Tough questions about the terrible diseases of greed and stupidity

On the Living Lies blog…

Michael Keane writes:

In this day and age, if a comparison were to be made, say, to a disease afflicting the human race, I would suggest it is presently, best defined as Greed.

For example, if law enforcement and the judiciary and the lawyers in our current, life threatening dilemma could be compared to a Jonas Salk, our families and children would be crippled, awaiting the day their final breath is forced from their bodies.

These are the types of people that think to themselves, while watching our country, and the middle class throughout the world degrade daily, “Hey look at that suffering family, before I go to try and help them, I wonder what type of extortion I can employ first… ? After all, what’s in it for me?”.

I look forward to the day We The People round them up and give them a good, old-fashioned @ss kicking.

Bob Hurt responds:

I consider stupidity an even worse, more epidemic and destructive disease, than greed.  A smart, greedy person will nearly always take unfair advantage of stupid people.  Smart people, however don’t make such easy targets for the greedy.

We have a problem with stupidity and with irresponsibility in the USA.  Most of the stupid are born stupid because they have stupid parents.  Thus stupidity is a genetic defect.  And by definition, stupid people do stupid things.  They don’t reason well, they cannot evaluate relative importances well, and they cannot solve problems well.  So, they gravitate to crime and welfare abuse to get by.  Stupid people are reliably irresponsible.

Other irresponsibles, aside from the stupid, include the lazy, those with bad rearing, those with deficient education and experience, the insane, the criminal, and people of poor judgment like those under 25 years of age whose brains have not fully developed.

25% of the US population falls in the category of stupid – that many people lack the cognitive ability (IQ of 85 or better) to graduate from a normal (non-dumbed-down) high school.  At least another 25% fall into the “irresponsible” category.  Got help us, many if not most have voting rights.  That at least partly explains irresponsibility in government.  And it suggests two controversial means of improving government:

  1.   Prevent irresponsibiles from procreating and rearing more of their kind; and
  2.   Prevent irresponsibles from voting.

Like I said:  controversial.  But nevertheless, logical.

I’d like to know answers to these questions:

  • How many irresponsibles have requested and received home loans they cannot or will not repay?
  • How many of irresponsibles have stumbled upon this Living Lies blog, and written comments to it?
  • How many irresponsibles have faced or presently face foreclosure because of breaching notes they never should have signed?
  • How many irresponsibles in a mortgage foreclosure fight have any chance of winning?
  • Who become the bigger crooks –
  1. the greedy irresponsibles who borrow money they cannot or will not repay, or
  2. the greedy appraiser who lies about the value of the property, or
  3. the greedy loan broker who lies on the loan application, or
  4. the greedy realtor who lists or sells a house for far more than its actual value, or
  5. the greedy title company who breaches regulations and shoves the borrower through the signing process too fast, or
  6. the greedy lawyer who drags out the inevitable foreclosure so as to bilk the irresponsible client out of thousands of dollars the client should pay the creditor, or
  7. the greedy (selfish) parents who procreated stupid children and reared them to behave irresponsibly so that greed would drive their behavior and they would buy a house on credit they don’t deserve?

Tough questions about the terrible diseases of greed and stupidity.

Lie travels Mark Twain

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The American Mortgage Experience

Look at the American experience and learn from it. People running the finance and banking and investment industries have the ambition of converting all work-a-day people into their serfs, their economic slaves, through debt. So they have structured (and obtained government approval) all contracts (notes, mortgages) to their advantage, and to the disadvantage of borrowers, and made them unilateral adhesions to prevent the borrowers from negotiating terms. Thus the lender has an easy, built-in judicial or non-judicial mechanism for foreclosing a loan in default, but no built-in mechanism exists whereby the borrower might obtain liquidated damages for appraisal fraud, loan application fraud by brokers, or various legal errors, contract breaches, or regulatory violations intended to protect borrowers, but to which borrowers have scant access because of lack of discretionary funds (if they had money the would not have needed to borrow more).

In the USA virtually everybody who can qualify for a loan (based on credit rating) HAS a loan of some kind, and pays interest. The greed for that interest led to securitization. The loan originators tend to make predatory loans that they know the borrowers cannot repay. They do it because they immediately sell the loan to a securitizing bank, so they have no responsibility to chase deadbeat borroweres for repayment. Even those who do chase the borrowers know that eventually they will force a sale of, or simply take, the collateral property with the court’s or a trustee’s help.

I estimate that some form of fraud or other torts, contract breaches, legal errors, and/or regulatory breaches underlie 90% of the mortgage loans in the USA. And the legal industry has few attorneys able and willing to find all those problems and litigate them on behalf of borrowers. Instead, the attorneys focus on “foreclosure defense” where they recycle cookie-cutter pleadings to drag the foreclosure process out as long as possible, thereby not actually defeating the foreclosure, but leading the client into the jaws of foreclosure sale of the property. Why? Because such borrowers cannot afford the fight it takes to beat up the crooked lender team. However, since they have stopped making house payments, they can afford to pay an attorney $300 to $1000 a month for the foreclosure defense. Many borrowers stay in the houses for 4 to 7 years without making any payments. Thus the legal community intercepts borrower money that the borrower should pay to the creditor.

Take note that when the Federal Reserve Board (central bank of USA) lowers interest rates, borrowers RUSH out to refinance their home loans or to borrow more so as to buy a better house or use it (the collateral) effectively as a ATM (automated teller machine), a source of discretionary cash, thinking they will flip (resell) the house when its value goes up (which it does because of inflation and the lower interest rate). Many use the money to fund a profligate, spendthrift lifestyle. As a consequence of lower interest rates since 2002, house values rose dramatically till the crash in 2008, then the values plummeted and many people lost jobs and foreclosures increased so badly they clogged the courts and created a terrible backlog. Now the Fed has lowered interest rates again, and predatory lending has increased along with house prices, heading for another collapse in the next 3 years.

How can any legislature prevent this kind of craziness?

The Vapor Money Theory – Utter Bullshouts

Courts across the land have trashed the Vapor Money Theory – the idea that the borrower’s note funded the loan, or there’s no real money and so the lender never actually gave money in the form of a loan.  I provide some court opinions, and a host of related citations.

http://www.leagle.com/decision/In%20FDCO%2020100615B54/BARNES%20v.%20CITIGROUP%20INC.

MICHAEL J. BARNES, Plaintiff(s), v. CITIGROUP INC., et al., Defendant(s).

United States District Court, E.D. Missouri, Eastern Division.
June 15, 2010.


In the typical vapor money claim, “Plaintiff alleges that the promissory note he executed is the equivalent of `money’ that he gave to the bank. He contends that [the lender] took his `money,’ i.e., the promissory note, deposited it into its own account without his permission, listed it as an `asset’ on its ledger entries, and then essentially lent his own money back to him….He further argues that because [the lender] was never at risk, and provided no consideration, the promissory note is void ab initio, and Defendants’ attempts to foreclose on the mortgage are therefore unlawful.” Demmler v. Bank One NA, No. 2:05-CV-322, 2006 WL 640499 at *3 (S.D. Ohio Mar. 9, 2006). While the vapor money theory has not been addressed by any court within the 8th Circuit, it and “similar arguments have been rejected by federal courts across the country.”McLehan v. Mortgage Electronic Registration Sys., No. 08-12565, 2009 WL 1542929 at *2 (E.D. Mich. June 2, 2009) (citations omitted). See, e.g., Thomas v. Countrywide Home Loans, No. 2:09-CV-00082-RWS, 2010 WL 1328644 (N.D. Ga. Mar. 29, 2010); Andrews v. Select Portfolio Servicing, Inc., No. RDB-09-2437, 2010 WL 1176667 (D. Md. Mar. 24, 2010); Barber v. Countrywide Home Loans, Inc., No. 2:09-CV-40-GCM, 2010 WL 398915 (W.D.N.C. Jan. 25, 2010); Kuder v. Washington Mut. Bank, No. CIV S-08-3087 LKK DAD PS, 2009 WL 2868730 (E.D. Cal. Sept. 2, 2009); Rodriguez v. Summit Lending Solutions, Inc., No. 09cv773 BTM(NLS), 2009 WL 1936795 (S.D. Cal. July 7, 2009); Johnson v. Deutsche Bank Nat’l Trust Co., No. 09-21246-CIV, 2009 WL 2575703 (S.D. Fla. July 1, 2009); Gentsch v. Ownit Mortgage Solutions Inc. No. CV F 09-0649 LJO GSA, 2009 WL 1390843 (E.D. Cal. May 14, 2009). Thus, the vapor money theory is not a valid route to recovery, and Plaintiff’s claims based upon it must be dismissed.

http://www.gpo.gov/fdsys/pkg/USCOURTS-mdd-1_10-cv-01130/pdf/USCOURTS-mdd-1_10-cv-01130-0.pdf

YVONNE MOSELY-SUTTON v.  KENNETH MACFADYEN, USDC Maryland, 17 June 2011


Plaintiff appears to make a vapor money claim by alleging that, “Lawful money no longer is available for payment of debt in our economic system.” Compl. at 7. Plaintiff seems to assert that the loan at issue is unenforceable because “no such required cash was tendered,” presumably at the closing of the loan. Compl. at 5, ¶ 14. To the extent Plaintiff asserts a vapor money claim, this Court has previously noted that this “theory has been consistently rejected by federal courts as frivolous and insufficient to withstand a motion to dismiss.” Andrews v. Select Portfolio Servicing, Inc., 2010 WL 1176667, at *3 (D. Md. March 24, 2010). Accordingly, all claims based upon any variation of the vapor money theory must be dismissed.

