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3 Year Rescissions for DE Borrowers

Ameriquest may have missed rescission notices

September 7, 2006

WASHINGTON correspondent for MortgageDaily.com

A potentially large number of Delaware borrowers may still be able to rescind mortgages closed up to three years ago with Ameriquest.

Gerard W. Kelly, Delaware's deputy bank commissioner for consumer affairs, this week urged Ameriquest's Delaware customers from 2003 until today to take a close look at their mortgage documents for a notice explaining their right to rescind the transaction under the "Truth In Lending Act." A notice of the right to rescind should have been provided at closing, been signed and dated and explain the date the rescission period begins and the date the rescission period ends.

If proper notice was not provided, Kelly is counseling Delaware homeowners that they can cancel the loans, obtaining a refund for interest and other fees paid to the lender, but that they must repay the principal amount due, most likely by refinancing with another lender.

The potential number of homeowners involved could be quite large. Kelly said that he has already received about 20-25 inquiries a day from homeowners via telephone and e-mail.

The state's actions stem from a lawsuit filed against Ameriquest in federal court in Illinois.

In late May, a federal judge issued a preliminary injunction requiring Ameriquest to give special notice to borrowers facing foreclosure on their homes. Borrowers challenged Ameriquest Mortgage Co.'s alleged mortgage loan practices under the "Truth in Lending Act," claiming they were not provided proper notice of the right to cancel the transaction.

As Delaware homeowners received postcards from Ameriquest in response to the judge's ruling and, as Ameriquest's customers called other Ameriquest customers to tell them about the court's ruling, the homeowners contacted the state's banking commissioner.

Federal law penalizes lenders if they fail to notify consumers of the three-day right to rescind, which means borrowers have three days to back out of the mortgage without paying interest or other charges. If the lender doesn't meet disclosure requirements, homeowners can make use of an extended right of cancellation, which lasts up to three years after closing. Under the right of extended cancellation, the borrower gets a refund for interest and other fees paid to the lender. But the borrower also has to repay, in lump sum, the principal amount of the mortgage.

In this case, only homeowners who refinanced with Ameriquest and received cash since September 2003 could make use of the cancellation protection.

Kelly said his office will be holding mortgage workshops in the state over the next two months to cover the issue.

Ameriquest did not respond to inquiries for comment.

Lisa D. Burden is a legal analyst for MortgageDaily.com and holds a law degree from the University of Maryland. She is currently a freelance journalist who previously wrote for Institutional Investor publications and the Baltimore Daily Record.

e-mail Lisa at: [email protected]

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