Rescission Has the Banks Running Scared!

Posted on August 10, 2015 by

Last month I wrote about how you could use the right of rescission as a silver bullet to stop a foreclosure in its tracks. Once you drop a notice of rescission in the mail, your loan has been nullified as a matter of law and the bank must either comply with the rescission or prove within 20 days that they have the right to enforce the note. Well, over the last few weeks I have been seeing more and more from the banks that the right of rescission has them on their heels. The banks are sending their lawyers around their offices explaining exactly how rescission leaves them vulnerable.

The main point that the lawyers are making to the banks is that mailing in a notice of rescission is all it takes to cancel a borrower’s loan, note, and mortgage. The notice is effective from the moment it is dropped in the mail as an act of law. This was written specifically into the Truth in Lending Act (TILA) so that homeowners wouldn’t have to use an attorney to act on their behalf, thus restricting the remedies provided by TILA to borrowers who can afford an attorney. While the note is canceled immediately as soon as the notice is dropped in the mail, the bank has 20 days from the date of receipt to respond. This is a good reason to send the notice with return receipt requested. This provides you with proof of the exact date the notice of rescission was received.

The only way for a bank to combat a notice of rescission is to file a lawsuit immediately (within the 20-day window). In their lawsuit, the bank must prove that it has absolute proof of the validity of the loan and that it met all of the TILA requirements at the time of origination and consummation. The burden of proof of standing to enforce the note and to vacate the rescission rests firmly on the bank. Not only that, but the bank must file suit within 20 days to contest all factual matters, including the statute of limitations. Once those 20 days are up, the bank loses all ability to contest the rescission, even if the rescission is sent in years after the statute of limitations has expired.

When a loan is rescinded, all parties must return all money paid or received. In the past the banks used this to bully borrowers into backing down from a rescission. The banks would try to force the borrower to return all of the money they received at closing up front. The law has now been clarified to say that only after the bank has canceled the note and returned all money received must the homeowner tender. This clarification allows homeowners without large amounts of cash sitting around to get the full protection of TILA.

After a successful rescission, the borrower has one year to file an enforcement action against the bank to get the canceled note and have all funds returned. After one year, the borrower can no longer get their money back from the bank. They can still file a quiet title to free the property for sale, though.

As you can imagine, the Supreme Court has given homeowners and real estate investors an incredibly powerful tool. No more begging the banks to accept our short sale and REO offers only to have them demand ridiculously high prices. We can now get the banks to the table and demand that they prove they have the right to enforce a loan.

This is a massive opportunity for real estate investors. If you know of anyone with a defaulted or underwater note, you need to get in contact with my office immediately at (706)-485-0162. I have spent the last two years building up a team of experienced attorneys and fraud examiners/forensic auditors who specialize in exposing fraud committed in the mortgage process and using that fraud as leverage to negotiate the sale of notes. This opportunity is not going to be available forever; we need to strike while the iron is hot!

We have a huge opportunity to help homeowners and do some great deals with multiple exit strategies. For more information, call me at 706-485-0162.

Bob MasseyBob Massey is a recovering corporate executive who is now living the dream running his own successful real estate investing business and teaching others how to do the same. In the process he has become the nation’s leading educator on the foreclosure investing process.

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