Why Foreclosure Courts Want Proof that the Lender Injured the Borrower

DEUTSCHE BANK NATIONAL TRUST COMPANY v. Gardner, 2015 PA Super 219 – Pa: Superior Court 2015

https://scholar.google.com/scholar_case?case=5819170402171567967

In this TILA rescission appeal the court explained exactly why the borrower must tender in order to complete the rescission, and why the court has the power to rearrange the process, including the tender and lien removal sequence and mechanism. The court also explained the difference between old money and new money tender. And, most importantly the court explained that it can relieve the borrower of the obligation to tender ONLY in the case of creditor cheating or deceit.

“However, those cases relieving the borrower of his or her tender obligation, resulting in a forfeiture by the lender, are limited to “situations where creditors have tried to deceive or cheat the consumer.”/In re Williams,/291 B.R. 636, 655 (Bankr. E.D. Pa. 2003) (quoting/Michel v. Beneficial Consumer Discount Co.,/140 B.R. 92, 101 (Bankr. E.D. Pa. 1992)) (declining to hold that the borrower “should be relieved of her `tender obligation’” under TILA even though it adopted the minority view that termination of the lender’s security interest could not be conditioned upon tender).”

“We hold that, with this absence of any proof of an intent by Deutsche Bank or any of its predecessors to deceive or cheat Gardner, the trial court abused its discretion in ruling that rescission was appropriate, and in ordering the termination of Deutsche Bank’s security interest obtained in the 2005 refinance transaction, without also requiring Gardner to fulfill his tender obligation.”

I rightly point out that the borrower’s failure to find and lodge cheating/deceit causes of action against the lender team, such as appraisal or loan application fraud, constituted a COLOSSAL error that COST the borrower a LOT OF MONEY.

This of course vindicates my OFTEN REPEATED assertion that all home loan borrowers should purchase a COMPREHENSIVE MORTGAGE EXAMINATION from a COMPETENT PROFESSIONAL… BEFORE seeking a rescission or defending against a foreclosure attack.

People interested in much more info can call me at 727 669 5511, because I know Neil Garfield cannot or will not give it to them.

Bob Hurt photo
Bob Hurt, Writer

Garfield clueless about TILA Rescission – Kansas USDC Tells how it works

Neil Garfield in his recent blog post https://livinglies.wordpress.com/2015/10/13/standing-will-ultimately-determine-what-happens-in-tila-rescission/, PRESUMES that because the notice of rescission voids the note and security instrument (which it in fact does not), therefore, lenders have no standing to challenge breach of the note (such as failing to make mortgage payments) EVEN if the rescission effort has no merit.   Neil is flat wrong as usual, and here I provide an excellent analysis of the matter a long time ago in an appeal from a bankruptcy proceeding, In Re Merriman.  I append the entire opinion below.

The Kansas USDC very concisely explained the chain of events that can follow accrual of a RIGHT to rescind under TILA, and it points out the difference between initiating and fully consummating (unwinding) a rescission.  The court’s faultless logic shows why the note and security instrument DO NOT BECOME VOID upon sending of a notice of rescission.  It explains that the full right to rescind obliges the borrower to have suffered a TILA breach in fact, to have given proper notice, and to have the ability to tender.  That and only that justifies tender and lien removal by the creditor.  And only when all of that has happened has rescission become fully consummated and the loan fully nullified.

The final section (D) of the In Re Merriman appellate opinion by the Kansas USDC BEAUTIFULLY explains why the court may not force the creditor to remove the security interest (lien) on the mortgaged property in a TILA rescission UNTIL the borrower has tendered or arranged a tender mechanism, such as proposal of alternate financing.
In re Ramirez, 329 BR 727 – Bankr. Court, D. Kansas 2005

https://scholar.google.com/scholar_case?case=12436550276985432132

In re Merriman, 329 BR 710 – Bankr. Court, D. Kansas 2005

https://scholar.google.com/scholar_case?case=6510952788647313169

Note:  The court ruled on these appeals from bankruptcy opinions at the same time.  The Ramirezes case had virtually the same text as Merriman in the section dealing with removal of the lien upon notice of rescission.

************ from in Re Merriman ************

329 B.R. 710 (2005)

In re Patricia Joan MERRIMAN, Debtor.
Patricia Joan Merriman, Plaintiff,
v.
Beneficial Mortgage Co. of Kansas, Inc., Defendant.

No. 03-4121-JAR, Bankruptcy No. 01-42851-13, Adversary No. 01-7142.United States Bankruptcy Court, D. Kansas.

September 7, 2005.711*711 712*712 713*713 Gary E. Hinck, Consumer Law Center, P.A., Topeka, KS, for Debtor/Plaintiff.

MEMORANDUM AND ORDER

ROBINSON, District Judge.

This is an appeal from an order of the bankruptcy court relating to a debtor’s right to rescind a home mortgage transaction for disclosure violations under the Truth in Lending Act (the “TILA”) and resulting statutory damages. For the reasons set forth below, the decision of the bankruptcy court is affirmed.

I. Background

The relevant facts are not disputed. In August 2000, Patricia Merriman entered into a non-purchase money loan transaction with Beneficial Mortgage Company of Kansas, Inc. (“Beneficial”), for $30,359.45 that was secured by a mortgage on her home. The transaction between Merriman and Beneficial was subject to Merriman’s right of rescission as described by § 1635 of the TILA[1] and Regulation Z.[2] Beneficial gave Merriman the appropriate loan information disclosures required by the TILA, and gave her at least one copy of a form called a “Notice of Right to Cancel” (“Notice”). The Notice was a “hybrid” form of Beneficial’s own design, which was drafted with alternative paragraphs in a “check-the-box” format. Neither of the alternative paragraphs had its corresponding box checked.

In October 2001, Merriman filed a Chapter 13 bankruptcy proceeding. On November 21, 2001, Merriman’s bankruptcy attorney sent correspondence to Beneficial stating that Merriman was exercising her right to rescind the loan transaction under the TILA. Beneficial took no action on Merriman’s notice of rescission.

On December 18, 2001, Merriman filed an adversary proceeding against Beneficial in her pending Chapter 13 bankruptcy case seeking relief under the TILA, including rescission of the loan transaction and the imposition of statutory damages against Beneficial. The bankruptcy court entered an order granting summary judgment in this case and a companion case, Marcelino Ramirez, et al. v. Household Finance Corporation III (In re Ramirez), Adversary No. 01-7122 (“the Order”).[3]

The bankruptcy court addressed three issues in the Order. First, the parties disputed whether Beneficial had given Merriman two copies of the Notice. The bankruptcy court refrained from deciding this issue of fact, and assumed that Beneficial had provided Merriman with only one copy of the Notice. The bankruptcy court determined that Beneficial’s assumed failure to provide Merriman with two copies of the Notice did not extend the date by which Merriman could rescind the transaction. The bankruptcy court further determined, however, that Beneficial’s failure to check a box on the Notice constituted inadequate notice to Merriman, such that the rescission period was extended to three years, pursuant to 15 U.S.C. § 1635(a).

Second, the bankruptcy court determined that rescission of the loan was appropriate and that the court was authorized to modify the parties’ respective reciprocal tender obligations under § 1635. Thus, the bankruptcy court concluded that Beneficial did not have to terminate its security interest and that 714*714 the amount Merriman owed Beneficial as a result of the rescission, was secured by Beneficial’s mortgage lien until paid. Finally, the bankruptcy court determined the amount of civil damages due Merriman based on Beneficial’s improper notice and rescission response pursuant to 15 U.S.C. § 1640.

Merriman filed a Notice of Appeal with respect to the Order and Beneficial filed a Cross-Appeal. Beneficial subsequently withdrew its appeal.[4]

II. Appellate Jurisdiction

The parties have opted to have the appeal heard by this Court.[5] The appeal was timely filed by the debtor, and the bankruptcy court’s Order is “final” within the meaning of 28 U.S.C. § 158(a)(1).[6]

III. Standard of Review

On appeal from the bankruptcy court, the district court sits as an appellate court.[7] The standards generally governing review of the bankruptcy court’s decision are well-settled: findings of fact are not to be set aside unless clearly erroneous; conclusions of law are reviewed de novo.[8] A finding is clearly erroneous if it is unsupported by any facts of record or if the district court, after reviewing all the evidence, is left with the definite and firm belief that a mistake was made.[9]

IV. Discussion

Merriman raises five issues on appeal addressing whether the bankruptcy court: (1) erred in holding that the rescission period was not extended from three days to three years by virtue of the lender’s failure to provide the debtor with two copies of the Notice describing her right to rescind the transaction; (2) erred in failing to award her twice the amount of any finance charge in connection with the transaction, with a maximum award of $2,000, for each violation of the TILA, and by reducing the amount owed Beneficial by that amount; (3) had discretion to condition or modify the consequences of a debtor’s rescission as specified in the TILA and Regulation Z; (4) was required to first find that Regulation Z is an irrational interpretation of the TILA before it could condition or modify the debtor’s remedy after a proper exercise of her right to rescind the transaction; and (5) erred by refusing to void the lender’s mortgage on the debtor’s home.

