either insane, or he is knowingly defrauding homeowners.

If anyone thinks they have been defrauded by Garfield, you’re probably right, and the only way to get this cancer off of homeowners is to report him to the authorities, and sue him for either disgorgement of fees, or malpractice.

Judges Spank Garfield Disciple for Scam TILA Rescission Arguments

Neil Garfield, Esq:

You might feel particular chagrin over this trio of judgments that shred some of your favorite TILA rescission delusions.  Litigant Dana Grant-Covert foolishly propounded them in New Jersey Bankruptcy Court.

The judge shredded those frivolous legal theories, leaning heavily on the very good lessons from Mortgage Examiner Storm Bradford’s stellar performance in his own TILA rescission case, which hundreds of courts have cited.

Bradford and his family have luxuriated in their Washington, D.C. area home for 9 years since he initiated rescission of his loan under TILA.  The creditor, for some mysterious reason, has still failed to tender in spite of Bradford’s stated ability to.

Grant-Covert appealed and lost in both NJ USDC and the 3rd Circuit.

She could become the poster child for losing TILA rescission in the Garfield tradition.  She sought TILA rescission of a purchase money loan years after end of the 3 year repose period even though no TILA violation occurred, and claimed the loan was never consummated – you cannot rescind a contract that was not consummated.

Please stop leading your trusting followers over a cliff of litigation disaster.

See the full opinion of the Bankruptcy Court appended below.
Bob Hurt
727 669 5511


Bankr. Court, D. New Jersey, 2016 – Google Scholar
The matter before the court is a core proceeding pursuant to 28 USC § 157(b)(2)(O), and the court has jurisdiction pursuant to 28 USC § 1334, 28 USC § 157(a) and the Standing Order of Reference issued by the United States District Court for the District of New Jersey on July 23,
Related articles


Dist. Court, D. New Jersey, 2016 – Google Scholar
… On February 27, 2007, debtor/appellant Dana N. GrantCovert borrowed $265,900 from Weichert Financial Services in connection with the purchase of her residence on 69 Green Vale Road, Cherry Hill, New Jersey … In re United Healthcare Sys., Inc., 396 F.3d 247, 249 (3d
Related articles


Court of Appeals, 3rd Circuit, 2016 – Google Scholar
Because the parties are familiar with the history and facts of the case, we will limit our discussion to those facts essential to our decision. Appellant filed a Chapter 7 bankruptcy proceeding in June of 2015. Wells Fargo Bank, NA, claiming to be a secured creditor based on a first mortgage
Related articles
******************  In Re Grant-Covert ************************

In Re: Dana N. Grant-Covert, Chapter 7.
Dana N. Grant-Covert, Plaintiff,
Mortgage Access Corp., d/b/a Weichert Financial Services, Wells Fargo Bank, NA, Zucker, Goldberg & Ackerman, LLC, and Reed Smith LLP, Defendants.

Case No. 15-20394-ABA, Adv. No. 15-2041-ABA.United States Bankruptcy Court, D. New Jersey.

November 18, 2016.



ANDREW B. ALTENBURG, Jr., Bankruptcy Judge.

The plaintiff/debtor, Dana N. Grant-Covert (“Plaintiff”), filed an adversary proceeding against Mortgage Access Corp. d/b/a Weichert Financial Services (“Weichert”), Wells Fargo Bank, NA (“Wells Fargo”), Zucker, Goldberg & Ackerman, LLC (“ZGA”), and Reed Smith LLP (“Reed Smith”), seeking to rescind a mortgage pursuant to the Truth in Lending Act, 15 U.S.C. § 1601, et. seq., (“TILA”). Weichert filed a motion to dismiss, which will be granted.

The matter before the court is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(O), and the court has jurisdiction pursuant to 28 U.S.C. § 1334, 28 U.S.C. § 157(a) and the Standing Order of Reference issued by the United States District Court for the District of New Jersey on July 23, 1984, as amended on September 18, 2012, referring all bankruptcy cases to the bankruptcy court. The following constitutes this court’s findings of fact and conclusions of law as required by Federal Rule of Bankruptcy Procedure 7052 material to this decision.


On June 2, 2015 Plaintiff voluntarily filed for protection under chapter 7 of the United States Bankruptcy Code. On July 15, 2015 the Plaintiff filed an adversary complaint in her bankruptcy case against Weichert, Wells Fargo, Reed Smith and ZGA. Doc. No. 1. On November 23, 2015, this court granted a Motion to Dismiss filed by Reed Smith and Wells Fargo Bank (the “Wells Fargo Opinion”). See Doc. Nos. 21, 22. On January 20, 2016, the court dismissed the complaint as against ZGA on its own Order to Show Cause for the failure to obtain relief from the stay against ZGA, which had filed its own bankruptcy case. Doc. No. 43. Thus only Weichert remains as a defendant.

On December 21, 2015 Weichert purported to answer the complaint by letter filed by an assistant vice president, Doc. No. 37, but the court entered an Order to Show Cause why that answer should not be stricken for failure to appear through counsel. Doc. No. 38. Before the Show Cause Order was heard, the Plaintiff filed a Request to Enter Default against Weichert. Doc. No. 40. Weichert not responding to either, the court struck Weichert’s answer on January 19, 2016 and entered default against Weichert on January 21, 2016. Doc. No. 44.

