Last month it was in California, this month it was in South Carolina. All across the country we are seeing rescission letters stopping foreclosures in their tracks. Over the last few months I have been writing about how effective a Truth in Lending Act (TILA) rescission of your mortgage could be, and how the banks are getting nervous. Well, the results keep coming in, and they are extremely encouraging!
One of my real estate investor students recently explained to his father how he might be able to use rescission to stop the foreclosure on his home. His father sent in a rescission letter and the 20-day period for the bank to respond went by without a peep from the bank or their attorney. When the auction day came up, the investor and his father went to the courthouse and explained to the judge about the rescission and the Supreme Court’s ruling on the matter. The judge pushed their auction to the end of the day in order to move onto other houses. At the end of the day, the judge asked for a copy of the Supreme Court decision to review it. After reviewing the decision, he canceled the auction and called for a new hearing.
On many of our deals we are well past the 20-day window for the banks to challenge the rescission in court. On the deals where we have heard back, not once has the bank actually gone forward with a legal defense. Instead they are sending letters stating that they are not accepting the rescission. If you have been reading my articles, you know that that letter is completely irrelevant! The bank has no right to approve or deny a rescission! Their only course of action is to prove in court that they complied with ALL of TILA’s requirements, and that they have the standing to foreclose on the property. Sending a letter to the homeowner isn’t worth the stamp.
The other tactic we are seeing is the banks are using fear and intimidation to scare homeowners who have rescinded their loans. The banks are calling homeowners or their attorneys and demanding to be paid back all of the money that was lent out before complying with the rescission. This is another case where the bank doesn’t have a legal leg to stand on. It is very clear in the statute that the lender must comply completely with all three of the duties spelled out by TILA before they can demand payment from the homeowner. This means that the banks must provide the homeowner with the canceled note, a release and satisfaction of the mortgage or deed of trust, and return ALL of the money ever paid on the loan, including principal, interest, fees, and anything paid to anyone in the origination process of the loan.
The banks are acting tough because they are scared. The law has caught up to them, and they are hoping they can bully homeowners out of their rights. This is why they’re sending out letters acting like they can simply decide not to agree to the rescission, and why they’re demanding money before fulfilling their legal requirements.
Not only does this provide homeowners with a powerful tool to stop foreclosure and stay in their house longer, it also creates an opportunity for investors to do some pretty amazing deals. During those 20 days, the bank could be more willing to negotiate the terms of the loan, or to sell it at a discount to an investor. The tides have turned and the banks are being forced to negotiate on our terms. No more begging the banks to accept our short sale and REO offers only to have them demand ridiculously high prices. We can now get the banks to the table and demand that they prove they have the right to enforce a loan.
This makes it more important than ever that homeowners and real estate investors act NOW. This is a massive opportunity for real estate investors. If you know of anyone with a defaulted or underwater note, you need to get in contact with my office immediately at (706)-485-0162. I have spent the last two years building up a team of experienced attorneys and fraud examiners/forensic auditors who specialize in exposing fraud committed in the mortgage process and using that fraud as leverage to negotiate the sale of notes. This opportunity is not going to be available forever; we need to strike while the iron is hot!
We have a huge opportunity to help homeowners and do some great deals with multiple exit strategies. For more information, call me at 706-485-0162