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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