On June 23, 2016, this court entered an Order to Show Cause why the adversary proceeding should not be dismissed as to Weichert for the Plaintiff’s failure to seek default judgment against it. Doc. No. 50. Weichert then filed a Motion to Vacate Entry of Default. Doc. No. 54. This court granted that motion by order dated September 1, 2016. Doc. No. 59. Weichert then filed a Motion to Dismiss Adversary Proceeding, on September 9, 2016, Doc. No. 62, but failing to properly serve it, withdrew that document and re-filed it on September 26, 2016 with proper service. Doc. No. 64. The Plaintiff filed a Certification in Opposition to Motion to Dismiss Adversary Proceeding on November 7, 2016. Doc. No. 72. Weichert then filed a Response to the Plaintiff’s Opposition. Doc. No. 73.

This court held a hearing on November 15, 2016 on the motion, and the matter is now ripe for consideration.


As this is a motion to dismiss, the court must accept as true all of the factual allegations contained in the complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Accordingly, this court recites the facts as alleged by the Plaintiff. In addition, as the Complaint was filed by a self-represented party, the court shall construe it liberally in favor of the Plaintiff. Telfair v. Tandy, No. CIV.A. 08-731(WJM), 2008 WL 4661697, at *3 (D.N.J. Oct. 20, 2008) (citing Erickson v. Pardus, 551 U.S. 89, 94 (2007)). In doing so, it also considers the documents attached to the Complaint, Pryor v. Nat’l Collegiate Athletic Ass’n., 288 F.3d 548, 559-560 (3d Cir. 2002), particularly to the extent that they contradict the Plaintiff’s allegations. See Adler Engineers, Inc. v. Dranoff Properties, Inc., CIV. 14-921 RBK/AMD, 2014 WL 5475189, at *2 (D.N.J. Oct. 29, 2014) (accepting number stated in attached contract rather than number alleged by the plaintiff in the complaint).

On February 12, 2007, the Plaintiff and Jason Covert executed a promissory note and security agreement on her personal dwelling, located at 69 Greenvale Road, Cherry Hill, New Jersey. Complaint, ¶ 32 and ex. B. Upon completion of the transaction, Weichert “transferred servicing right of the loan to Wells Fargo” thus the “Weichert Disclosure Statement being a `lender’ was not `accurate.’ See [15] U.S.C. 1638(a).” Id., at ¶ 33. The Plaintiff further alleges that:

On February 12, 2007 to present, Weichert and its successors and assigns violated multiple counts of Truth in Lending Act by failing to disclose to Plaintiff who the true lender is and using subterfuge to hide the fact that Weichert acted as a “lender” at closing and were paid to pose as the “lender” when in fact the lender is undisclosed unregistered third party.

Id., at ¶ 34.

The Plaintiff argued that, as a result, the transaction “was never consummated” and “[t]he limitation on the right to rescind was extended indefinitely.” Id., at ¶ 35.

The note attached to the Complaint, dated February 12, 2007, identifies the lender as Weichert Financial Services in a loan of $265,900. Complaint, ex. B. The note is signed by the Plaintiff and Jason Covert as borrowers, and is stamped “Pay to the order of Wells Fargo Bank, NA, without recourse Weichert Financial Services.” Id. A mortgage, also dated February 12, 2007, was entered into by the Plaintiff and Mr. Covert, with MERS solely as nominee for lender Weichert Financial Services. Id. The mortgage states that the borrowers mortgaged the property for the purpose of obtaining $265,900, the property “[b]eing the same premises conveyed to the mortgagors herein mentioned by deed dated and recorded simultaneously herewith. The within mortgage is a first purchase money mortgage, the consideration for which constitutes part of the purchase price of the property.” Id., p. 2.

More than eight years later, on March 23, 2015, the Plaintiff sent “Notices of Rescission/Cancellation” to Weichert, Wells Fargo, and Mortgage Electronic Registration Systems (“MERS”). Id., at ¶¶ 37, 40, 43; ex. C. Since none responded within 20 days she contends that the rescission is “affected [sic] and fully enforced and Plaintiff is entitled to the benefits and reimbursements accorded under the TILA.” Id., at ¶¶ 39, 42, 45. She argued that the mortgage is now “extinguished and any rights under the mortgage have terminated.” Id.

The notices sent by Plaintiff and Mr. Covert stated that rescission was based on the following violations:

(a) Weichert Financial Services failed to disclose to Jason Covert who the true lender is and as a result the transaction did not consummate;

(b) Weichert Financial Services did not fund the loan;

(c) Weichert Financial Services posed as a straw entity in dealing with me;

(d) Jason Covert did not receive two signed copies of the loan documents from lender;

(e) Jason Covert did not receive two copies of a Right to Rescind/Cancel Notice as required by law from lender. All consumers with rescission rights must receive two copies of signed loan documents and a Right to Rescind/Cancel Notice from lender.

Complaint, ex. C. An identical list of violations naming the Plaintiff was also included in the letter. Id. Both the Plaintiff and Jason Covert signed the letter under the words “I wish to cancel.” Id.

A signed certified mail card acknowledging receipt of the Notice to Rescind from Weichert supports that the notice was received. Complaint, ex. D. See In re Cendant Corp. Prides Litig., 311 F.3d 298, 304 (3d Cir. 2002) (noting rebuttable presumption that properly addressed and stamped mail was received).

The Plaintiff’s first cause of action seeks enforcement of her rescission of the transaction. Complaint, p. 11. She argues that she had a right to rescind pursuant to 15 U.S.C. § 1635 due to the failure to properly disclose the lender, and her sending notice of that intent effected that rescission. Id., ¶¶ 47-53. She further argues that she is entitled to her costs to enforce the rescission pursuant to 15 U.S.C. § 1640(a)(3). Id., at ¶¶ 56, 58. She states that she acted within the one year statute of limitations of section 1635, measured from the date she sent the notices of rescission. Id., at ¶ 57.

