As the attached two recent federal district court opinions illustrate, the courts are divided on the issue of when a borrower must file a court claim for TILA rescission, after the borrower already demanded rescission within 3 years following the date of closing.
In Briosos v. Wells Fargo Bank, No. C 10-02834 (N.D. Cal. Aug. 25, 2010), the U.S. District Court for the Northern District of California held among other things that the borrower timely exercised his right to rescission within the 3-year period for doing so, and that his lawsuit to enforce his TILA rescission demand filed some 9 months later after the 3-year period had expired was still timely.
However, agreeing with a growing majority of federal courts, especially those having situs in California, the court in Briosos also held that the borrower failed to sufficiently allege facts supporting his ability to tender the non-rescindable balance due as part of the rescission process, with leave to amend and replead on this issue.
On the other hand, in Rosenfield v. HSBC Bank, USA, No. 10-cv-58 (D. Colo. Aug. 31, 2010), the borrower demanded rescission of a November 2006 mortgage loan in 2008. However, the borrower did not file to enforce the demand for rescission until December of 2009. The U.S. District Court for the District of Colorado held that TILA provides an absolute 3-year limit on both the right to rescind and the ability to file suit, and therefore that the TILA rescission allegations were time-barred.
In addition, the Rosenfield court also held that a judicial proceeding filed under Colorado law in connection with non-judicial foreclosures in that state was not an "action to collect the debt," and therefore that the borrower's attempt to assert a TILA claim for damages more than 1 year after the closing was also time-barred.
Ralph T. Wutscher
Kahrl Wutscher LLP
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