Homeowners Win Truth in Lending Act Case

A recent case about a homeowner’s right of rescission recently went before the U.S. Supreme Court, and the Court found in favor of the homeowners. This particular case, Jesinoski v. Countrywide Home Loans, concerned homeowners with a mortgage through Countrywide Home Loans. Before three years elapsed on their loan, the homeowners decided to rescind the loan because of a disclosure violation.
In making its ruling, the Court decided that the Truth in Lending Act only requires a consumer to give written notice of rescission within the required 3-year period, and it doesn’t require the consumer to file a lawsuit within that time period. This case is likely to have a positive impact on homeowners in Illinois and, indeed, consumers across the country.
Facts of the Case in Jesinoski
What makes the recent Supreme Court case important? In short, it makes clear that homeowners don’t need to file a lawsuit in order to cancel a loan. To understand how this works, let’s take a look at the facts of the case.
In Jesinoski, the homeowners borrowed money from Countrywide Home Loans to refinance their home mortgage. According to the Court, “exactly three years after” borrowing that money, they sent a letter to Countrywide indicating that they planned to rescind. In that three-year period, Bank of America had acquired Countrywide. As such, Bank of America responded to the homeowners by refusing to acknowledge the rescission.
More than one year later, the homeowners filed a lawsuit. The District Court found in favor of Bank of America, concluding that “a borrower can exercise the Truth in Lending Act’s right to rescind a loan . . . only by filing a lawsuit within three years of the date the loan was consummated.” Since the homeowners had filed their complaint exactly four years and one day after the loan’s consummation, the court considered their complaint ineffective. The homeowners appealed, but the Eighth Circuit affirmed in favor of Bank of America.
At the U.S. Supreme Court, the Court reasoned that the language of the Truth in Lending Act specifies only “when the right to rescind must be exercised, but says nothing about how that right is exercised.” As such, the Court found in favor of the homeowner, holding that “a borrower exercising his right to rescind under the Act need only provide written notice to his lender within the 3-year period, not file a suit within that period.”
What is the Right of Rescission?
When you enter into a mortgage loan contract, you have a certain time period in which you can change your mind. This is called a “right of rescission,” which allows you to rescind, or cancel, the loan.
Under the Truth in Lending Act, a consumer has until midnight on the third business day after consummation of the loan to change her mind. However, if the lender doesn’t provide the consumer with material disclosures concerning the loan (including but not limited to information about finance charges, the annual percentage rate, the total of the payments, or the payment schedule), then the consumer has the right to rescind until 3 years after consummation of the loan.
The right of rescission can be a powerful tool for consumers, and it’s important to know how it works. Do you have questions about your mortgage loan? Are you dealing with a dispute with your lender? You should contact an experienced Oak Park consumer protection lawyer as soon as possible to discuss your situation.
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