VIRGINA USDC AWARDS MORTGAGE FRAUD EXAMINERS
FOUNDER STORM BRADFORD OVER $40,000 IN TILA LAWSUIT
by Mort Gezzam 3 May 2012
A recent mortgagor's win in federal court has proven the
wisdom of suing the loan servicer under TILA rather than RESPA for
the servicer's failure timely to identify the note owner to the
borrower.
Dispute Over Interpretation of Truth In Lending Act
Storm Bradford just won a Truth In Lending Act (TILA)
lawsuit against HSBC in the Virginia Eastern United States District
Court (USDC). Earlier, the 4th United States Circuit Court of
Appeals (USCCA) had opined that a TILA violation victim must post a
rescission letter AND FILE A LAWSUIT within 3 years after
consummating the loan in order to get the court to rescind the loan.
Bradford disagreed with that opinion.
So, he purposely waited 4 years to file the lawsuit in
order to challenge the ruling. Bradford filed the rescission letter
within 3 years but waited another year to file the lawsuit, just to
make a point. He lost that count but won $35,000 in damages and
another $5000 in sanctions because the servicer had refused to
identify the owner of the note. He sued the substitute trustee,
mortgage broker, and lender over a TILA violation.
Who Says What TILA Means?
That raises the question of what TILA really means
Congress created the Consumer Financial Protection Bureau (CFPB) and
mandated that it interpret TILA for lenders, consumers, and the
courts. Bradford conferred with policy advocates at the CFPB. He said
they agree with him that a victim of a TILA violation that justifies
rescission need not sue within 3 years because the TILA statute does
not require it. According to them, the 4th Circuit ruling wrongly
construed TILA to require suit within 3 years. To help correct this
misconception, CFPB intends submit an amicus
curiae brief when his case comes before the
USCCA. They submitted a similar
brief for a case before the 10th USCCA.
What Would YOU Think TILA Means?
The issue at hand boils down to this. An ordinary
citizen reading the TILA statute would think it necessary only to
submit a notice of rescission to the bank within 3 years after
receiving the loan, and that the bank would have to answer the notice
within 20 days. From reading the law, the citizen would not think the
opportunity to sue had expired if the bank didn't timely respond.
Thus the "court-created" requirement to sue within 3 years
deprives the citizen of the due process requirement of notice and
opportunity to respond. Bradford's appeal will challenge this
court-created law.
Does the Judge Want to Help You?
Bradford believes that generally a litigant can play the
case correctly and win the heart of a judge who tends to favor the
bank. In ordering the damages award, the judge said the bank
substantially impeded Bradford's ability to sue timely under TILA.
Bradford alleges he did not know whom to sue and couldn't sue within
the 3-year period because he did not know who owned the note. He had
asked the bank to tell him who owned the note, and they had refused
in order to drag things out and make Bradford miss the 3-year TILA
window for filing the rescission case.
Can a Mortgage Examination Justify Rescission?
Rescission is a common law remedy regarding contracts.
But federal common law does not exist, so Congress enacted the TILA
statute. Rescission restores the parties to their financial status
prior to contract. The parties must return money to one another.
But, a borrower under-water on a loan typically cannot
return the lender's money. For this reason, many mortgagors have
chosen to dig for the lender/agent torts, legal errors, and contract
breaches underlying the mortgage. It just so happens that Mortgage Attack (http://mortgageattack.com) can assist beleaguered homeowners in obtaining a comprehensive professional mortgage examination that reveals all the evidence of causes of action underlying the mortgage.
Speaking from Experience and Know-How
“When I give seminars and teach homeowners and
attorneys about the principles in solving mortgage and foreclosure
problems, I want them to know that I have walked in their shoes, that
I myself have fought the battle in court,” said Mortgage Attack ombudsman Bob Hurt in an interview today. He mentioned that he remains available to provide knowledgeable spokespersons at
seminars nationwide for attorneys seeking Continuing Legal Education
credits and to learn the techniques and nuances of winning financial
compensation for clients and getting them their houses free and clear
from tortious lenders.
Know the Law to Make a Picky Judge Happy
Bradford sees USDC Sr. Judge T.S. Ellis as a stickler
for perfection and holds all parties', including their attorneys’,
feet to the fire. Typically USDC mortgage-related cases become
"rocket dockets,” but Bradford kept this case in court for
nearly 3 years. He based his lawsuit on violations of TILA rather
than RESPA. Most such plaintiffs would complain that the lender had
violated RESPA by refusing to answer the QWR, and Bradford knew that
the servicer must answer the QWR only for questions related to
servicing the loan. However, he wanted the name of the note owner
because without it he could not file a TILA complaint against the
proper defendant.