TILA Disclosures and Remedies

Congress enacted the TILA to regulate the disclosure of the terms of consumer credit transactions in order “to aid unsophisticated consumers and to prevent creditors from misleading consumers as to the actual costs of financing.”[10] Disclosure allows consumers to compare different financing options and their costs.[11] Indeed, the TILA recognizes that in the 715*715 marketplace of lending and financing, consumers should be armed with the appropriate information to make beneficial and sound decisions about the sources and terms of financing arrangements. To encourage lender compliance, TILA violations are measured by a strict liability standard, so even minor or technical violations impose liability upon the creditor.[12] The consumer-borrower can prevail in a TILA suit without showing that he or she suffered any actual damage as a result of the creditor’s violation.[13]

In TILA transactions such as this, involving non-purchase-money loans secured by consumer-borrowers’ homes, the borrower has a right to rescind the transaction, established by TILA § 1635. The right to rescind continues for three days so long as the lender gives the borrower the disclosures required by the TILA and a notice of the right to rescind; the right is extended up to three years if the lender fails to give the disclosure and notice. Section 1635(a) provides in relevant part:

Except as otherwise provided in this section, in the case of any consumer credit transaction . . . in which a security interest . . . is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction 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, by notifying the creditor, in accordance with regulations of the Board, of his intention to do so. The creditor shall clearly and conspicuously disclose, in accordance with regulations of the Board, to any obligor in a transaction subject to this section the rights of the obligor under this section. The creditor shall also provide, in accordance with regulations of the Board, appropriate forms for the obligor to exercise his right to rescind any transaction subject to this section.[14]

A. Number of Copies of Notice Provided to Merriman

Regulation Z states that a lender “shall deliver two copies of the notice of the right to rescind to each consumer entitled to rescind.”[15] The bankruptcy court concluded that it need not decide whether Beneficial had supplied Merriman with one or two copies of this Notice. Rather, the bankruptcy court held that the second physical copy of the Notice was not actually necessary to inform Merriman of her right to rescind; thus, her right to rescind the transaction was not extended on this basis.[16] The bankruptcy court further stated that while Regulation Z’s requirement that two copies be provided to the borrower is probably not irrational, it would be irrational to extend the rescission period to three years, simply because the borrower did not receive the extra copy of716*716 the Notice.[17]

Ultimately, the bankruptcy court concluded that irrespective of the number of copies provided to Merriman, the Notice was insufficient because none of the alternative paragraphs was marked with a checked box, and that this justified an extension of the rescission period to three years. Because the bankruptcy court found a TILA violation based on this insufficiency, this Court need not reach, on appeal, the issue of the effect of providing one, rather than two copies of the Notice.[18]

B. Calculation of Civil Damages for the Notice and Rescission Violations

The bankruptcy court found that Beneficial violated the TILA in two ways: (1) in failing to provide adequate disclosure to Merriman of her rescission rights by not checking a box on the Notice (the “Notice Violation”); and (2) in failing to respond to Merriman’s notice of rescission within 20 days (the “Rescission Violation”). The bankruptcy court imposed the minimum damages allowed by § 1640(a)(2)(A)(iii), awarding $200 for each violation for a total of $400, and reduced Beneficial’s post-rescission claim against Merriman by that amount. Merriman contends that the bankruptcy court erred, because it was required to award her the maximum $2,000 in statutory damages for each violation of the TILA. Merriman further argues that the civil damages due as a result of the Rescission Violation should be paid in cash by Beneficial, rather than credited against the post-rescission claim due Beneficial.

1. Amount Awarded

Under TILA § 1640(a)(2)(A)(iii), statutory damages may be awarded to Merriman for the TILA disclosure and rescission violations discussed above. That section provides in pertinent part:

Except as otherwise provided in this section, any creditor who fails to comply with any requirement imposed under this part, including any requirement under section 1635 of this title, or part D or E of this subchapter with respect to any person is liable to such person in an amount equal to the sum of —

(1) any actual damage sustained by such person as a result of the failure;

[and]

(2)(A) . . . (iii) in the case of an individual action relating to a credit transaction not under an open end credit plan that is secured by real property or a dwelling, not less than $200 or greater than $2,000; . . . [19]

In light of “the substantial reduction of Beneficial’s claim as a result of the offsets,” the bankruptcy court imposed the minimum penalty for these violations, for a total of $400, which it credited against Beneficial’s claim against Merriman.[20]

Merriman argues that § 1640 must be read to require a court to award double the “finance charge” as used in subparagraph (i) or the maximum amount set forth in subparagraph (iii), in order to determine the amounts properly assessed under subparagraph (iii). Beneficial argues that the bankruptcy court had authority to exercise 717*717 its discretion to award damages between $200 and $2,000.[21]

The Court agrees with Beneficial. There is no ambiguity as to how statutory damages should be awarded in this case. Subparagraph (iii) plainly states that damages “not less than $200 or greater than $2,000” may be awarded. The plain language of subparagraph (iii) imposes no obligation to impose the lesser of: (1) the maximum penalty under (iii), or (2) double the “finance charge” under (i). The bankruptcy court’s award was consistent with that provision and is affirmed.

2. Manner of Payment

Merriman’s corollary issue is that the bankruptcy court improperly set off or recouped the statutory damages assessed against Beneficial for its Rescission Violation. Merriman concedes that the Notice Violation award was properly set off against Beneficial’s post-rescission claim. But, Merriman argues that the Rescission Violation damages cannot be set off against Beneficial’s claim because the claims do not arise out of the same transaction or occurrence.

Beneficial’s failure to respond to Merriman’s notice of rescission of the loan transaction within 20 days from the date of its receipt of the notice gave rise to a claim against Beneficial under § 1635(g).[22] It is that claim that resulted in the bankruptcy court’s assessment of a civil damage award pursuant to § 1640. Merriman argues that while the claim against Beneficial for the Rescission Violation arose post-petition on December 13, 2001, Beneficial’s claim against her for the mortgage loan proceeds arose pre-petition, at the time the loan was made in August 2000, and thus set off or recoupment is inappropriate. The Court disagrees.

Generally, recoupment, while similar to setoff, is a separate, equitable doctrine that is not subject to the setoff provisions and limitations of section 553 of the Bankruptcy Code.[23] Rather, a creditor is allowed to “recoup” its claim against the debtor or the bankruptcy estate so long as the claims of creditor and debtor arise out of the “same transaction,” without regard to the timing and mutuality restrictions of setoff.[24]Beneficial’s post-rescission claim as determined by the bankruptcy court did not arise in August 2000; it arose at the same time and as part of the same transaction that Merriman’s claim arose. Under § 1635(b), Merriman was obligated to tender property to Beneficial upon her rescission 718*718 of the loan and after Beneficial had returned all costs and interest. As recognized by the bankruptcy court, the parties had “reciprocal payment obligations under the TILA and § 1635(b) and Regulation Z § 226.23(d)(2) and (3).”[25] Merriman’s claim for damages accrued as a part of the Rescission Violation and Beneficial’s claim for the reciprocal payment obligation arose out of the same transaction, that is, Merriman’s rescission. Accordingly, the obligations were in fact part of the same transaction for purposes of recoupment, and the bankruptcy court properly exercised its discretion to deduct the Rescission Violation damages from the post-rescission balance due Beneficial. The bankruptcy court is affirmed as to this issue.

C. Voiding of Security Interest Under the TILA

In TILA transactions such as this, § 1635(a) creates the right of rescission; § 1635(b) explains the effect that rescission has on the consumer-borrower and lender. In short, upon rescission, the borrower is not liable for any finance or other charge, and any security interest given by the borrower becomes void.[26] After giving Beneficial notice of rescission and receiving no response, Merriman filed an adversary proceeding in bankruptcy court, seeking rescission and damages. The bankruptcy court ordered that the $5206.09 in closing costs and fees Beneficial charged Merriman, plus all amounts paid on the loan since the closing, $3,981.84, for a total of $9,187.93, be subtracted from the principal amount of the loan, $30,359.45, leaving a balance of $21,171.52 due Beneficial.

Merriman contends that the bankruptcy court erred in ordering that this balance would remain secured by Beneficial’s mortgage lien until paid. Merriman argues that § 1635(b) mandates that the security interest become void upon rescission, such that the balance due is unsecured and subject to compromise, discharge, or both in the Chapter 13 bankruptcy proceeding. Merriman argues that § 1635(b) mandates the voiding of the security interest irrespective of the borrower’s payment of the principal balance due. Section 1635(b) provides:

When an obligor exercises his right to rescind under subsection (a) of this section, he is not liable for any finance or other charge, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has delivered any property to the obligor, the obligor may retain possession of it. Upon the performance of the creditor’s obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value. Tender shall be made at the location of the property or at the residence of the obligor, at the option of the obligor. If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his part 719*719 to pay for it. The procedures prescribed by this subsection shall apply except when otherwise ordered by a court.[27]

Merriman suggests that the plain language of § 1635(b) effects a voiding of the security interest upon the giving of notice of rescission. The statute does not state, however, that the security interest becomes void upon the giving or receipt of notice. Rather, the statute states that the security interest “becomes void upon rescission.” Nothing in the statute suggests that giving notice of rescission is synonymous with “upon rescission.” Section 1635(b) expressly becomes operative “[w]hen an obligor exercises his right to rescind under subsection (a). . . .” Section 1635(a) goes on to provide that “the obligor shall have the right to rescind . . . by notifying the creditor . . . of his intention to do so ….. The creditor shall also provide . . . appropriate forms for the obligor to exercise his right to rescind. . . .” Read together, these two subsections of § 1635 provide that the borrower exercises her right to rescind by giving notice; but the security interest becomes void only upon rescission. The plain language of the statute indicates that exercising the right to rescind is a discrete event; and rescission is a separate discrete event. If the drafters intended for exercise of the right to rescind to be rescission, they would not have used different terms for the same event.[28]