The Plaintiff’s second cause of action seeks enforcement of the rescission under 12 C.F.R. § 226.23. The Plaintiff again argues that rescission was effective as of her mailing of the notices, and that she did not need to first tender the proceeds received under the transaction, citing the Supreme Court’s Jesinoski v. Countrywide Home Loans, Inc., decision. Id., at ¶¶ 62-63, 76. In this count, she adds an allegation that she was never provided closing documents, “called `material disclosures[.]'” Id., at ¶ 67. She argues that the latter entitles her to damages including twice the finance charge, actual damages, and costs, citing 15 U.S.C. § 1640. Id., at ¶ 84.

In her third cause of action, the Plaintiff alleges that the transaction was never consummated. Id., at ¶ 95. “Under these circumstances, the loan is not `consummated’ until the actual lender is identified, because until that point there is no legally enforceable contract.” Id., at ¶ 95. She alleges that because of this, the requirement that she rescind within three years “after the date of the consummation of the transaction” does not apply. Id., at ¶¶ 92, 97.

A fifth count[1] seeks “Enforcement of Restitution” pursuant to 12 C.F.R. § 1026.23(d)(2). The Plaintiff here repeats her allegation about the lender not being identified, the loan not being consummated, and failure of the defendants to file a lawsuit within 20 days of receiving the Notices of Intent to Rescind. Id., at ¶¶ 3, 6. She requests that the court issue a declaratory judgment that the note and mortgage are rescinded and that all monies paid by her, plus fees, costs and damages, should be returned. Id., at ¶ 7.

The Plaintiff’s Prayer for Relief includes enjoining any state court proceeding against her, return of the note marked cancelled, return of the mortgage, actual damages pursuant to 15 U.S.C. §§ 1640(a)(1) and 1611, statutory damages of twice the finance charge pursuant to 15 U.S.C. § 1640(a)(2), costs and reasonable attorney’s fees pursuant to 15 U.S.C. § 1640, return of $71,415.27 plus escrow fees, costs and assessments, and closing costs, compensatory damages and damages for emotional distress, and such other relief as the court deems just and proper. Id., at pp. 23-24.

Finally, the court notes that the Plaintiff filed a no asset chapter 7 case on June 2, 2015. See Fed. R. Evid. 201 (incorporated into bankruptcy cases by Fed. R. Bankr. P. 9017) (the court may take judicial notice of the documents filed by the debtor); Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1200 n. 3 (3d Cir. 1991); Levine v. Egidi, 1993 WL 69146, at *2 (N.D. Ill. 1993); In re Paolino, 1991 WL 284107, at *12 n. 19 (Bankr. E.D. Pa. 1991); see generally In re Indian Palms Associates, Ltd., 61 F.3d 197 (3d Cir. 1995). On Schedule A she disclosed joint ownership of her residence, located at 69 Greenvale Road. She estimated the value of her interest in the property as $167,400 and the amount of the secured claim as $265,000. On Schedule D, she disclosed a creditor of a claim in the amount of $521,181.27 incurred on February 12, 2007 as “unknown unsecured nonpriority ??” and as unliquidated and disputed.


A. Objection to hearing the Motion to Dismiss

Preliminarily, the court notes that at the hearing held on this motion, the Plaintiff objected to Weichert’s asserting a motion to dismiss, stating that Weichert had received “excessive opportunities to answer, in which they failed. I move the court to rule in my favor based on due process and equal protection. A default should be in place. There’s been no excusable reason presented as to why they have neglected. However they have. So this violates my equal protection. Generally speaking, people in my position would not be given multiple opportunities to respond.” Audio, 11/15/16 at 2:05. The court denied the Plaintiff’s request from the bench, noting that the issue of Weichert’s filing of an answer pro se, entry of default, and vacating of the entry of default, had been argued by the parties and decided previously by the court on September 1, 2016. See Doc. No. 59.

B. Motion to Dismiss

Weichert proceeds pursuant to Federal Rule of Civil Procedure 12(b)(6), incorporated into bankruptcy adversary proceedings by Federal Rule of Bankruptcy Procedure 7012(b). Rule 12(b)(6) provides for the dismissal of a complaint if a plaintiff fails to state a claim upon which relief can be granted. Stover v. Freedom Health Care, No. CIV. 13-119 WJM, 2013 WL 2420643, at *1 (D.N.J. June 3, 2013). The moving party bears the burden of showing that no claim was stated. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). The Supreme Court has instructed that the court must engage in “a context-specific task that requires [it] to draw on its judicial experience and common sense” to determine whether the complaint states a plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. at 678.

Weichert argues that as the TILA does not apply to a “residential mortgage transaction,” which includes purchase money mortgages, the remedy of rescission is not available to the Plaintiff. It continues that, even if she had a right to rescission, the claim would be barred by the statute of limitations. Moreover, as these issues were decided by this court in the Wells Fargo Opinion, that decision should continue to govern.[2]

1. Residential Mortgage Transaction

Rescission is not available to a borrower in “a residential mortgage transaction as defined in section 1602[x] of this title[.]” 15 U.S.C. § 1635(e)(1), 12 C.F.R. §§ 226.23(f)(1), 1026.23(f)(1). Section 1602(x) provides:

(x) The term “residential mortgage transaction” means a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained against the consumer’s dwelling to finance the acquisition or initial construction of such dwelling.

