Posted in Foreclosure, Foreclosure Defense, Legal News

8th Cir. holds TILA’s ‘$35 tolerance’ right to cancel in foreclosures must be exercised after foreclosure initiated – Lexology

Rescission Words

The U.S. Court of Appeals for the Eighth Circuit recently rejected an attempt to rescind a mortgage loan and recover damages under the federal Truth in Lending Act (TILA), affirming the district court’s grant of summary judgment in favor of the mortgagee because the borrowers only tried to cancel their mortgage loan before foreclosure proceedings were initiated, and not thereafter.

Therefore, the Court held, the borrowers did not qualify for TILA’s expanded right to rescind in foreclosure arising under 15 U.S.C. § 1635(i)(2).

via 8th Cir. holds TILA’s ‘$35 tolerance’ right to cancel in foreclosures must be exercised after foreclosure initiated – Lexology.

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3 thoughts on “8th Cir. holds TILA’s ‘$35 tolerance’ right to cancel in foreclosures must be exercised after foreclosure initiated – Lexology

  1. Is it just me, or does it also look to others like the court bent over backwards to make a “heads they win, tails you lose” decision? A court/the courts wouldn’t really do that, would it/they?

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    1. At first blush, it does appear the court’s logic is a bit strained. However, I am not aware of any other case addressing the issue of when the $35 tolerance is applicable. I read the court’s opinion and it is a sound opinion. A plain reading of the statute supports the court’s opinion that in order for the $35 tolerance to be effective, the notice of rescission must be sent after the initiation of a foreclosure proceeding.

      I know that Neil Garfield and others may disagree and argue that if the creditor does not respond within 20 days then the creditor is SOL. However, that does not appear in TILA. As a matter of fact, TILA is silent on what the penalties are for a creditor who does not respond to a notice of rescission.

      TILA talks about a valid right of rescission. The word “valid” is the operative word. Who decides what is valid and when? Neil and many debtors will say that TILA automatically rescinds the mortgage when the debtor notifies the creditor. To some extent, TILA supports this argument. However, as I said, TILA talks about a valid right of rescission and lists the violations that will create a valid right of rescission.

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