Nor does the language of Regulation Z,[29] the statutory mandate for courts to act with respect to the TILA, support Merriman’s argument that the security interest is void upon notice or the exercise of the right to rescind. Regulation Z mirrors § 1635(b) and details the rescission process.[30] Whereas the statute states that the security interest becomes “void upon rescission,” Regulation Z states that the security interest becomes void “[w]hen a consumer rescinds a transaction.” Although this language in the regulation is less than clear, it does not indicate that a 720*720 “consumer rescinds” merely by exercising the right to rescind through notice. As Judge Crow noted inQuenzer v. Advanta Mortgage Corp. U.S.A. (In re Quenzer),[31] rescission does not mean an annulment that is definitively accomplished by unilateral pronouncement.[32]

In Yamamoto v. Bank of New York,[33] the Ninth Circuit rejected the very argument that Merriman makes here, that the notice of rescission had the automatic and immediate effect of voiding the loan transaction. The Ninth Circuit observed that the borrower was essentially arguing that rescission could be accomplished automatically upon a borrower’s decision to rescind, communicated by a notice of rescission, and without regard to whether the law permits her to rescind upon the grounds asserted.[34] The court noted that, “this makes no sense when, as here, the lender contests the ground upon which the borrower rescinds.”[35] “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.”[36]

The First Circuit has observed under similar circumstances that “[n]either the statute nor the regulation establishes that a borrower’s mere assertion of the right of rescission has the automatic effect of voiding the contract.”[37] This occurs either because the lender acknowledges that the right of rescission is available or because the appropriate decision maker has so determined.[38] Of course, in this case Beneficial challenged the right to rescission, taking the position that it gave adequate disclosure under TILA, an issue adjudicated in the adversary proceeding in bankruptcy court.

Although the bankruptcy court declined to void Beneficial’s mortgage lien, it invited this Court to reverse that decision, in part because the bankruptcy court agreed with Merriman’s position that the security interest was void before, and irrespective of, the seriatim obligations of borrower and lender and borrower’s payment obligation, spelled out in § 1635(b) and Regulation Z.[39] As discussed above, because the plain language of § 1635(b) and Regulation Z demonstrates that rescission is not automatic upon the exercise of the right to rescind by giving notice, this Court affirms, in part because the mortgage lien was not automatically void upon Merriman giving notice to Beneficial.

D. Conditioning Voiding of Security Interest on Payment

Merriman contends that the bankruptcy court had no authority to condition 721*721 the voiding of Beneficial’s mortgage lien on Merriman satisfying her obligation to pay Beneficial the principal balance due. Noting that the district court had previously reversed the bankruptcy court on this issue in Quenzer III,[40] the bankruptcy court stated that it felt constrained to follow the district court on this issue as well, but invited this Court to reverse, in favor of Merriman’s position. This Court affirms the bankruptcy court’s decision, concluding, as Judge Crow concluded in Quenzer III, that a court has authority to condition voiding of the security interest on satisfaction of payment by the borrower.

Similar to her analysis concerning when the security interest becomes void, Merriman argues that the language of § 1635(b) and Regulation Z mandates the voiding of the security interest and precludes judicially imposed conditions or modifications. Merriman contends that language in the statute and regulation concerning court ordered modifications to the rescission process does not apply to the voiding of the security interest. The last sentence of § 1635(b) states, “[t]he procedures prescribed by this subsection shall apply except when otherwise ordered by a court.”[41] Merriman contends that the voiding of the security interest is not a “procedure,” but is substantive relief accorded by this statute. Regulation Z states in pertinent part, “[t]he procedures outlined in paragraphs (d)(2) and (3) of this section may be modified by court order.” Merriman contends that this language means that the court may modify only the lender’s obligation to return money in § 226.23(d)(2) and the borrower’s obligation to tender money or property in § 226.23(d)(3), but the court may not modify the voiding of the security interest in § 226.23(d)(1).

The premise of Merriman’s position is that the voiding of the security interest is substantive relief accorded by § 1635(b) and Regulation Z, rather than a procedural step in the rescission process. Indeed, in inviting this Court to reverse its decision, the bankruptcy court urged that the voiding of a lender’s security interest is substantive and punitive, a consequence of the lender’s violation of the TILA. The voiding of the security interest, however, is but a step in the rescission process; it is not the substantive relief, nor is it punitive. Rather, the TILA’s express punitive measures are that the lender loses its finance charges for the period of time that the borrower enjoyed the loan proceeds or property, which can range from three days to three years, and that the lender be subject to a fine for each violation. The voiding of the security interest is neither punitive in design nor effect.

Rescission, whether statutory or common law, is an equitable remedy. Its relief, in design and effect, is to restore the parties to their pre-transaction positions. The TILA authorizes the courts to apply equitable principles to the rescission process. As the court observed in Quenzer III, within the context of the TILA, rescission is a remedy that restores the status quo ante.[42] And, as the Eleventh Circuit noted in Williams v. Homestake Mortgage 722*722 Co.,[43] the last sentence of § 1635(b), which states that “[t]he procedures prescribed by this subsection shall apply except when otherwise ordered by a court,” is a reflection of this equitable goal.[44] The Eleventh Circuit further observed, “[t]he sequence of rescission and tender set forth in § 1635(b) is a reordering of common law rules governing rescission,” which “place[s] the consumer in a much stronger bargaining position than he enjoys under the traditional rules of rescission.”[45] The TILA’s statutory rescission procedures do not alter the equitable nature of the rescission remedy, nor the goal of returning the parties most nearly to the position they held prior to entering into the transaction.[46]

Merriman’s focus on the voiding of the security interest as a substantive, punitive measure is largely based on the TILA provision that the security interest becomes void, and the Regulation Z provision that within 20 days after receiving notice of rescission, the lender must return money or property to the borrower and “take any action necessary to reflect the termination of the security interest.”[47] Merriman argues that the seriatim reciprocal obligations of lender and borrower provided in the statute and fleshed out in Regulation Z, make clear that the lender must take steps to terminate the security interest before the borrower is required to tender money or property to the lender. Indeed, the lender’s obligation to return money or property (i.e., the finance charge) and take action to reflect termination of the security interest is found in § 226.23(d)(2) of Regulation Z, while the borrower’s payment obligation comes later, in § 226.23(d)(3).

The order of reciprocal obligations, however, is not indicative that the voiding of the security interest is substantive. Rather, this order of reciprocal obligations serves to place the borrower who seeks rescission in a position to obtain financing from another lender. Indeed, as the Eleventh Circuit has observed, TILA’s rescission process places the borrower in a stronger position than under traditional rules of rescission.[48] The TILA requires the lender to return the finance charge and take steps to terminate the security interest first, before requiring the borrower to pay off the principal balance. This allows the borrower to seek a new loan, having the benefit of cash in the amount of the refunded finance charge, which might be used for loan fees or charges. And, the borrower has property to pledge as security to the new lender, unencumbered with a lien from the rescinded lender, because the TILA requires the lender to terminate its security interest. With these benefits accorded under TILA’s rescission process, the borrower has the means to obtain a new loan, and thus the means to repay the principal balance due on the rescinded loan.

The TILA recognizes, in effect, that a borrower who wishes to rescind a loan may not have the means to repay the principal balance of the loan without first securing new financing. The TILA’s requirement that the lender terminate the security interest before the borrower pays off the principal balance due, simply recognizes the reality that a consumer-borrower rescinding 723*723 a loan, may need alternative financing to pay off that loan.

This underlying consideration, to allow the borrower the means to obtain financing to pay off the rescinded loan, is further illustrated in Regulation Z’s placing time limits on the lender’s obligations, but no time limit on the borrower’s obligation to repay the principal balance due. Regulation Z § 226.23(d)(2) requires that upon receiving notice of rescission, within 20 days the lender must refund all finance charge and fees and take action to terminate the security interest, yet the next seriatim obligation, the borrower’s obligation to tender the principal balance due in § 226.23(d)(3), has no time limit. This is surely in recognition that the borrower needs time to obtain alternative financing. Section 226.23(d)(3) requires the lender to accept the borrower’s tender of money within 20 days after tender. By placing time limits on the lender’s obligations, but no time limits on the borrower’s obligation to repay the principal balance, and by requiring that the lender refund finance charges and terminate the security interest first, Regulation Z effectuates rescission in a timely fashion, recognizing that the borrower needs the time and the means to obtain alternative financing.