15 U.S.C.A. § 1602(x). See In re Ramirez, 329 B.R. at 732 (stating that rescission available only for non-purchase money consumer credit transactions secured by the consumer’s home). Logically, where rescission does not apply, a creditor has no obligation to deliver a notice of right of rescission. Perkins v. Cent. Mortgage Co., 422 F. Supp. 2d 487, 489 (E.D. Pa. 2006).

But the Plaintiff now argues that subsection (x) only excludes a “purchase money security interest arising under an installment sales contract.” She states that since her transaction did not involve an installment sales contract, it is not excluded from the rescission remedy of section 1635.

While the court agrees that the Plaintiff did not enter into an installment sales contract, it disagrees with her reading of section 1602(x). Though a purchase money security interest arising under an installment sales contract is excluded, the statute also expressly excludes a mortgage, a deed of trust, and any other equivalent consensual security interest that is created or retained against the consumer’s dwelling to finance the acquisition or initial construction of such dwelling. The mortgage documents here clearly show that the Plaintiff purchased her home with the proceeds from this loan—a fact the Plaintiff does not deny. As a mortgage was created or retained against her residence to finance her purchase of the residence, it is a residential mortgage transaction that is excluded from the rescission provision of TILA and Plaintiff’s claim fails.

2. Failure to Respond to Notice of Intent to Rescind

It then follows that the Plaintiff’s sending notices of rescission did not bring about a rescission of the note and mortgage. Dalton v. Countrywide Home Loans, Inc., 828 F. Supp. 2d 1242, 1249 (D. Colo. 2011) (holding that section 1635 did not apply to allow the plaintiff to rescind the transaction and thus the three-year statute of limitations in section 1635(f) did not assist her, because the definition under section 1602(x) of exempt transactions includes loans obtained by the plaintiff to finance the purchase of her primary residence). Therefore Weichert did not violate TILA by refusing to honor the purported rescission and it is not liable for damages under section 1640.

But the Plaintiff argues that her rescission attempt was successful because, regardless of whether she was entitled to rescind, Weichert had to respond within 20 days. “The instant suit is to enforce the steps after rescission, and NOT a suit to make the rescission effective by operation of law.” Doc. No. 72, p. 10 (emphasis in original). Plaintiff cited 12 C.F.R. § 226(d)(2) as supporting that Weichert was required to respond, else it would be liable to her.

Section 1635 provides that “[w]ithin 20 days of receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction.” 15 U.S.C. § 1635(b). Thereafter, “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.” Id. “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.” Id.

Section 226.32(d)(2) of Title 12 of the Code of Federal Regulations, cited by the Plaintiff, provides:

(d) Effects of rescission. . . .

(2) Within 20 calendar days after receipt of a notice of rescission, the creditor shall return any money or property that has been given to anyone in connection with the transaction and shall take any action necessary to reflect the termination of the security interest.

12 C.F.R. § 226.23(d)(2).

Both section 1635(b) and section 226.23(d) provide for court discretion, the former stating “The procedures prescribed by [15 U.S.C. § 1635(b)] shall apply except when otherwise ordered by a court.” 15 U.S.C. § 1635(a) (last sentence), and the latter stating “The procedures outlined in paragraphs (d)(2) and (3) of this section may be modified by court order.” 12 C.F.R. § 226.23(d)(4).

As explained in the Wells Fargo Opinion, courts have construed sections 1635(b) and 226.32(d) as not automatically voiding a transaction. “[U]nder § 1635(b), the lender has twenty days to decide whether it will (i) recognize the existence of a rescission right and privately arrange rescission with the borrower and any other interested parties, or instead (ii) dispute the existence of a rescission right and await the borrower’s initiation of suit.Bradford v. HSBC Mortgage Corp., 838 F. Supp. 2d 424, 429 (E.D. Va. 2012) (emphasis supplied). The notice of intent is just that—making the lender aware that the borrower intends to rescind, not a rescission in fact. Id. Thus when a lender does not respond within 20 days, the borrower may, as the Plaintiff did here, file an action seeking to enforce rescission. Id. As explained by the Ninth Circuit Court of Appeals: “Otherwise, a borrower could get out from under a secured loan simply by claiming TILA violations, whether or not the lender had actually committed any. Rather, under the statute and the regulation, the security interest `becomes void’ only when the consumer `rescinds’ the transaction. In a contested case, this happens when the right to rescind is determined in the borrower’s favor.” Yamamoto v. Bank of New York, 329 F.3d 1167, 1172 (9th Cir. 2003) (emphasis in original). See also Lenhart v. Bank of Am., N.A., 2:12-CV-4184, 2013 WL 1814820, at *7 (S.D. W. Va. Apr. 29, 2013) (noting that a creditor might be liable for damages under section 1640 if it improperly refused rescission).

In coming to this conclusion, the Bradford court discussed American Mortgage Network, Inc. v. Shelton, 486 F.3d 815 (4th Cir. 2007), which affirmed that a secured loan “is rendered void only when a creditor voluntarily voids the security interest or a court orders rescission.Bradford v. HSBC Mortgage Corp., 838 F. Supp. 2d at 430, citing Shelton at 821. The Shelton court described this as the majority view of reviewing courts. American Mortgage Network, Inc. v. Shelton, 486 F.3d at 820-21. The Bradford court explained its reasoning:

Because § 1635(b) merely prescribes `procedural requirements’ that a district court may adapt at its discretion, it is clear that mere notice of intent to rescind does not trigger a lender’s obligation to effect rescission immediately given that a lender cannot know with certainty ex ante whether a court will deny rescission or modify the procedure for effecting rescission. In other words, § 1635(b) cannot, at once, be a set of default procedures a court may equitably alter after a borrower’s notice of intent to rescind and, at the same time, require a lender to effect rescission immediately upon receiving such notice.

