The ability to return something to the store that you bought on a whim or later regret buying does not always apply to major purchases or loans. Fortunately, in some cases, homeowners who have taken out a home equity loan or have had their mortgage refinanced under certain conditions may have a chance to cancel these transactions if their lenders failed to follow the law.
The Truth In Lending Act is a federal law that seeks to protect consumers who are extended credit by lenders, by requiring lenders to provide information on the loan costs including interest rates and fees. When lenders do not provide the required disclosures, there are statutory damages that the borrowing consumer may receive.
For borrowers who have taken home equity loans secured by their principal dwelling, the remedy for a lender’s failure to provide the necessary material disclosures under the Truth In Lending Act can be as strict as rescission. Rescission is a process that allows the borrower to void the loan. A rescinded loan no longer exists, and the borrower no longer owes the money originally borrowed. The lender is required to provide the borrower with information on the right to rescission along with the disclosures required by the law.
The borrower initially has a three day window in which to rescind after the lender provides the disclosures and information on the right to rescission. If the lender fails to provide either the material disclosures or the material disclosures, the borrower has three years in which to rescind the transaction. If the borrower decides to exercise this right, the lender has twenty days after receiving the notice of rescission in which to begin undoing the transaction.
The United States Supreme Court has interpreted the Truth In Lending Act to not require the borrower to file suit in order to exercise the right to rescind. All the law requires is that the borrower sends written notice of his or her intent to exercise the right of rescission to the lender before the end of three years from the loan’s closing. This is good news for borrowers who were previously thought to have to go through the expense of filing a lawsuit in order to exercise their rights. Furthermore, borrowers do not have to have the money upfront to repay the lender in order to exercise their rights, although a lender may file a lawsuit asking a court to compel this before a mortgage lien can be removed from a property.
The right to rescission does not mean that a homeowner in trouble can walk away from a mortgage and still retain the property. While this may be possible under the law, it is not likely to happen. Most lenders are careful to respond to the notice of intent to rescind, especially in light of the United States Supreme Court decision. However, this remedy does allow a homeowner who was not provided with all the necessary information that would have helped him or her make an informed decision about taking out a loan.
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If you are facing a foreclosure, you need an experienced foreclosure defense attorney to advise you on your rights. Contact the North Miami foreclosure attorneys at Charlip Law Group, L.C. for a consultation.