Short Sale, Foreclosure and Strategic Default


Thursday, June 19, 2008

TILA, RESPA and leveraging the law against lenders

If you are having trouble getting the lenders to bend to your will or you may want to go on offense.

Assignee Liability and Set-off Rights: Steps to Mitigate Risks of Purchasing or Financing Residential Mortgage Loans
Potential Liability Under Truth in Lending Act and Real Estate Settlement Procedures Act

Under TILA, loan originators and assignees may be held liable for failure to make required disclosures. Remedies for TILA violations include rescission, damages and equitable relief. With respect to mortgage loans which are not purchase money mortgage loans created to finance the acquisition or initial construction of the borrower's principal dwelling, within three years following loan consummation, a borrower may rescind such loan if the TILA disclosure requirements were not properly made. An assignee who acquires such a loan is subject to rescission claims to the same extent as the loan originator. A borrower who successfully exercises the right to rescind is entitled to a refund of all amounts paid to the mortgagee (including points, interest, insurance premiums and paydowns on the loan principal) and release of the mortgagee's security interest on the mortgaged property within twenty days. Moreover, if a borrower's action to rescind a loan is successful, the loan originator or its assignee may be liable for the mortgagor's costs and attorney's fees.

Within one year of a TILA disclosure violation, a borrower may assert a claim for damages against the loan originator or an assignee of the loan originator.