WASHINGTON (1/14/15)--The Supreme Court Tuesday ruled in favor of homeowners wishing to rescind their mortgages. Jesinoski v. Countryside sought to address if borrowers can send a written notice or rescission to lenders, or if they also have to file a lawsuit within the three-year window.
"So long as the borrower notifies within three years after the transaction is consummated, his rescission is timely. The statute does not also require him to sue within three years," reads the court's opinion, from Associate Justice Antonin Scalia.
The Truth in Lending Act allows consumers to rescind the transaction three business days after the closing of a refinancing or home equity line of credit. The right of rescission is extended for up to three years if the mortgage disclosures are found to be inaccurate, the finance charge was understated or the lender failed to provide the borrower with the proper disclosures.
On Feb. 23, 2007, petitioners Larry and Cheryle Jesinoski refinanced their home by borrowing $611,000 from Countryside Home Loans, Inc. On Feb. 23, 2010 the couple mailed a letter to rescind the loan, and it was refused.
The Eight Circuit Court ruled that a lawsuit was necessary for rescission, which the Supreme Court reversed in their Tuesday decision.
"As this case points out, an ordinary three-day right of rescission can result in a three-year rescission period if the lender fails to provide a material disclosure. The real issue in this case is whether the borrower has to file a lawsuit during the three-year period to rescind or whether he only has to provide 'notice' to the lender. The Supreme Court overruled the District Court and the Eighth Circuit Court of Appeals, in holding that the borrower only has to provide a notice to the lender," said Mike McLain, senior assistant general counsel for compliance at the Credit Union National Association. "There may be situations where the borrower may have the right to rescind, but should not exercise that right because, for example, the house is currently worth less than the remaining loan balance."