WASHINGTON (3/28/12)--Borrowers that do not receive Truth in Lending Act (TILA) mandated disclosures from mortgage lenders may cancel those loans, provided they inform the lender of their intent to cancel the loan within three years, the Consumer Financial Protection Bureau (CFPB) said in an amicus brief filed this week in Colorado.
The amicus brief was filed in the United States Court of Appeals for the Tenth Circuit in Denver, Colo., and is tied to the case of Jean C. Rosenfield v. HSBC Bank, USA, which is being heard in that court.
Rosenfield in 2006 purchased a home, using Ownit Mortgage Solutions, which eventually sold her mortgage to HSBC. Ownit allegedly violated TILA by failing to notify Rosenfield of her right to rescind the loan and by providing incomplete disclosures regarding the adjustable interest rate. Ownit also inaccurately stated the total finance charge, according to the CFPB filing.
TILA permits borrowers that do not receive these disclosures to cancel their loans within three years, the CFPB noted. Borrowers that cancel mortgage loans due to disclosure errors by their lenders are released from any liens against their home. The borrowers must return the loan he or she received from the lender, according to the CFPB.
The homeowner contacted HSBC in a bid to end the contract, but did not receive a response from the bank, and eventually sued the bank around 37 months after the mortgage was signed, seeking an injunction to bar HSBC from foreclosing on her home. Rosenfield also included a declaratory judgment that she had rescinded the loan, and sought damages, the CFPB wrote.
Rosenfield's suit was dismissed, with the court finding that mortgageholders must notify and sue the lender within three years of the moretgage being signed. This ruling has been appealed, and the CFPB has backed the appeal, calling for the dismissal to be reversed.
The CFPB, which implements and interprets TILA, said in a release that "TILA specifies that consumers can cancel a loan under this provision by notifying their lenders of their cancellation within three years of signing their loan documents.
"If the lender ignores the consumer's timely notice or refuses to cancel the loan, the courts can determine in subsequent litigation whether the consumer's exercise of the right to rescind was valid, even if that litigation starts after the three-year timeframe has expired," the CFPB added.
CFPB Director Richard Cordray said the agency is "committed to making sure that borrowers can exercise their rights to the full extent allowed," and added "the consumer's right to cancel gives lenders a powerful incentive to provide the disclosures that consumers need to make good financial choices."
The CFPB in a release called amicus briefs "an important way for the CFPB to ensure that the statutes it oversees are correctly and consistently interpreted" by courts, and said it "is committed to filing amicus briefs in litigation involving the federal consumer financial protection laws that it oversees and in which the CFPB determines its views will assist the courts in correctly resolving the matters."
For more on the CFPB's brief, use the resource link.