WisBar News: Borrower overcomes rebuttable presumption in mortgage loan rescission case:

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  • WisBar News
    December
    09
    2011

    Borrower overcomes rebuttable presumption in mortgage loan rescission case

    Joe Forward
    Legal Writer

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    Dec. 9, 2011 – A consumer who claims he did not receive the requisite number of documents at his mortgage loan closing will have an opportunity to make that case to a federal jury, a panel for the U.S. Court of Appeals for the Seventh Circuit has ruled.

    Borrower overcomes rebuttable presumption in mortgage loan rescission case

    At his mortgage loan closing, borrower Richard Marr signed a written acknowledgment form that he received two copies of a notice outlining his right to rescind the mortgage loan transaction within three days of closing, creating a rebuttable presumption that he received two copies.

    By org jforward wisbar Joe Forward, Legal Writer, State Bar of Wisconsin

    article title Dec. 9, 2011 – A consumer who claims he did not receive the requisite number of documents at his mortgage loan closing will have an opportunity to make that case to a federal jury, a panel for the U.S. Court of Appeals for the Seventh Circuit has ruled.

    In 2007, Wisconsin resident Richard Marr decided to refinance the mortgage on his home in Wauwatosa, and applied for a new loan to help with his credit card bills.

    Countrywide Bank, acquired by Bank of America in 2008, accepted Marr’s application and used Summit Title Services LLC to close Marr’s new mortgage loan.

    This type of mortgage loan is subject to Regulation Z of the federal Truth-in-Lending Act, which requires that lenders provide borrowers with two copies of a clear and conspicuous notice of the borrower’s right to rescind the loan within three business days following the transaction.

    Failure to comply with the rule extends the time to rescind from three days to three years, according to the panel’s decision in Marr v. Bank of America, N.A., No. 11-1424 (Dec. 6, 2011).

    Under 12 C.F.R. section 226.23, effective rescission means the lender must return any payments made by the debtor and terminate its security interest in the home, and the borrower must return the loan principal or its reasonable value.

    Marr, who sued Bank of America (successor in interest to Countrywide Bank) and Summit Title to rescind the transaction two years after closing, had paid off the loan in full. He sued for reimbursement of interest payments totaling $17,000, statutory damages, and attorney fees.

    The U.S. District Court for the Eastern District of Wisconsin, Judge J.P. Stadtmueller, granted summary judgment to Bank of America and Summit Title, ruling that Marr could not overcome a rebuttable presumption that he received two copies of the notice on closing day. That’s because Marr signed an acknowledgment, on closing day, that he did receive two copies.

    But the appeals court panel disagreed, concluding that Marr produced enough evidence “to permit a reasonable jury to find in his favor,” Judge Diane Wood explained in the opinion.

    Marr testified that he left the closing with a folder containing all closing documents, and did not remove anything from it for the next two years. When his attorney inspected the folder for an unrelated lawsuit, only one copy of the notice acknowledgement was inside.

    On the other hand, Summit Title’s closing agent submitted an affidavit that two copies must have been provided, because she always followed Summit Title’s closing practices and procedures, which specify that a closing agent must provide them and ensure that a borrower understands them when presented at the end of closing.

    Standing alone, Marr’s undisturbed envelope evidence, the so-called “envelope theory,” may have been insufficient to overcome the presumption, the panel suggested. “But Marr presented more than that,” the panel explained.

    Specifically, Marr submitted an affidavit that Summit Title’s agent deviated from the stated closing practices and procedures. For instance, Marr said the agent rushed the closing, and he did not have time to review the documents he signed, including the rescission notice.

    “If believed, this evidence is enough to rebut the presumption created by Marr’s acknowledgement that he received two copies of the Notice,” the opinion states.