Because the requirement that the lender terminate the security interest merely serves to provide a means for the rescinding borrower to obtain alternative financing, the voiding of the security interest is appropriately characterized as a procedural step in the rescission process, not substantive or punitive relief. Given that it is a merely part of the rescission procedures, § 1635(b) permits the court to condition or modify the voiding of the security interest, stating “[t]he procedures prescribed by this subsection shall apply except when otherwise ordered by a court.”[49] Notably, in 1980, Congress amended § 1635 by adding this last sentence to subsection (b), specifically giving the courts authority to change at least part of what happens when the borrower rescinds.[50] But even prior to the statute’s amendment, the majority of circuit courts that addressed this issue permitted judicial modification of the statutory rescission process.[51] The Tenth Circuit had previously held in Rachbach v. Cogswell[52] “that courts can alter the TILA’s statutory scheme because rescission is an equitable remedy.”[53]

Merriman asks the Court to reverse the ultimate conclusion reached by the bankruptcy court and order that Beneficial’s lien be voided, effectively allowing her to pay nothing or a very small portion of the post-rescission amount calculated by the bankruptcy court. Although the Tenth Circuit has not ruled on this precise issue, the majority of courts addressing this issue have held that the TILA authorizes them to modify the procedure for effecting the avoidance of a lender’s mortgage on the tender of the post-rescission amount by the borrower.[54] In Quenzer III, Judge 724*724 Crow concluded, based on the analysis in Rachbach, as well as the statutory revisions to the TILA and Regulation Z, that “although a debtor’s tender back is not mandated as a prerequisite to rescission, it may be an appropriate condition attached thereto under certain circumstances because of the equitable nature [of] that statutory remedy.”[55] Since then, bankruptcy courts in Kansas and Oklahoma have followed Quenzer III in concluding that courts do have equitable discretion to modify rescission under the TILA.[56]

Indeed, in the context of bankruptcy, where the borrower seeks to compromise or discharge the debt on the rescinded loan, judicial modification of the rescission process is well justified. At the time Merriman gave notice of rescission, the Federal Reserve Board of Governors (“FRB”) Official Staff Interpretation of Regulation Z provided, “The procedures outlined in § 226.23(d)(2) and (3) may be modified by a court. For example, when a consumer is in bankruptcy proceedings and prohibited from returning anything to the creditor, or when the equities dictate, a modification might be made.”[57]

And since the parties submitted their briefs in this appeal, the FRB has made “technical revisions” to its commentary with respect to § 226.23(d)(4), effective April 1, 2004. The revised Official Staff Commentary for Regulation Z § 226.23(d)(4) reads as follows:

1. Modifications. The procedures outlined in § 226.23(d)(2) and (3) may be modified by a court. For example, when a consumer is in bankruptcy proceedings and prohibited from returning anything to the creditor, or when the equities dictate, a modification might be made. The sequence of procedures under § 226.23(d)(2) and (3), or a court’s modification of those procedures under § 226.23(d)(4), does not affect a consumer’s substantive right to rescind and to have the loan amount adjusted accordingly. Where the consumer’s right to rescind is contested by the creditor, a court would normally determine whether the consumer has a right to rescind and determine the amounts owed before establishing the procedures for the parties to tender any money or property.[58]

This revised Official Staff Interpretation, which the FRB deems “technical,” does not correspond to any amendment of the regulation itself.[59] The Court notes that while commentators generally supported the revision, industry and consumer groups asked the FRB staff to address an issue not raised by the proposal, namely, whether a court could condition rescission and voiding of the lender’s security interest on tender by the borrower.[60] Comment 23(d)(4) did not address this issue, and instead clarifies only that the sequence of procedures under § 226.23(d)(2) and (3), or a court’s modifications of those procedures, under (d)(4), does not affect consumers’ substantive right to rescind.[61]

725*725 When an agency charged with enforcing a statute has promulgated a regulation that adopts a permissible construction of the statute, a court must defer to that interpretation and not impose its own.[62] The Supreme Court has indicated this rule is especially strong in the context of the TILA and Regulation Z, where even official staff interpretations of the statute and regulation should control unless shown to be irrational.[63] Regulation Z § 226.23(d)(1) recognizes the statutory mandate that a lender’s security interest is void when a borrower rescinds a loan transaction. Subparagraph (d)(4) restates the power given to courts under § 1635(b) to modify the statutory procedures outlined in subparagraphs (d)(2) and (d)(3), including the power to modify the procedure to effect the rescission. Rather than being in conflict with TILA § 1635(b), Regulation Z § 226.23(d)(4) supports the court’s authority to modify the rescission process, including allowing the lender to retain its security interest pending tender of the loan proceeds by the borrower. This manner of modification is especially relevant in the bankruptcy context. The Court finds nothing irrational about Regulation Z § 226.23(d)(4).[64]

Moreover, the legislative history regarding the amendment to § 1635(b) supports the modification of the rescission process in the context of a bankruptcy case, noting:

Upon application by the consumer or the creditor, a court is authorized to modify this section’s procedures where appropriate. For example, a court might use this discretion in a situation where a consumer in bankruptcy or wage earner proceedings is prohibited from returning the property. The committee expects that the courts, at any time during the rescission process, may impose equitable conditions to insure that the consumer meets his obligations after the creditor has performed his obligations as required under the Act.[65]

As one court noted, the legislative history’s reference to bankruptcy is significant and illustrates Congress intended to allow courts to condition the voiding of a lien or security interest on payment by the debtor:

Had Congress intended otherwise, there would be no reason to mention bankruptcy, as a creditor’s secured interest in a debtor’s homestead would be void upon rescission, relegating the debtor’s remaining obligations to an unsecured, often dischargeable status. The net effect, then, would be that a debtor receives the entire benefit of the credit transaction, often substantial sums of money or what amounts to a free house, while the creditor receives nothing, 726*726 which would be contrary to the purpose of rescission.[66]

In this case, Merriman is attempting to use an equitable remedy to create a legal right to effectively strip Beneficial’s mortgage lien, a right she is not accorded under bankruptcy law.[67] Thus, the bankruptcy court Order requiring Merriman to satisfy her reciprocal tender obligation prior to release of Beneficial’s mortgage is precisely the type of equitable condition contemplated by Congress. To hold otherwise would disproportionately punish Beneficial for a technical violation of the TILA while giving Merriman a windfall in excess of $20,000.

Moreover, in this case, in Quenzer III, and in the majority of cases allowing the rescission process to be modified or conditioned, rescission was initiated after the initial three-day period-often years after. That circumstance factors highly in the majority decisions, and clearly alters the apparent equities between the parties. As the court stated in Quenzer III,

This court cannot accept the proposition that strict enforcement of TILA justifies rendering a debt in the amount at issue here [$48,000 or more] unpaid and completely unsecured, given the passage of time and other circumstances present. Even though the defendant violated TILA, automatically relegating its entire claim to unsecured status under these circumstances would be completely inequitable and would exact a penalty entirely disproportionate to its offense.[68]

In Quenzer III, the court recognized that courts should analyze all the surrounding circumstances in determining the appropriate effect of the borrower’s decision to rescind rather than disproportionately punishing the lender within the scope of remedies otherwise provided in the TILA. In this case, the bankruptcy court did precisely that by preserving the rights of Merriman and Beneficial with respect to rescission under the TILA and Regulation Z. The bankruptcy court’s exercise of equitable authority means that Merriman can exercise her rescission rights without being confronted with the dilemma of a lump sum payment to the lender that would otherwise be due under the TILA. It also avoids Merriman receiving the so-called “free house” benefit, while Beneficial receives little or nothing. Instead, the bankruptcy court structured repayment after adjustment of Beneficial’s claim, preserving the lender’s expectation of being paid the reciprocal tender by allowing Beneficial to retain its mortgage lien.

Conclusion

The Court concludes that Beneficial’s mortgage lien was not automatically void upon Merriman’s giving notice of rescission to Beneficial. In so ruling, the Court joins the majority of courts in concluding that TILA § 1635(b) and Regulation Z § 226.23(d)(4) authorize it to modify the procedure for rescission by conditioning the avoidance of a lender’s mortgage lien on tender of the post-rescission amount by the borrower. This comports with Congressional intent that “the courts, at any time during the rescission process, may impose equitable conditions to insure that the consumer meets his obligations after the creditor has performed his obligations 727*727 as required by the act.”[69] The bankruptcy court’s decision to allow Beneficial to retain its mortgage lien subject to payment of Merriman’s post-rescission obligation, as calculated by the bankruptcy court, is affirmed.[70]

IT IS THEREFORE ORDERED BY THE COURT that the Order of the bankruptcy court dated May 28, 2003, is AFFIRMED.

IT IS SO ORDERED.

[1] 15 U.S.C. § 1635.

[2] 12 C.F.R. § 226.23.

[3] An appeal of the Ramirez portion of the order is also pending before this Court, Case No. 03-4122-JAR.

[4] Case No. 03-4120 (Doc. 9).

[5] See 28 U.S.C. § 158(c); B.A.P. 10th Cir. R. 8001-1(a), (d).

[6] See Fed. R. Bankr.P. 8001-8002.

[7] See 28 U.S.C. § 1334(a).

[8] Va. Beach Fed. Sav. & Loan Ass’n v. Wood, 901 F.2d 849, 851 (10th Cir.1990); In re Barber, 191 B.R. 879, 882 (D.Kan.1996); see Fed. R. Bankr.P. 7052, 8013.

[9] Davidovich v. Welton (In re Davidovich), 901 F.2d 1533, 1536 (10th Cir.1990).

[10] Morris v. Lomas & Nettleton Co., 708 F.Supp. 1198, 1203 (D.Kan.1989) (citing Mourning v. Family Publ’ns Serv., Inc., 411 U.S. 356, 363-69, 93 S.Ct. 1652, 36 L.Ed.2d 318 (1973)).

[11] 15 U.S.C. § 1601(a).

[12] See, e.g., Mars v. Spartanburg Chrysler Plymouth, Inc., 713 F.2d 65, 67 (4th Cir.1983) (“To insure that the consumer is protected, as Congress envisioned, requires that the provisions of [the TILA and Regulation Z] be absolutely complied with and strictly enforced”).

[13] Herrera v. First N. Sav. & Loan Ass’n, 805 F.2d 896, 900 (10th Cir.1986).