Bradford v. HSBC Mortg. Corp., 838 F.Supp.2d at 433-34. See Iroanyah v. Bank of Am., N.A., 851 F. Supp. 2d 1115, 1125 (N.D. Ill. 2012) (following Bradford), aff’d sub nom. Iroanyah v. Bank of Am., 753 F.3d 686 (7th Cir. 2014).

Since this court’s Wells Fargo Opinion, at least one more court has agreed with this analysis. In Sluka v. Rushmore Loan Mgmt. Servs., LLC, 16-00357 JMS-KSC, 2016 WL 6275387 (D. Haw. Oct. 26, 2016), the plaintiff similarly argued “that Defendant’s failure to respond to her notice of rescission within 20 days entitles her to rescission even though the notice is time-barred.” Id., at *3. The court explained that “the statute is not self-effectuating and imposes no automatic obligation on Defendant to rescind the mortgage loan.” Id. “Construing the statute otherwise `would give TILA claimants the right to simply walk away with a windfall . . . without any further obligation,’ a result certainly not intended by Congress.'” Id. (quoting Bradford v. HSBC Mortg. Corp., 838 F. Supp. 2d at 429, which was quoting Shelton, 486 F.3d at 820). See Baker v. Bank of Am., N.A., 5:13-CV-92-F, 2014 WL 298909, at *6 (E.D.N.C. Jan. 27, 2014) (same) (appeal pending).

The Jesinoski opinion cited by the Plaintiff is not to the contrary. There, the Supreme Court stated that “The language [of section 1635(a)] leaves no doubt that rescission is effected when the borrower notifies the creditor of his intention to rescind.” Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 792 (2015). But it so stated in determining whether an obligor had to notify a creditor of rescission within three years, or actually sue within three years: “It follows that, so long as the borrower notifies within three years after the transaction is consummated, his rescission is timely. The statute does not also require him to sue within three years.” Id. See Sherzer v. Homestar Mortgage Servs., 707 F.3d 255 (3d Cir. 2013) (same). The Supreme Court was concerned only with the statute of repose. The decision does not stand for allowing a rescission where one has no such right.

Plaintiff’s theory here, that she can rescind by default, is correspondingly incorrect. As explained to the Plaintiff several times throughout this case, where a defendant fails to answer a complaint, the plaintiff must still prove that he or she has cause for relief. Pfeiffer v. Wulster, 09-13388 MBK, 2011 WL 1045355, at *2 (Bankr. D.N.J. Mar. 17, 2011) (stating that plaintiff must demonstrate a prima facie case to be entitled to entry of judgment by default), aff’d sub nom. In re Wulster, ADV 09-2015 MBK, 2012 WL 589564 (D.N.J. Feb. 22, 2012). Thus, even had Weichert not appeared in this proceeding, the Plaintiff would not have won her case, as she has no right to rescind under TILA.

3. Statute of Limitations

Both Weichert and the Plaintiff are correct on parts of their statute of limitations arguments. A creditor who fails to comply with any requirement under section 1635—which provides for rescission—may be liable for certain damages, including “in the case of any successful action to enforce the foregoing liability or in any action in which a person is determined to have a right of rescission under section 1635 or 1638(e)(7) of this title, the costs of the action, together with a reasonable attorney’s fee as determined by the court[.]” 15 U.S.C. § 1640(a)(3). An action for damages for violation of section 1635 may be brought within one year from the date of the occurrence of the violation. 15 U.S.C. § 1640(e). Thus, the Plaintiff is correct that she had one year from Weichert’s failure to respond to her Notice of Intent to Rescind to bring a lawsuit to seek damages for failure to rescind. She sent those notices on March 23, 2015 and filed this adversary proceeding on July 15, 2015, thus was within the one year period.

But an obligor’s right to rescind runs “until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter, whichever is later.” 15 U.S.C. § 1635(a). If the creditor never delivers the material disclosures, as alleged here, then an obligor has “three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first,” to assert a right of rescission. 15 U.S.C. § 1635(f); 12 C.F.R. § 226.23(a)(3). The Supreme Court has stated that the latter “talks not of a suit’s commencement but of a right’s duration.” Beach v. Ocwen Fed. Bank, 523 U.S. 410, 417 (1998). This has been interpreted to mean that, rather than a statute of limitations, the three-year period is a statute of repose. In re Cmty. Bank of N. Virginia, 622 F.3d 275, 301 n. 18 (3d Cir. 2010), as amended (Oct. 20, 2010). Statutes of repose are not subject to extension by application of equitable tolling. Williams v. Wells Fargo Home Mortgage, Inc., 410 Fed. Appx. 495, 499 (3d Cir. 2011). Thus the three-year period is absolute. Luther v. Wells Fargo Bank, 4:11CV00057, 2012 WL 4405318, at *4 (W.D. Va. Aug. 6, 2012).

