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Santos/Rojas vs. Doral Mortgage Corporation,

(United States Court of Appeals for the First Circuit)

Two plaintiffs, the Santoses and the Rojases, brought suit against Doral Mortgage Corporation in the U.S. District Court for the District of Puerto Rico. Each had a mortgage loan with Doral and each refinanced with them. Doral provided the rescission form H-8 (a general rescisison form) found in Appendix H to Reg Z, instead of using form H-9 (a rescission with the same lender on the old and new loans). Santos/Rojas maintained that because the incorrect form was used, they had three years to rescind. Doral fought the claim and the district court agreed with Doral. It was then taken to the U.S. Court of Appeals for the First Circuit.

There were two issues reviewed. Santos/Rojas maintained that because Doral used the wrong rescission form, the borrowers were entitled to a three year rescission period. The Court noted that the lender may use a model form or (emphasis added) a comparable written notice. Use of the model forms is not obligatory and this portion of the complaint was denied.

The second portion of the complaint was that use of the incorrect form was misleading as to the customers' rights to rescind. The court examined the elements of the rescission requirements. The rescission notice must be a separate, written document that is "clear and conspicuous." There are five elements to being clear and conspicuous:
Requirements Procedure Followed by Doral with form H-8
1 - State that there will be the retention or acquisition of a security interest in their principal dwelling. The form stated there would be a mortgage on their home.
2 - Tell the consumer they have the right to rescind The form stated they could rescind without cost within three days.
3 - Explain how to rescind the loan. The form explained that they must rescind in writing and may use any written statement, signed and dated, or they could use the notice provided.
4 - Describe the effects of rescission. The form stated "If you cancel the transaction, the mortgage, lien or security interest is also cancelled."
5 - Describe when the rescission period expires. Forms H-8 and H-9 are similar in describing date triggers for rescission.

The Appeals Court noted that "Most courts have concluded that the TILA's clear and conspicuous standard is less demanding than a requirement of perfect notice." Because the requirements were met, the appeals court affirmed the district court's dismissal.

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