[14] 15 U.S.C. § 1635(a) (emphasis added).

[15] 12 C.F.R. § 226.23(b)(1).

[16] Order at 11-12.

[17] Id. at 12.

[18] Specifically, the bankruptcy court held that the unmarked alternative paragraph in Beneficial’s “hybrid” Notice form was not sufficient notice of her right to rescind under the mandates of the TILA. Order at 12-14. Beneficial dismissed its cross-appeal, and the parties do not dispute this issue.

[19] 15 U.S.C. § 1640(a)(2)(A)(iii).

[20] Order at 23-24.

[21] Beneficial argues alternatively, in footnote 2 of its brief, that Merriman’s claim for damages related to the Notice violation is barred by the applicable statute of limitations. Beneficial did not preserve a statute of limitations affirmative defense in the bankruptcy court proceedings, and will not be allowed to raise it here, for the first time, on appeal. Moreover, Beneficial’s argument ignores the second sentence of 15 U.S.C. § 1640(e), which permits Merriman to recover statutory penalties “as a matter of defense by recoupment,” which is not barred by the statute of limitations.

[22] 15 U.S.C. § 1635(g) provides, “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.”

[23] 11 U.S.C. § 553. Setoff is allowed where (1) the debts involved are between the same parties standing in the same capacity, (2) the debts are valid and enforceable, and (3) the debts are mutual, though they need not arise out of the same transaction. In re Davidovich, 901 F.2d at 1533. In the bankruptcy context, the claims must be pre-petition debts. In re Peterson Distrib., Inc., 82 F.3d 956, 963 (10th Cir.1996).

[24] Davidovich, 901 F.2d at 1537; Peterson Distrib., 82 F.3d at 959.

[25] Order at 21.

[26] 15 U.S.C. § 1635(b).

[27] 15 U.S.C. § 1635(b) (emphasis added).

[28] See Qwest Commc’ns Int’l, Inc. v. F.C.C., 398 F.3d 1222, 1232-33 (10th Cir.2005) (Explaining that generally, when Congress includes a specific term in one provision of a statute, but excludes it in another, it is presumed that the term does not govern the sections in which it is omitted) (citations omitted). The Court sees no reason to disturb this cannon of statutory construction here.

[29] 12 C.F.R. § 226.23(d).

[30] Sec. 226.23(d) Effects of rescission.

(1) When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer shall not be liable for any amount, including any finance charge.

(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.

(3) If the creditor has delivered any money or property, the consumer may retain possession until the creditor has met its obligation under paragraph (d)(2) of this section. When the creditor has complied with that paragraph, the consumer shall tender the money or property to the creditor or, where the latter would be impracticable or inequitable, tender its reasonable value. At the consumer’s option, tender of property may be made at the location of the property or at the consumer’s residence. Tender of money must be made at the creditor’s designated place of business. If the creditor does not take possession of the money or property within 20 calendar days after the consumer’s tender, the consumer may keep it without further obligation.

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

[31] 288 B.R. 884 (D.Kan.2003) (“Quenzer III“).

[32] Id. at 888 (citing Ray v. Citifinancial, Inc., 228 F.Supp.2d 664 (D.Md.2002)).

[33] 329 F.3d 1167 (9th Cir.2003).

[34] Id. at 1172.

[35] Id.

[36] Id.

[37] Large v. Conseco Fin. Servicing Corp., 292 F.3d 49, 54-55 (1st Cir.2002); cf. Williams v. Homestake Mortgage Co., 968 F.2d 1137, 1141-42 (11th Cir.1992) (noting that rescission is automatic, but rejecting the argument that § 226.23(d)(4)’s lack of reference to subsection (d)(1) restricts a court’s ability to impose conditions that run with the voiding of a lender’s security interest upon terms that are equitable).

[38] Large, 292 F.3d at 54-55.

[39] In finding that Beneficial’s mortgage lien was not void, Bankruptcy Judge James A. Pusateri stated that he felt “constrained to follow” District Judge Crow’s decision in Quenzer III, which reversed Judge Pusateri’s decision on these same issues. See 266 B.R. 760 (Bankr.D.Kan.2001) (“Quenzer I“); 274 B.R. 899 (Bankr.D.Kan.2001) (“Quenzer II“).

[40] 288 B.R. at 884.

[41] 15 U.S.C. § 1635(b) (emphasis added). In 1980, Congress amended § 1635 by adding the last section to subsection (b), specifically giving the courts authority to change at least part of what happens when the borrower rescinds. See Truth in Lending Simplification and Reform Act, Title VI of Depository Institutions Deregulation and Monetary Control Act of 1980, Pub.L. No. 96-221, § 612(a)(4), 1980 U.S.C.C.A.N. (94 Stat.) 132, 175 (hereinafter “TILA Simplification Act”).

[42] 288 B.R. at 888.

[43] 968 F.2d 1137 (11th Cir.1992).

[44] Id. at 1140.

[45] Id. (quoting Note, Truth-in-Lending: Judicial Modification of the Right of Rescission, 1974 Duke L.J. 1227, 1234 (1974)).

[46] Id.

[47] 12 C.F.R. § 226.23(d)(2).

[48] Williams, 968 F.2d at 1140.

[49] 15 U.S.C. § 1635(b).

[50] See TILA Simplification Act, § 612(a)(4), 1980 U.S.C.C.A.N. (94 Stat.) at 175.

[51] Rudisell v. Fifth Third Bank, 622 F.2d 243 (6th Cir.1980); Powers v. Sims and Levin, 542 F.2d 1216 (4th Cir.1976); Rachbach v. Cogswell, 547 F.2d 502 (10th Cir.1976); LaGrone v. Johnson, 534 F.2d 1360 (9th Cir.1976). Contra Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir.1981) (refusing to permit judicial modification).

[52] 547 F.2d at 502.

[53] Id. at 505.

[54] See, e.g., Yamamoto, 329 F.3d at 1167; Williams, 968 F.2d at 1140; FDIC v. Hughes Development Co., 938 F.2d 889, 890 (8th Cir.1991), cert. denied, 502 U.S. 1099, 112 S.Ct. 1183, 117 L.Ed.2d 426 (1992); Quenzer III,288 B.R. at 888 (citing Black’s Law Dictionary on Westlaw (Garner, Ed., 7th ed.1999), defining “procedure” as “1. A specific method or course of action”);

[55] 288 B.R. at 888 (citing Rachbach, 547 F.2d at 505).

[56] In re Stanley, 315 B.R. at 602; In re Webster, 300 B.R. 787 (Bankr.W.D.Okla.2003).

[57] 12 C.F.R. Pt. 226, Supp. I, Paragraph 23(d)(4).

[58] Id. (2004) (emphasis added).

[59] 69 F.R. 16769-03 (March 31, 2004).

[60] Id. at 16772.

[61] Significantly, the new language as originally proposed read: “The consumer’s substantive right to rescind under § 226.23(a)(1) and § 226.23(d)(1) is not affected by the procedures referred to in § 226.23(d)(2) and (3), or the modification of those procedures by a court.” 68 F.R. 68799 (proposed December 10, 2003). This version, which might support Merriman’s position, was not the one ultimately adopted.

[62] Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-844, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).

[63] Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 559-70, 100 S.Ct. 790, 63 L.Ed.2d 22 (1980); Davison v. Bank One Home Loan Serv., No. 01-2511-KHV, 2003 WL 124542, at *5 (D.Kan. Jan.13, 2003).

[64] Cf. In re Stanley, 315 B.R. at 615-16 (concluding that Regulation Z § 226.23(d)(4) is manifestly contrary to TILA § 1635(b) and an irrational construction that did not bind that court).

[65] S.Rep. No. 96-368 at 29 (1980), U.S.Code Cong. & Admin.News 1980, 236, 264-65 (emphasis added).

[66] In re Stanley, 315 B.R. at 615 (citing In re Webster, 300 B.R. at 804 (rejecting debtor’s “free house” theory)).

[67] 11 U.S.C. § 1322(b)(2) (debtor’s Chapter 13 plan may not modify rights of a holder of a security interest in debtor’s principal residence).

[68] 288 B.R. at 889.

[69] S.Rep. No. 96-368, at 29 (1980), U.S.Code Cong. & Admin.News 1980, 236, 265.

[70] Merriman asks that the Court certify the question for immediate appeal to the Tenth Circuit pursuant to Fed.R.Civ.P. 54(b). Because the Court affirms the decision of the bankruptcy court, such certification, assuming it is appropriate, is not necessary.

Tender under Rescission of ANY Contract

Rescission means making a contract null. It requires unwinding of the deal so as to restore the parties to “status quo ante,” or “pre-contract condition.”  The unwinding requires the creditor to remove any lien and both creditor and borrower to tender (offer or present for acceptance) payment back to each other of what they received from each other.  See the below definitions, court opinions, and law references.

Definitions

RESCIND.  To abrogate, annul, avoid, or cancel a contract; particularly, nullifying a contract by the act of a party.  See Powell v Lince Co., 29 Misc. Rep. 419, 60 N. Y. Supp 1044; Hurst v. Trow Printing Co., 2 Misc. Rep. 361, 22 N. Y. Supp. 371.

