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| A federal judge has ruled on a Washington, D.C., woman’s attempt to rescind her high cost loan a year and a half after closing.
Section 1635 (b) of the Truth in Lending Act provides that lenders “shall take any action necessary or appropriate to reflect the termination of any security interest” after receiving valid notice of rescission by a borrower. But that was not the case of a 79-year old widow who submitted a valid notice to rescind her loan but did not show ability to return loan proceeds, and thus raised concerns that rescission would result in an unfair and large windfall to the borrower, according to an opinion and order filing by a judge in the U.S. District Court or the District of Colombia. The mortgage being disputed for rescission is a $75,000 refinance loan Georgette Bynum obtained from First Government Mortgage to repair her home. The new loan retired the $53,400 original loan balance held with Crusader Savings Bank, paid off nearly $3,700 in delinquent real estate taxes to the District of Columbia, and provided a $9,100 check to Bynum. Bynum, however, did not receive a written statement saying she could pay property taxes and insurance directly, the order said, nor did she receive a Home Owners Equity Protection Act early warning disclosure at least three days before closing. A year after the refinance loan was originated, Bynum stopped making payments and foreclosure proceeding initiated. Six months following the ceased payments, she sent a notice of rescission to First Government and ContiMortgage Corp. First Government had assigned Bynum’s loan to ContiMortgage, which later filed for bankruptcy and transferred the loan to Manufacturers Traders and Trust. Following Manufacturers’ refusal to honor her rescission notice and release the mortgage on her property, Bynum sued the lender for violating TILA, HOEPA and state laws, among other allegations. Bynum claimed she validly rescinded the loan under HOEPA because it was a high cost loan and First Government failed to make required disclosures three or more days prior to the loan’s closing. She claimed the rescission was valid under TILA because the lender did not accurately disclose and characterize the loan’s finance charges and amount financed. Failure to make the required disclosures are material violations under the TILA and HOEPA, the judge said, thus entitling the borrower to rescind the loan within three years of the transaction’s consummation. However, Bynum had previously sued First Government, but accepted an offer of judgment by the lender as an understanding that it did not hold her loan and was unable to provide the recession remedy. In exchange for her release of all claims and resolving First Government’s liability in the matter, she received $3,600. Manufacturers claimed that Bynum could not purse claims against it because she had already recovered for liability of the original lender and was not entitled to recovery twice for the same alleged wrongful conduct. According to the opinion and order filing, HOEPA allows a borrower to raise against any assignee “all claims…that could be raised against the original lender.” Under the TILA, a borrower’s claim for rescission against the lender carries over to an assignee of the loan. However, the judge refused to require Manufacturers to unconditionally release the mortgage on Georgette Bynum’s home, rather she ordered the two parties to brief a mutually agreeable rescission plan. The TILA gives courts the discretion to modify the prescribed procedures of the act. “Whether to alter the sequence requires case by case consideration,” the judge said. “Bynum makes no claim that Manufacturers independently violated her rights under federal and state law,” the judge said. “Rather, all claims are based on First Government’s actions |
