Tag: truth in lending act

4th Circuit: Klein v. Household Realty- Arbitration Rider did not Render Rescission Notice invalid under TILA


The Court of Appeals held that arbitration rider in mortgage refinance agreement did not render consumer’s right to rescind credit transaction unclear or non-conspicuous under TILA.

For a copy of the opinion, please see:

Klein v. Household Realty- Arbitration Rider did not Render Rescission Notice invalid under TILA.pdf Read More

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Law Review: Shepard- It’s All about the Principal: Preserving Consumers’ Right of Rescission under the Truth in Lending Act


This Article explores a significant market-based threat to the Truth in Lending Act’s (“TILA”) right of rescission, a remedy that attempts to deter lender overreaching and fraud during one of the most complex financial transactions of a consumer’s lifetime. The depressed housing market has substantially impaired many borrowers’ ability to fulfill their responsibilities in rescission’s unwinding process: restoring the lender to the status quo ante by repaying the net loan proceeds of the mortgage transaction.

When a consumer is unable to finance her tender obligation, nonbankruptcy judges’ overwhelming response has been to protect the lender and deny rescission to the borrower.… Read More

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4th Circuit: Larrabee v. Bank of America- Iqbal/Twombley Pleading of Truth In Lending Rescission Action


The Court of Appeals held that the Plaintiff had failed to state a plausible claim for relief under the TILA because her proposed reading of the notice disclosing the number and due dates of payments due under that transaction is not objectively reasonable. Further, because the disclosure to the Plaintiff of her right to cancel the 2007 credit transaction contained all of the information required by the TILA, 15 U.S.C.A. § 1635(a)-(b), and Regulation Z, 12 C.F.R. § 226.23(a)-(b), (d), the disclosure complied with the TILA.

The grant of summary judgment against the plaintiff she did not suggest that she was confused as to whether she could cancel the 2007 credit transaction without cost, nor did she put forth any evidence explaining how or suggesting that an average borrower faced with both the notice of right to cancel and the fee notice would be confused as to whether she could cancel the 2007 credit transaction without cost.… Read More

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4th Circuit: Gilbert v. Residential Funding, L.L.C.- 3-Year Right of Rescission under TILA did not require commencement of enforcement suit


The Debtors executed an adjustable rate mortgage note on May 5, 2006, and received several disclosures, including a Truth in Lending Disclosure Statement, a Notice of Right to Cancel, a Variable Rate Mortgage Program Disclosure, a HUD-1 Settlement Statement and a First Payment Letter.

On April 5, 2009, the Debtors, through counsel, sent a letter to GMAC, the subservicer on the note, seeking to rescind the note pursuant to 15 U.S.C. § 1635 (f), which provides an extended 3-year right of rescission .  GMAC refused the rescission.  On September 14, 2009, while a foreclosure was pending, the Debtors filed suit to enjoin the foreclosure and to enforce their rescission rights.… Read More

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4th Circuit: Watkins v. Sun Trust- Incorrect TILA Notice of Right to Cancel Form is not a Material Violation


The Debtors refinanced their home original Sun Trust mortgage again with Sun Trust, which provided the Model Form H-8 “Notice of Right to Cancel”, which is used for closed-end secured consumer credit transactions.  In fact it should have used Model Form H-9, which applies in a refinancing rather than new extension of credit.  Form H-9 differs from  Form H-8 in two ways- First, instead of Form H-8’s disclosure that the borrower is “entering into a transaction that will result in a security interest in your  home,” Form H-9 provides that “[y]ou are entering into a new transaction to increase the amount of credit previously provided to you.” Second, Form H-9 adds a sentence, “If you cancel this new transaction, it will not affect any amount that you presently owe.”

In a divided opinion, the Court of Appeals held that neither the Truth in Lending Act nor Regulation Z, which is promulgated by the Federal Reserve to implement TILA, makes a distinction between a refinancing and an initial financing. … Read More

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