HOW BORROWERS CAN RESCIND CERTAIN LOAN TRANSACTIONS POTENTIALLY TO BE REVIEWED BY U.S. SUPREME COURT

The United States Supreme Court is entertaining two different petitions filed by home borrowers seeking to exercise their rights under the federal Truth-in-Lending Act. This law gives a borrower the right, under 15 U.S.C. § 1635(a), to “rescind the transaction until midnight of the third business day following . . . the delivery of the formation and rescission forms required under this section . . . by notifying the creditor . . . of his intention to do so.” The Act further creates, per 15 U.S.C. § 1635(f). a “[t]ime limit for [the] exercise of [this] exercise of [this] right,” providing that the borrower’s “right of rescission shall expire three years after the date of consummation of the transaction” even if the “disclosures required . . . have not been delivered.” The Truth-in-Lending Act gives borrowers an opportunity to review certain mandated disclosures from lenders so as to allow them the right to rescind a loan transaction within the given time period. 

In the case of Jesinoski v. Countrywide Home Loans, Inc., the petitioner asks the high court whether a borrower can exercise his right to rescind a transaction in satisfaction of the requirements of Section 1635 by “notifying the creditor” in writing within three years of the consummation of the transaction, as the Third, Fourth, and Eleventh Circuits have held, or must a borrower file a lawsuit within three years of the consummation of the transaction, as the First, Sixth, Eighth, Ninth, and Tenth Circuits have held? The Supreme Court does not have to accept this case which originates from the Eight Circuit Court of Appeals but, considering the fact there is such a stark conflict between the different appellate courts on this issue, there is a strong likelihood the court will agree to review it.

These chances are bolstered by the filing of a petition for writ of certiorari in the similar case of Keiran v. Home Capital, Inc.in which this same issue of what action is sufficient for rescission: the sending of a written notice or the filing of a lawsuit. As the former, which the relatively-new Consumer Financial Protection Bureau, itself claims is sufficient, imposes a much smaller burden on the borrower than initiating a civil action, the linked cases, if accepted for review, will settle the dispute between lenders and borrowers. The Supreme Court was scheduled to conduct a conference on whether to take the cases on April 18, 2014.

Before making any real estate purchase or transaction, contact the attorneys at Giddens & Gatton Law,amp; P.C. located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico. Call the Law Office of George “Dave” Giddens at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com for more information.