Therefore, even if the Plaintiff had a right to rescind, because she did not seek to rescind within three years from the date of consummation of the transaction, she cannot sue to enforce rescission or for damages for failure to rescind. The transaction occurred on February 12, 2007. She sent the Notices of Intent to Rescind more than eight years later, on March 23, 2015. Since she did not timely rescind, she has no cause of action for failure to rescind. Smith v. Fid. Consumer Disc. Co., 898 F.2d 896, 903 (3d Cir. 1990) (“The Coplins’ entitlement to statutory damages under 15 U.S.C. § 1640 is, therefore, wholly dependent upon, and flows directly from, their entitlement to rescissory relief.”); Maines v. Guillot, 5:16CV00009, 2016 WL 3556258, at *3 (W.D. Va. June 16, 2016) (“Because the plaintiff no longer had the right to rescind her 2005 loan transaction at the time foreclosure proceedings were initiated in 2015, she has no plausible claim for damages under TILA.”).

The Plaintiff argues that the statutes of limitations never ran because “the transaction was never consummated as alleged in the complaint, a fact that must be taken as true on the 12(b)(6) motion.” The basis of that allegation in the Complaint was that the “true lender” was never disclosed. But the Plaintiff also alleges that “Upon completion of the signing of the loan documents on February 12, 2007, Weichert has transferred servicing right of the loan to Wells Fargo [sic] Weichert Disclosure Statement being a `lender’ was not `accurate.'” Complaint, ¶ 33. Lenders and servicers are two distinct roles: Wells Fargo being the servicer did not negate Weichert being the lender. The mortgage documents the Plaintiff attached to her Complaint clearly show that Weichert originated this mortgage. See Jiaxing Hongyu Knitting Co. v. Allison Morgan LLC, 11 CIV. 09342 AJN, 2013 WL 81320, at *6 (S.D.N.Y. Jan. 8, 2013) (stating that documentary evidence attached to a complaint that contradicted the allegations of the complaint may render the allegations insufficient to defeat a motion to dismiss). That Weichert transferred it after consummation does not mean either than the transaction was not consummated or that Weichert was not the lender.

The Plaintiff also asserts that the transaction was not consummated because she cancelled it in 2015 when she sent her notices of rescission. “Consummation means the time that a consumer becomes contractually obligated on a credit transaction.” 12 C.F.R. § 226.2(a)(13). The Plaintiff alleged in her Complaint that “On February 12, 2007, in anticipation of a home loan in the amount of $265,900.00, Dana Grant-Covert executed a promissory note and security agreement on Plaintiff’s personal dwelling[.]” Complaint, ¶ 32. Thus she admits that she entered into the transaction. Indeed, had the loan transaction never consummated, the Plaintiff could not have purchased her residence. And she could not later cancel something that did not occur in the first place.

The Plaintiff also cites Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790 (2015), for the proposition that the statute of limitations did not run. But as explained above, Jesinoski held that a borrower need only send a written notice of intent to rescind within three years of the transaction, not file suit within that period.

4. The Accardi doctrine

One argument of the Plaintiff remains. In her opposition to the Motion to Dismiss, she asserts that:

This Court is bound by the Accardi Doctrine and cannot decline jurisdiction by dismissing the complaint, such action would constitute an abandonment of, inter alia, multiple Supreme Court Precedent, misapplication of the Rooker-Feldman Doctrine, misinterpretation and misapplication of TILA and Regulation Z, violation of the Federal Rules of Civil Procedure which govern almost all litigations in this Court; and in doing so the Court would not construe the Federal Rules of Evidence to secure fairness to the end that the truth may be ascertained and proceeding justly determined in accordance with the Accardi Doctrine.

Doc. No. 72, p. 9.

The Plaintiff argues that the doctrine, based on United States ex rel. Accardi v. Shaughnessy, 347 U.S. 260 (1954), stands for the proposition that administrative agencies must follow their own regulations. She alleges that this court is a federal agency, citing 28 U.S.C. § 2671. Id., pp. 8-9.

The Accardi decision held that an agency’s failure to comply with its own rules automatically nullified its actions. Leslie v. Attorney Gen. of U.S., 611 F.3d 171, 178 n.4 (3d Cir. 2010). The Third Circuit Court of Appeals distinguished this to apply only where the regulation was “promulgated to protect fundamental statutory or constitutional rights[.]” Id., at 178.

This doctrine has no application to this case, as this court is not a federal agency. Section 2671 of Title 28, cited by the Plaintiff, defines agencies only for the purpose of the Federal Tort Claims Act, which “protects Federal employees from personal liability for common law torts committed within the scope of their employment, while providing persons injured by the common law torts of Federal employees with an appropriate remedy against the United States.” Pub. L. 100-694, § 2, Nov. 18, 1988, 102 Stat. 4563. It is not applicable here.

The court knows of no regulations applicable to bankruptcy courts and the Plaintiff did not proffer any. Rather, the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure govern cases brought in this court. Dismissing an adversary proceeding for failure to state a cause of action under Federal Rule of Civil Procedure 12(b) (incorporated into adversary proceedings by Federal Rule of Bankruptcy Procedure 7012), is not a declination of jurisdiction, but a proper exercise of the court’s jurisdiction over adversary proceedings.


The Plaintiff failed to state causes of action against Weichert, the Motion to Dismiss all counts against Weichert will be granted.

An appropriate judgment will be entered consistent with this decision.

The court reserves the right to revise its findings of fact and conclusions of law.

[1] The Plaintiff’s fourth count alleges violation of 15 U.S.C. § 1611 by Wells Fargo and ZGA and therefore is not relevant here.

[2] Weichert’s argument that the court’s decision as to Wells Fargo applies here and cannot be challenged now by the Plaintiff is well placed.

