Right to Rescind/TILA Moves to Block Foreclosures Increase

Servicers are seeing increased cases where borrowers are trying to stall or stop foreclosures by filing "right to rescind" notices as violations of the Truth in Lending Act, according to speakers at the MBA's National Mortgage Servicing Conference in Tampa. During a panel on mortgage litigation, Terry Hutchens, president of the law firm of Hutchens, Senter & Britton, said that debtors attorneys are claiming that borrowers were given inadequate documents at the time of closing and did not understand the loan, which judges are starting to honor. It's worth it for servicers to try and negotiate a settlement or consider a loan modification with the borrower rather than take the case through expensive litigation, he said. "We're not so vulnerable that we are rolling over in every case, but we have to consider doing things differently than we have in the past," said Mr. Hutchens. The cost of defending these types of cases has gone up in the past year, he said. Shaun Ramey, a partner with Sirote & Permutt PC, said servicers must decide how to handle these new cases. Cities, states and counties are putting giant roadblocks up to fight foreclosures, he said. "There are new claims and new defenses. Public nuisance lawsuits are coming up because foreclosures are driving up the cost of mounting properties sitting around and the cost it takes to maintain them." It was also said that claims of reverse redlining are being brought against lenders at the city level as well as borrowers bringing suitability actions against lenders. "If the judges feel that something isn't right, they will stop the foreclosure."