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.
Relying on American Mortgage Network, Inc. v. Shelton, 486 F.3d 815 (4th Cir. 2007), GMAC argued that the April 5, 2009, letter was insufficient alone to rescind the mortgage and that a lawsuit seeking to enforce the rescission was required within 3 years.
The 4th Circuit, however, read Shelton much more narrowly, declining to "conflate the issue of whether a borrower has exercised her right to rescind with the issue of whether the rescission has, in fact, been completed and the contract voided."
Further, the 4th Circuit held that the rescission action against the assignees, rather than the original lender, was appropriate under 15 U.S.C. § 1641(c), which specifically provides as such.
Further, while 15 U.S.C. § 1640(e) provides a 1 year statute of limitations for damages under TILA, such damages accrue when the rescission notice was denied by GMAC, not from the date of the mortgage note.
This narrowing of American Mortgage Network, Inc.v. Sheldon revitalizes the prospects for TILA rescission in the 4th Circuit. That so few mortgages have actually originated since the Fall of 2008, however, means that calendrically few mortgages are still subject to TILA rescission.
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