Black’s Law Dictionary
2nd Edition (1910)

rescind (ri-sind), vb. (17c) 1. To abrogate or cancel (a contract) unilaterally or by agreement. [Cases: Contracts C=c249.] 2. To make void; to repeal or annul <rescind the legislation>. 3. Parliamentary law. To void, repeal, or nullify a main motion adopted earlier.
Also termed annul; repeal. rescindable, adj. rescind and expunge. See EXPUNGE (2).

rescission (ri-sizh-an), n. (17c) 1. A party’s unilateral unmaking of a contract for a legally sufficient reason, such as the other party’s material breach, or a judgment rescinding the contract; VOIDAKCE.• Rescission is generally available as a remedy or defense for a nondefaulting party and is accompanied by restitution of any partial performance, thus restoring the parties to their precontractual positions. Also termed avoidance. [Cases: Contracts G=’249.] 2. An agreement by contracting parties to discharge all remaining duties of performance and terminate the contract. – Also spelled recision; recission. – Also termed (in sense 2) agreement of rescission; mutual rescission; abandonment.

Cf. REJECTION (2); REPUDIATION (2); REVOCATION (1). [Cases: Contracts G=252.] – rescissory (ri-sis-<lree or ri-siz-), adj.
“The [UCC] takes cognizance of the fact that the term ‘rescission’ is often used by lawyers, courts and businessmen in many different senses; for example, termination of a contract by virtue of an option to terminate in the agreement, cancellation for breach and avoidance on the grounds of infancy or fraud. In the interests of clarity of thought – as the consequences of each of these forms of discharge may vary the Commercial Code carefully distinguishes three circumstances. ‘Rescission’ is utilized as a term of art to refer to a mutual agreement to discharge contractual duties. ‘Termination’ refers to the discharge of duties by the exercise of a power granted by the agreement. ‘Cancellation’ refers to the putting an end to the contract by reason of a breach by the other party. Section 2-720, however, takes into account that the parties do not necessarily use these terms in this way.” John D. Calamari & Joseph M. Perillo, The Law of Contracts § 21-2. at 864-65 (3d ed. 1987).

equitable rescission. (1889) Rescission that is decreed by a court of equity. [Cases: Cancellation of Instruments (;::; 1.]

legal rescission. (1849) 1. Rescission that is effected by the agreement of the parties. [Cases: Contracts C=> 251.] 2. Rescission that is decreed by a court of law, as
opposed to a court of equity.
“The modern tendency is to treat rescission as equitable, but rescission was often available at law. If plaintiff had paid money, or had delivered goods. he could rescind by tendering whatever he had received from defendant and suing at law to recover his money or replevy his goods. But if he had delivered a promissory note or securities, or conveyed real estate, rescission required the court to cancel the instruments or compel defendant to reconvey. This relief was available only in equity. Many modern courts ignore the distinction …. But versions of the distinction are codified in some states:’ Douglas Laycock, Modern American Remedies 627-28 (3d ed. 2002).

Black’s Law Dictionary 9th Edition (2009)

Court Opinions

“There is no reason why a court that may alter the sequence of procedures after deciding that rescission is warranted, may not do so before deciding that rescission is warranted when it finds that, assuming grounds for rescission exist, rescission still could not be enforced because the borrower cannot comply with the borrower’s rescission obligations no matter what. Such a decision lies within the court’s equitable discretion, taking into consideration all the circumstances including the nature of the violations and the borrower’s ability to repay the proceeds. If … it is clear from the evidence that the borrower lacks capacity to pay back what she has received (less interest, finance charges, etc.), the court does not lack discretion to do before trial what it could do after. Determinations regarding rescission procedures shall be made on a “case-by-case basis, in light of the record adduced.”
Yamamoto v. Bank of New York, 329 F.3d 1167 (9th Cir. 2003)

Courts have equitable discretion to allow borrowers to tender via monthly payments.  In re Stuart, 367 B.R. 541, 552 (Bankr.E.D.Pa.2007); Shepeard v. Quality Sliding & Window Factory, Inc., 730 F.Supp. 1295 (D.Del.1990) (allowing borrower to satisfy tender obligation by making monthly payments); Mayfield v. Vanguard Sav. & Loan Ass’n, 710 F.Supp. 143, 149 (E.D.Pa.1989) (allowing borrower to satisfy tender obligation by making monthly payment).

Law

15 U.S.C. §1635. Right of rescission as to certain transactions

http://www.gpo.gov/fdsys/pkg/USCODE-2010-title15/html/USCODE-2010-title15-chap41-subchapI-partB-sec1635.htm

(a) Disclosure of obligor’s right to rescind

Except as otherwise provided in this section, in the case of any consumer credit transaction (including opening or increasing the credit limit for an open end credit plan) in which a security interest, including any such interest arising by operation of law, is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction 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, by notifying the creditor, in accordance with regulations of the Board, of his intention to do so. The creditor shall clearly and conspicuously disclose, in accordance with regulations of the Board, to any obligor in a transaction subject to this section the rights of the obligor under this section. The creditor shall also provide, in accordance with regulations of the Board, appropriate forms for the obligor to exercise his right to rescind any transaction subject to this section.

(b) Return of money or property following rescission

When an obligor exercises his right to rescind under subsection (a) of this section, he is not liable for any finance or other charge, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the boligor 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. If the creditor has delivered any property to the obligor, the obligor may retain possession of it. Upon the performance of the creditor’s obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value. Tender shall be made at the location of the property or at the residence of the obligor, at the option of the obligor. If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his part to pay for it. The procedures prescribed by this subsection shall apply except when otherwise ordered by a court.

(c) Rebuttable presumption of delivery of required disclosures

Notwithstanding any rule of evidence, written acknowledgment of receipt of any disclosures required under this subchapter by a person to whom information, forms, and a statement is required to be given pursuant to this section does no more than create a rebuttable presumption of delivery thereof.

(d) Modification and waiver of rights

The Board may, if it finds that such action is necessary in order to permit homeowners to meet bona fide personal financial emergencies, prescribe regulations authorizing the modification or waiver of any rights created under this section to the extent and under the circumstances set forth in those regulations.

(e) Exempted transactions; reapplication of provisions

This section does not apply to—

(1) a residential mortgage transaction as defined in section 1602(w) of this title;

(2) a transaction which constitutes a refinancing or consolidation (with no new advances) of the principal balance then due and any accrued and unpaid finance charges of an existing extension of credit by the same creditor secured by an interest in the same property;

(3) a transaction in which an agency of a State is the creditor; or

(4) advances under a preexisting open end credit plan if a security interest has already been retained or acquired and such advances are in accordance with a previously established credit limit for such plan.

(f) Time limit for exercise of right

An obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor, except that if (1) any agency empowered to enforce the provisions of this subchapter institutes a proceeding to enforce the provisions of this section within three years after the date of consummation of the transaction, (2) such agency finds a violation of this section, and (3) the obligor’s right to rescind is based in whole or in part on any matter involved in such proceeding, then the obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the earlier sale of the property, or upon the expiration of one year following the conclusion of the proceeding, or any judicial review or period for judicial review thereof, whichever is later.

(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.

(h) Limitation on rescission

An obligor shall have no rescission rights arising solely from the form of written notice used by the creditor to inform the obligor of the rights of the obligor under this section, if the creditor provided the obligor the appropriate form of written notice published and adopted by the Board, or a comparable written notice of the rights of the obligor, that was properly completed by the creditor, and otherwise complied with all other requirements of this section regarding notice.

(i) Rescission rights in foreclosure

(1) In general

Notwithstanding section 1649 of this title, and subject to the time period provided in subsection (f) of this section, in addition to any other right of rescission available under this section for a transaction, after the initiation of any judicial or nonjudicial foreclosure process on the primary dwelling of an obligor securing an extension of credit, the obligor shall have a right to rescind the transaction equivalent to other rescission rights provided by this section, if—

(A) a mortgage broker fee is not included in the finance charge in accordance with the laws and regulations in effect at the time the consumer credit transaction was consummated; or

(B) the form of notice of rescission for the transaction is not the appropriate form of written notice published and adopted by the Board or a comparable written notice, and otherwise complied with all the requirements of this section regarding notice.

(2) Tolerance for disclosures

Notwithstanding section 1605(f) of this title, and subject to the time period provided in subsection (f) of this section, for the purposes of exercising any rescission rights after the initiation of any judicial or nonjudicial foreclosure process on the principal dwelling of the obligor securing an extension of credit, the disclosure of the finance charge and other disclosures affected by any finance charge shall be treated as being accurate for purposes of this section if the amount disclosed as the finance charge does not vary from the actual finance charge by more than $35 or is greater than the amount required to be disclosed under this subchapter.

(3) Right of recoupment under State law

Nothing in this subsection affects a consumer’s right of rescission in recoupment under State law.

(4) Applicability

This subsection shall apply to all consumer credit transactions in existence or consummated on or after September 30, 1995

TILA Regulation Z 12 C.F.R.§ 1026

Stay Up To Date here:
http://www.consumerfinance.gov/eregulations/1026

12 C.F.R. § 1026.23 Rescission under Regulation Z

http://www.gpo.gov/fdsys/pkg/CFR-2015-title12-vol9/pdf/CFR-2015-title12-vol9-sec1026-23.pdf

Appendix I.  Interpretation of Regulation Z by Consumer Financial Protection Burea (CFPB)

http://www.gpo.gov/fdsys/pkg/CFR-2015-title12-vol9/pdf/CFR-2015-title12-vol9-part1026-appI-id89.pdf

Garfield and Sickler in deep confusion over TILA Right to Rescind

Neil Garfield recently posted this:

Hat tip to Carol Molloy, Esq. in Tennessee in bringing this article to my attention. I think that the author, Alexandra P. Everhart Sickler associate Professor of Law at North Dakota School of Law, has done an excellent job in analyzing the legal precedent, the statutory provisions, the agency rules, and the general attitude of the Courts that seek to restrict the effect of TILA Rescission. Published by Rutgers Journal of Law and Public Policy, this is the best of what I have read thus far. I see many parts that could be quoted in briefs and memorandums of law.

see THE TRUTH SHALL SET YOU FREE

It looks like Garfield has finally found a fellow BOZO who cannot grok TILA rescission, and writes nonsense about it in a law journal. With opinions like hers, Sickler will never become a full professor. She clearly cannot read and comprehend either the law nor the SCOTUS opinion in Jesionski nor the myriad circuit opinions explaining the unwinding process of rescission in patient detail.

