Rescission turns mortgage in to unsecured debt!

Posted on January 17, 2009. Filed under: Case Law, Foreclosure Defense, Mortgage Audit, Mortgage Law, right to rescind, Truth in Lending Act | Tags: , , , , , , , , , , , , |

The borrowers were married but received only 2 copies of the Right to Cancel notice five days after signing the closing documents for a refinance of their primary residence. Upon completion of a Forensic Loan Audit and the discovery of  “material disclosure violations” they rescinded the loan and filed for protection under chapter 13 of the bankruptcy code.

The lender refused to rescind the loan and the borrowers consequently filed an Adversary Proceeding in the Bankruptcy Court. The judge found in favor of the borrowers and determined that they had the right to rescind.

Since they had rescinded the loan, it was held by the court that the loan became an unsecured debt and the mortgage was automatically voided as per the TILA. Because the debt became “unsecured” it was able to be discharged through bankruptcy like any other type of unsecured debt such as a credit card debt.

JAASKELAINEN v. Wells Fargo

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2 Responses to “Rescission turns mortgage in to unsecured debt!”

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did they get to keep the house?

Even after the sig-off @ title Co.? By signing rescission form at Title isn!t it construed as acknowledging that they had 3 days rescission? I am reviwing my coe docs on my 2008 re-fi to find any violation in order to stop sale of my propperty. What does receive means? Title Co will always give copy of e/a signned doc. @ sign off, isnt it receiving the recission doc.?


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