A decision in favor of lenders on how long borrowers have to rescind a loan has been overturned by the nation’s high court.
Larry and Cheryle Jesinoski closed on a $611,000 loan with Countrywide Home Loans Inc. in February 2007 to refinance the mortgage on their Minnesota residence.
However, the former Calabasas, Calif.-based lender mistakenly neglected to provide the borrowers with adequate disclosures required under the Truth in Lending Act.
So exactly three years after closing on the loan, the borrowers sent a letter to Bank of America Home Loans — which acquired Countrywide in 2008 — rescinding the transaction.
The right to rescind is
allowed under TILA up to three years after the loan closing when required disclosures are not provided.
But BofA refused to acknowledge the rescission’s validity. BofA conceded that the written notice would have been adequate if both parties agreed that the lender failed to make the required disclosures.
“Respondents argue, however, that if the parties dispute the adequacy of the disclosures — and thus the continued availability of the right to rescind — then written notice does not suffice,” court documents state.
A little more than a year later, the
Jesinoskis filed a federal lawsuit against BofA seeking a declaration of rescission and damages.
The district court ruled in favor of BofA, finding that the borrowers would need to file a lawsuit within three years of the loan closing. The
Jesinoskis filed their complaint four years and one day after they closed.
So they appealed to the Eighth Circuit Court of Appeals, which affirmed the decision.
They then took their case to the highest court in the land, which
agreed in April 2014 to hear the case.
In a decision
Tuesday, the U.S. Supreme Court ruled in favor of the borrowers, noting that the Federal Reserve Board’s TILA regulation made it clear that only written notice — and not the filing of a lawsuit — is required to exercise the right rescission.
“The Jesinoskis mailed respondents written notice of their intention to rescind within three years of their loan’s consummation,” Justice Antonin Scalia wrote in the Supreme Court opinion.” Because this is all that a borrower must do in order to exercise his right to rescind under the act, the court below erred in dismissing the complaint. Accordingly, we reverse the judgment of the Eighth Circuit and remand the case for further proceedings consistent with this opinion.”
