Borrower overcomes rebuttable presumption in mortgage loan rescission
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
By Joe Forward, Legal Writer,
State Bar of Wisconsin
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
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
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
“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.