The “law of the case” doctrine reflects courts’ general reluctance to reconsider matters soundly decided. “The doctrine is designed to protect traditional ideals such as finality, judicial economy and jurisprudential integrity.” In re City of Phila. Litig., 158 F.3d 711, 717-18 (3d Cir. 1998). In many ways, “law of the case” disputes are the opposite side of the motion for reconsideration coin. The only difference between the two is the filing party: prevailing parties or similarly-situated parties seek to apply the “law of the case” against subsequent parties in similar circumstances, and losing parties seek reconsideration of the adverse decision. Not surprisingly, the Third Circuit has adopted the same basic “extraordinary circumstances” framework for reviewing “law of the case” disputes that applies to motions for reconsideration: the “law of the case” doctrine does not apply where “(1) new evidence is available; (2) a supervening new law has been announced; or (3) the earlier decision was clearly erroneous and would create manifest injustice.” In re City of Phila. Litig., 158 F.3d at 718 (citing Pub. Interest Research Group of N.J., Inc. v. Magnesium Elektron, Inc., 123 F.3d 111, 116-17 (3d Cir. 1997)); cf. N. River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir. 1995) (motion for reconsideration standard). However, the “law of the case” doctrine only applies to a court’s decisions of law. See, e.g., In re City of Phila. Litig., 158 F.3d at 718; Wright & Miller, Federal Practice and Procedure § 4478. In other words, dicta does not have precedential value such that a court may consider a matter previously decided.

Falor v. G & S Billboard, CIV A 04-02373(HAA), 2008 WL 5190860, at *2 (D.N.J. Dec. 10, 2008) (stating that law of the case mandated dismissal of case against defendant since case had been dismissed against other defendants on same products liability claim); McKowan Lowe & Co. v. Jasmine, Ltd., CIV. 94-5522 (RBK), 2005 WL 3500032 (D.N.J. Dec. 20, 2005), aff’d, 231 Fed. Appx. 216 (3d Cir. 2007) (holding that as absence of loss causation was now the law of the case, defendants were entitled to summary judgment).

However, as the Plaintiff is pro se, the court finds it preferable to issue this full opinion, explaining again its reasoning and why any variations on the arguments that the Plaintiff presented here yet do not entitle her to denial of this motion to dismiss.

Garfield Rescission Theory Leads Borrowers into Trouble


Neil Garfield:

I write to disagree with your explanation of TILA rescission in your blog entry “Rescission is not a claim – No Lawsuit Necessary” (appended below) because it leads borrowers into trouble.

You wrote:

“Rescission is an event. Either it happened or it didn’t. If the notice was sent, it happened. If the notice wasn’t sent then it didn’t happen.”

Rescission is a process, not an event.  The process consists of several events including mutual tender and release of lien.  If the parties don’t agree, one or the other must act to press the issue.  Typically the creditor will foreclose or the borrower will sue to enforce the rescission or raise the rescission defensively in foreclosure or bankruptcy.

TILA allows the borrower to rescind for any or no reason within 3 days after loan consummation.  Rescission beyond that requires timely notice by the borrower to the creditor AND a TILA violation – creditor failure to deliver required disclosures to the borrower.

TILA rescission more than 3 days after consummation requires the borrower to mail notice of intent to rescind to the creditor, tender and release of lien by the creditor, tender by the borrower, and finally a handover of respective properties to finish unwinding the transaction and return the parties to their condition prior to the loan, as though the loan had not occurred.

TILA and Regulation Z impose a condition upon initiation of the rescission process:  failure of the creditor to deliver required disclosures or notice.  If this condition does not exist, the borrower has no right to rescind more than 3 days after consummation under TILA .

Regulation Z – 12 C.F.R. 1026.23(3)(i).

“If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer‘s interest in the property, or upon sale of the property, whichever occurs first.”

The above three year repose window never opens if the creditor timely delivered the required documents to the borrower. If the borrower sends the creditor a notice of intent to rescind, and the the creditor knows he did not violate TILA, then the creditor will typically acknowledge the notice of intent to rescind, deny the rescission, and then take no further action until the time comes to foreclose.

The process can continue or abort in a number of ways.

The process will abort if the loan does not qualify for TILA rescission, OR if no TILA violation occurred, OR if the creditor fails to tender and release the lien and the borrower and creditor fail to raise the issue in court, OR if the borrower fails to tender and the creditor sues, OR if the court orders a dismissal of the borrower’s TILA rescission complaint for cause.

In many cases, the creditor receives the notice of intent to rescind, acknowledges it, and rejects it. Often the borrower, after having signed an acknowledgement of receipt of the disclosures, will claim he did not receive them. The court always rules in favor of the creditor in such cases unless the borrower can demonstrate that he left closing without the disclosures and the creditor never mailed them.

The court may modify the rescission.  In some cases, the court will help the borrower and creditor work out the borrower’s inability to tender, such as through a periodic payment program.  In that case the TILA rescission process can take a long time to finish.

You wrote:

” The moment that a rescission notice is dropped in US Mail the note and mortgage are void ‘by operation of law.'”

As I stated above, and as corroborated by 12 C.F.R. 1026.23(3)(i), the mortgage does not become void upon mailing of notice of rescission UNLESS the creditor violated TILA by not timely delivering the required notices/disclosures to the borrower.

I imagine if the creditor knew he did not violate TILA and the borrower recorded the rescission notice with the county clerk to cloud the creditor’s mortgage, the creditor would most likely initiate foreclosure or sue to remove the cloud.