I don’t agree with Sickler’s obvious misunderstanding that “The Supreme Court ruled against the federal circuits’ majority-held view, holding that the statute does not require the filing of a lawsuit… That view holds that TILA implicitly requires a consumer borrower to file a lawsuit to exercise her right to rescind even though the statute expressly provides that written notice is sufficient. Five circuits imposed this requirement even though Congress did not, … ”

The SCOTUS in Jesinoski mentioned in its holding the unwinding process which the law requires, but Sickler, no stickler for reality, ignores it. The statute implies the unwinding and the Reg Z SPELLS OUT unwinding through mutual tender, and BOTH statute and reg explain that the court can modify the process of rescission.

Common sense tells us that a creditor has no obligation to accept the borrower’s rescission as some kind of command that applies regardless of whether the lender failed to give the borrower proper disclosures of the right to cancel and rescind, or if the borrower sent notice of rescission styled as some malformed indecipherable curiosity
instead of a proper notice, or whether the borrower sent the notice after the 3-year window had closed. That reasoning makes it obvious that only a court should determine the matter,

Thus a “RIGHT” to rescind begins with a failure of the lender to give the borrowers sufficient disclosures of the right to cancel the loan within 3 days, and the right to rescind it within 3 years. If the lender actually gave sufficient disclosure, then the “RIGHT” never accrues to the borrower, and the borrower might have the right to rescind under the common law, but has no such right under TILA.

In my humble opinion, only a bozo cannot comprehend the common sense that rescission differs from cancellation, and the ACCRUAL OF RIGHT TO RESCIND (through lender failure to give proper disclosures of the right), not written notice of rescission, ENABLES the START of the rescission process.  Then, if and only if a valid causes exists, the borrower initiates rescission by sending notice of rescission to the lender. If the creditor doesn’t agree, the creditor may with impunity ignore or deny the wrongful notice of rescission. Exactly such denials happen all over the USA, and borrowers have no choice but to sue or sleep on their rights. And when borrowers sue, the court determines the reality of the TILA violation, the sufficiency of notice of rescission, and the ability of the parties to tender. Then, IF and ONLY IF ALL of those determinations justify it, the court will order the rescission.

The Jesinoski opinion did NOTHING to change the TILA rescission unwinding process. Yes, rescission starts with mailing of notice, but the parties COMPLETE i ONLY by fulfillment of all the conditions the law and regulation require, which, incidentally, I mentioned above.

A plethora of post-Jesinoski opinions fully corroborate the unwinding requirement. Furthermore, USCCA TILA rescission opinions in Circuits 2, 3, 4, 5, 7, and 11 constitute stare decisis because the SCOTUS in Jesinoski did not overturn their opinions, for they had already supported rescission lawsuits after the 3-year notice of rescission limitation. However, ALL of the circuits had already supported the 1-year-and-20-days limit on the borrower’s right to sue to enforce the rescission following notice. Let us not forget that Jesinoski dealt only with the question of whether borrower may sue later than 3 years after loan consummation. The SCOTUS said yes, and now Jesinoski fights the issue of rescission back in trial court. I have predicted the rescission will not happen because he cannot tender.

Sickler seeks to inquire about federal circuit hostility to TILA rescission. She need look no further than to the common sense reality that the borrower MUST have accrued the right, then must give proper notice, and then must tender after the lender tenders, and if the lender denies the rescission, the borrower MUST SUE the lender under 15 USC 1640, or include rescission as an affirmative defense in a foreclosure proceeding or related action.

That explains how TILA rescission works, and Sickler clearly doesn’t grok it.

References:
15 USC § 1565
12 CFR § 1026.23
Jesinoski v. Countrywide Home Loans, Inc.
135 S. Ct. 790, 190 L. Ed. 2d 650, 574 US __ – Supreme Court, 2015

PRIME EXAMPLE OF CROOKED BORROWER (Learn from this)

The Shelton case shows EXACTLY why the courts feel so hostile toward borrowers who try to shake down lenders and get a free house or rescission money for nonsensical reasons.

American Mortg. Network, Inc. v. Shelton, 486 F. 3d 815 – Court of Appeals, 4th Circuit 2007

https://scholar.google.com/scholar_case?case=857794094684968730&q=shelton+mortgage+north+carolina&hl=en&as_sdt=40003

********** My Overview of the Issue

Real Estate Appraiser Shelton overvalued the property in an appraisal he oversaw, took out a loan for more than he could afford, and timely sent the lender notice of rescission because of understated loan cost. The lender agreed to unwind if Shelton would agree to tender, but Shelton responded that he could not tender. Instead Shelton suggested a deed in lieu of tender if the lender would pay the difference between the loan balance and the exorbitant appraised value. The lender refused because of the inflated appraisal. Shelton claimed the bank forfeited the loan proceeds by refusing to remove the lien within 20 days of cancellation.

The lender sued , seeking declaratory judgment that it had processed Shelton’s TILA rescission effort correctly (denying rescission). The trial court sided with the lender and denied rescission, and the 4th USCCA affirmed.

I have appended excerpts of the opinion. They show that scammer Shelton committed loan application fraud (felony), appraisal fraud (felony), and numerous other shenanigans.

************* From the opinion (SCAMMERS HEED THIS)

First, it appeared to the trial court that Shelton significantly overstated his income in the initial loan application submitted on his behalf by Waterford Financial Services, 819*819 Inc. (“Waterford Financial”). The application stated that Shelton’s annual income in 2004 was $97,200. Subsequent examination of Shelton’s 2004 tax return revealed an income of $34,236. According to Amnet, if Shelton’s application had disclosed his actual 2004 net income, he would not have qualified for the loan.

Second, the Uniform Residential Appraisal Report received from Waterford Financial and purportedly prepared by an independent appraiser was in fact prepared by an appraiser operating under Shelton’s supervision. Although the appraiser was technically an independent contractor, he had been trained by Shelton and worked exclusively for Shelton’s company. The report estimated the fair market value of the house as of November 15, 2004, to be $370,000. Amnet contends that the appraisal was inflated and that a “truly independent” appraiser assessed its fair market value at closer to $300,000. Irrespective of the numbers, it appeared to be uncontroverted that the Sheltons’ appraiser was not independent.

Third, despite signing an Occupancy Agreement at closing, representing that he intended to occupy the house as his primary residence throughout the twelve-month period immediately following the loan closing, Shelton was in fact in the process of building another home that would serve as his primary residence. The Sheltons could not afford to finance the custom home and continue payments on the Amnet loan.

The Sheltons argue that the above-described alleged misrepresentations, which were found by the district court to constitute inequitable conduct, were material facts “hotly in dispute.” The Sheltons maintain that the resolution of these factual disputes was critical to the issues of rescission and forfeiture. In their view, the trial court erred by refusing to conduct an evidentiary hearing to address these disputed facts. We disagree.

Despite the Sheltons’ protestation, many of the facts underlying the inequitable conduct were uncontroverted. For example, Shelton’s 2004 tax return reflected income far below that represented to Amnet. There is also no dispute that the appraiser who conducted the appraisal on the property was affiliated with Shelton and operated under his supervision. Although we do not believe that Shelton’s inequitable conduct necessarily controlled the outcome of this case, it was appropriately considered by the trial judge.[3] As the United States Court of Appeals for the District of Columbia noted in Brown v. National Permanent Federal Savings & Loan Ass’n, 683 F.2d 444 (1982), “[a]lthough the right to rescind is [statutory], it remains an equitable doctrine subject to equitable considerations.”[4] Id. at 447.

Specifically, the Sheltons allege that pertinent portions of the Notice of Right to Cancel were obstructed by removable “Sign Here” stickers. They assert that the stickers obscured the cancellation signature blocks and the language indicating where to sign in order to rescind the transaction. It is, however, interesting to note that the Sheltons executed the cancellation documents almost immediately upon receipt and returned them to Amnet in a timely manner. The Sheltons also complain that they received only one copy of the new Notice of Right to Cancel as opposed to the four copies they argue are required by statute—two for each of the Sheltons. See 12 C.F.R. § 226.23(b) (“[A] creditor shall deliver two copies of the notice of the right to rescind to each consumer entitled to rescind.”)

Although this Court believes that Amnet substantially complied with all requirements of TILA in notifying the Sheltons of their right of rescission, this Court need not address each alleged hyper-technical violation. Here, Amnet had no obligation under TILA to provide a renewed notice of right of rescission or to reopen the cancellation 822*822 period. This obligation is only triggered under TILA when the financial discrepancy is over $100. See 15 U.S.C. § 1605(f)(1)(A); 12 C.F.R. § 226.18(d)(1)(i). The notice provided to the Sheltons in this case was strictly voluntary and therefore needed not meet the technical requirements of 12 C.F.R. § 226.23(b).