"There is no substitute for knowing the law,"
Bradford said. "None! It is a two-edged sword. You have to make
sure it cuts them, not you. Many lawyers let the sword cut their own
clients because they don't know the law. I don't operate their way."
This shows the importance of paying attention to the law and doing
things the right way. Bradford’s case above provides a perfect
example.
Gilbert Opinion Vindicates Bradford
The 4th USCCA just vindicated Bradford's views when it
opined on 3 May 2012 in Gilbert
v. Residential Funding LLC as follows:
“Here,
we are primarily concerned with just one statute and
one regulation.
Section 1635(f) provides, in relevant part, the
following:
“'An
obligor’s right of rescission shall expire three
years after the
date of consummation of the transaction or upon the sale of the
property, whichever
occurs first, notwithstanding the fact that the
information and forms required under this section or any
other
disclosures required under this part have not
been delivered to the
obligor . . . .
' (15 U.S.C. § 1635(f)).
“Its
implementing regulation, Regulation
Z, states as follows:
'To
exercise the right to rescind, the consumer shall
notify the
creditor of the rescission by mail, telegram
or other means of
written communication. Notice is
considered given when mailed, when
filed for telegraphic transmission or, if sent by other means,
when
delivered to the creditor’s designated place of
business.
' (12
C.F.R. § 1026.23(a)(2)).
“Taking
the plain meaning of these
texts, and assuming that the words say
what they mean and
mean what they say, we come to the conclusion
that the Gilberts exercised their right to rescind with the April 5,
2009,
letter. Simply stated, neither 15 U.S.C. § 1635(f) nor
Regulation Z says anything about the filing of a lawsuit, and we
refuse to graft such a requirement upon them.
”
In view of this recent opinion, Bradford
has already drawn up the Rule 60 motion to vacate the ruling against
him and allow his TILA/Rescission lawsuit to proceed.
How to Avoid Foreclosure When Underwater on a Mortgage
Hurt explained that his clients who obtain mortgage
fraud examinations never suffer foreclosure. And over 90% of them
learn that they have causes of action against the lender such as the
TILA violation at issue in this article. Mortgage Attack provides professional reports that delineate all of those causes of action in red ink.
Those with causes may negotiate settlement or sue. Those without
causes know they might as well leave the house.
For those who sue, attorneys can simply cut and paste
that red ink text into a settlement demand letter to send to the
lender. Many times lenders respond by offering a dramatic reduction
in the loan balance. Sometimes the victim must sue the lender.
Courts give huge awards to some who sue, including the house free,
legal fees paid, and punitive damages.
How to Improve Credit Rating in Foreclosure
Those with no causes of action, know they need to look
into a short sale or a deed-in-lieu of foreclosure. That keeps them
from wasting their resources litigating when they should get out of
the house.
Getting out of the house can make sense when one
considers the impact of foreclosure and other options on the
borrower's credit rating. Credit ratings suffer typically like this
- 150 point FICO hit for deed in lieu of foreclosure or short sale, 2 or 3 years to recover.
- 400+ point FICO hit for foreclosure - at least 7 years to recover
Clearly, one fares better by reducing the FICO hit. The
worse the hit, the higher the interest one pays IF one can get a loan
at all. Also, leaving the house will reduce the judgment lien against
underwater owners whose houses won't sell at foreclosure auction for
what they owe.
So if you face foreclosure and have no cause of
action, you can get out of the house quickly, and in 2 or 3 years
when house values have hit rock bottom, you can get financing on a
lower priced house.
A Winning Strategy for Mortgage Victims and Attorneys
By following the above guidelines you can win in the end
because you will have properly engineer your foreclosure or your
court case.
As to strategy, Bradford considers it practical for a
borrower in his shoes to continue attacking lenders in court till the
court has given every possible remedy to the borrower.
"Decide the outcome you want and engineer the case
to produce that outcome," he advised.
Hurt explained the winning strategy for people with
mortgages. “In the end, you have to know whether you have any
causes of action against the lender or the lender's agents,” he
said. “And if you litigate you must know the law and rules, Then
if you have the willingness and resources to demand settlement and
litigate, you can beat a crooked mortgage. You can win whether or
not you face foreclosure, even if you owe far more than the value of
your property. A court can award you the house, legal fees and costs,
and punitive damages. That beats going through foreclosure.”
Mortgage Attack arranges coaching for attorneys who want to use mortgage examination reports as the basis for settlement
demands and lawsuits. A growing number of attorneys nationwide
consider themselves fortunate for obtaining such reports and litigation/negotiation guidance. They realize that no other type of
service will allow their clients to get their houses free and clear.
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| Mort Gezzam |
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