Yes, the elements of TILA rescission can become draconian against the creditor who does not timely tender and release the lien.  But ONLY if he violated TILA as above.

You wrote:

“it remains a question of fact as to the exact moment of consummation — assuming there was any ‘consummation’ with anyone in the chain upon which the present forecloser relies.”

No court that I know of has embraced your pet theory that consummation never occurred because the lender was unknown.  If you have a supporting citation, please pass it over to me.

The name of the lender appears on the note, and the borrower, in signing it, states “For a loan I have received, I hereby promise to pay…”  Now, the funds might be withheld for 3 days to allow the unconditional right to cancel to expire, so as to ensure that the borrower doesn’t abscond with funds and then cancel.  But once the borrower has signed the note and security instrument and the closer has released the funds to the proper parties, that loan has become consummated.

I consider reckless your preachment that borrowers should send notice of intent to rescind more than 3 years after consummation.  A borrower who does that will stop making mortgage payments and that will put him in jeopardy of foreclosure, all in the hope that some court will idiotically embrace your theory that consummation did not occur at or within 3 days of closing.

A borrower who wants to prove some tardy date of consummation should bring the question before a judge in a declaratory judgment action before sending out a notice of intent to rescind.

In summary, Neil, you are

  1. wrong about TILA rescission being merely an event,
  2. wrong about the 3-year right to rescind being unconditional, and
  3. wrong about consummation occurring a long time after closing.I have no trouble pulling up hundreds of post-Jesinoski court opinons to prove my assertions above.  I have shown a bunch of them at my web site.  I have yet to see any court opinion supporting your theory on the issues above.

I find it appalling that you, a seasoned attorney, so blithely lead borrowers astray with a frivolous and failing legal theory that can get them into a lot of trouble with a mortgage.

Bob Hurt
727 669 5511

On 02/01/2018 08:35 AM, Livinglies’s Weblog  (Neil Garfield) wrote:

Rescission is not a Claim — No Lawsuit Necessary

To those who think that this a gotcha moment consider this: Your lack of understanding of civil court procedure is what is preventing you from seeing the obvious — claims are not granted relief unless they are litigated — no matter how “obvious” the outcome. Rescission is an event not a claim. It’s the contest of the rescission that is the claim. It is therefore the contest of rescission that must be litigated.

Rescission is not a claim. Rescission is an event. Either it happened or it didn’t. If the notice was sent, it happened. If the notice wasn’t sent then it didn’t happen.

If the rescission is contested it is still effective and the note and mortgage are still void. If anyone thinks the rescission was not sent under the right circumstances they must establish standing and sue to vacate the rescission — not just ignore it. SCOTUS specifically stated that there is no difference between a contested rescission or an uncontested one. They are both effective on mailing.

Those who take a contrary view are ignoring basic procedural law. Under their “theory” the fact that someone contests it is enough to require the borrower to prove a “claim.” That is exactly the opposite of what is stated in the statute and what was confirmed by a unanimous SCOTUS opinion in Jesinoski. There is no “claim” of rescission under the TILA rescission statute. There is only an event that either happened or didn’t happen.

Since this is a jurisdictional matter it can be raised at any time. Assuming nobody has stepped in to plead and prove ownership of the debt, there is nobody with standing that can attack the rescission. Once the 20 days expires, and no court has extended the period during which the actual creditor could bring a claim, the “lender” duties require compliance no matter how wrongful they think the rescission notice was sent.

If the lender remains in noncompliance for more than a year, their right to claim tender of the amount due expires by the express terms of the TILA statute. So at that point the note is void, the mortgage is void, the loan contract is canceled and the right to receive the principal back is time barred.

The standing issue is the key. The moment that a rescission notice is dropped in US Mail the note and mortgage are void “by operation of law.” Any “holder” of the note or mortgage is no longer the holder of anything that is legally relevant. The note and mortgage don’t exist. Hence while some named party might have had standing to foreclose they no longer have standing to foreclose or contest the rescission unless they can plead and prove standing by establishing themselves as the owner of the debt.

Some people consider it a slam dunk against the borrower if the rescission notice is sent more than 3 years from presumed consummation — i.e., the date on the documents. But we all know that funding usually doesn’t occur until hours, days, weeks and sometimes months after the loan documents are signed. So consummation is a question of fact UNLESS the homeowner admits that consummation of a loan contract occurred on specific date more than three years before the notice of rescission.

Many people, including those who see rescission as I do (as SCOTUS does) believe that SCOTUS will ultimately carve out an exception to accommodate the three year limitation on rescission under TILA. I admit that is possible but here is why I think they won’t.

In order to establish a doctrine that a rescission is to be conclusively presumed to be beyond the three year limitation you need a statute, not common law, stating exactly that. The Courts lack the authority to invent a new law of evidence. While it may be “obvious” to some people that the rescission notice was sent more than 3 years after consummation, it remains a question of fact as to the exact moment of consummation — assuming there was any “consummation” with anyone in the chain upon which the present forecloser relies.

Proving the loan and the status of the “lender” would therefore be a requirement to establish that the rescission was sent beyond three years from consummation. Proving that requires showing the holy grail of foreclosure litigation that the banks have successfully hidden since the 1990’s — who paid who for what and when?

Could SCOTUS go the other way? Of course! There is no appeal from their decision. I’m more optimistic that eventually SCOTUS will rule consistently with the Jesinoski decision. That means that if anyone has a gripe about a rescission they must file a lawsuit, establish standing and then plead and prove their case to vacate the rescission.