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#51630 - 01/02/03 04:57 PM
Re: Rescission
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10K Club
Joined: Oct 2000
Posts: 27,752
On the Net
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This is a very bad practice. You don't know in advance that they didn't rescind and if they do and you go to court, the customer will say "look at all the papers they gave us. We just signed where they told us to."
Do it right and you won't have these worries. While that confirmation isn't required anyway, it is a safeguard to help protect you at funding so that you don't get the mailed rescission a day or two later.
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AndyZ CRCM My opinions are not necessarily my employers. R+R-R=R+R Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell
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#51631 - 01/02/03 05:03 PM
Re: Rescission
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10K Club
Joined: Nov 2000
Posts: 18,763
Central City, NE
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Andy is exactly right. BAD, BAD, BAD. The loan officers made (asked, suggested, whatever) the borrower's sign a false statement. It reads "The rescission period has expired and I do not wish to cancel ...." But the rescission period has not expired, so this is false.
What if the borrower wants to rescind the 2nd day, but feels like they can't because they already signed that statement? "Your honor, I wanted to rescind, but I couldn't because the loan officer told me to sign this statement."
This is not required to be signed at all! Andy pointed out, it is a good practice, but we have debated this before here at BOL. I'm in the camp that I rather it not be signed than have a loan officer have it falsely signed. Tell this loan officer to stop this practice.
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#51633 - 01/02/03 05:18 PM
Re: Rescission
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Power Poster
Joined: Nov 2001
Posts: 7,985
FINALLY ABOVE the gnat line
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This particular practice has already been tested in court. The bank lost. I'll try to locate the cite for you if you need reinforcment with your loan officers.
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"Once you learn to read, you will be forever free." - Frederick Douglass
My Opinion Only.
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#51634 - 01/02/03 05:37 PM
Re: Rescission
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10K Club
Joined: Aug 2002
Posts: 47,532
Bloomington, IN
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My bank was "mentioned" by the FDIC for this practice in its last audit, and it has also been one of the biggest habits for me to get the lenders to break since I was hired. They didn't address it so much as a "violation" because no funds were disbursed, but on the fact that it could be construed as being a "deceptive" practice, as once the borrower signs the confirmation they could be under the impression they have given up their right to rescind.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#51635 - 01/02/03 06:28 PM
Re: Rescission
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Gold Star
Joined: Jun 2002
Posts: 299
Midwest
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I remember the case too, Louvera. The bottom line was the court said the bank had basically taken away the customer's right to rescind when they had them sign off at closing that they didn't want to rescind.
It's a terrible practice that, unfortunately, was unintentionally caused by the forms suppliers. Nothing in Reg Z requires the customer sign off that they know the 3 days have gone by. So that signature area in the form is not needed. But the form houses put it in as someone thought it a good idea to get the customer's sign-off that they didn't want to rescind. Perhaps it was some of us compliance people that thought it a good idea? In any event, the forms have the sign-off area that is just too tempting to not fill in at closing.
Face it, nobody rescinds. At closing the lender will say to the borrower, "OK, your multi-week process to close this loan is now over. I know you have writer's cramp but we have one more thing to sign. The rescission. Sign here acknowledging you have received this notice. Then come back in 3 business days. Don't count federal holidays. Then you'll be signing this other part on the form that says you don't want to rescind. Then I can give you the money." To which the customer replies, "Hey, why don't I just sign off now and save me taking time off from work to come back down here. Just send me the check or put it in my account after the 3 days. Let's save us all some time?" The accomodating banker goes along with it and everyone is happy. Until the compliance dude comes along.
It's a wrong practice but it's understandable on how it happens.
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Sponge Steve, CRCM, CBA
Opinions expressed are mine and not my employer's
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#51636 - 01/02/03 06:49 PM
Re: Rescission
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10K Club
Joined: Oct 2000
Posts: 27,752
On the Net
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This could be Curry v. Fidelity Consumer Discount Co. (656 F. Supp. 1129 (ED Pa. 1987)) where a postdated RoR was deemed to extend the rescission period to 3 years and that the bank disbursed prior to the rescission period expiring.
_________________________
AndyZ CRCM My opinions are not necessarily my employers. R+R-R=R+R Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell
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#51638 - 01/02/03 08:51 PM
Re: Rescission
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Joined: Oct 2000
Posts: 27,752
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The TiLA manual on my bookshelf is where I have it. That doesn't do you much good though. It contains a small amount of information so I am not even sure that is the case being mentioned, nor all the specifics of the case.
I don't know where it is online, but I'll bet a legal scholar out there has a good resource to this case or the actual one in question if this is not it.
_________________________
AndyZ CRCM My opinions are not necessarily my employers. R+R-R=R+R Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell
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#51639 - 01/02/03 08:57 PM
Re: Rescission
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Platinum Poster
Joined: Dec 2002
Posts: 703
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#51641 - 01/03/03 04:34 PM
Re: Rescission
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Posts: 27,752
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I thought Rodash was more about the overnight fees. Was it about rescission forms being dated and signed at closing, effectively eliminating the right to rescind?
_________________________
AndyZ CRCM My opinions are not necessarily my employers. R+R-R=R+R Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell
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#51642 - 01/03/03 05:25 PM
Re: Rescission
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10K Club
Joined: Sep 2002
Posts: 13,965
TN
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If memory serves it was both.
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#51644 - 01/03/03 05:28 PM
Re: Rescission
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100 Club
Joined: Jul 2002
Posts: 157
Grand Rapids, MI
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Andy, I have been trying to find a direct link to the case but apparently it is to old. But here is a discussion that was in yet anohter case:
In Rodash v. AIB Mortgage Co., 16 F.3d 1142 (11th Cir.1994), a creditor provided notice of the right to rescind, but required the debtor to sign beneath a single paragraph that both acknowledged the receipt of the notice and simultaneously waived the right to rescind. We held that the notice violated TILA because it forced an immediate waiver of rights, when TILA's implementing regulations only permit the consumer to waive the three- day rescission period "if the consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency," in the form of a written statement describing the emergency. Id. at 1145-46; 12 C.F.R. ยง 226.23(e)(1). Based on the totality of the circumstances, we found that the lender violated TILA's requirement of "clear and conspicuous" disclosure of the right to rescind because: (1) the proffer of the notice together with the waiver implied that waiver was possible within the three- day period, although it is not; (2) forcing the borrower to sign a waiver on the date of the transaction would make her believe that the waiver was effective on that date; (3) including the waiver in the same paragraph with the receipt of notice would deceive the borrower as to the nature of what she was signing; and (4) proffering the waiver along with the mortgage papers would lead a consumer to believe that she had to sign the waiver in order to consummate the mortgage transaction. 16 F.3d at 1146. Despite these findings, however, we emphasized that judging a lender's compliance with the notice provision is not mechanical; rather, a court "must scrutinize the circumstances of the transaction." Id.
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#51645 - 01/03/03 05:45 PM
Re: Rescission
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Anonymous
Unregistered
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The commentary to 226.23(c) states:
"4. Delay beyond rescission period. The creditor must wait until it is reasonably satisfied that the consumer has not rescinded. For example, the creditor may satisfy itself by doing one of the following:
. Waiting a reasonable time after expiration of the rescission period to allow for delivery of a mailed notice.
. Obtaining a written statement from the consumer that the right has not been exercised.
When more than one consumer has the right to rescind, the creditor cannot reasonably rely on the assurance of only one consumer, because other consumers may exercise the right."
This seems to say that unless you want to wait even longer to assure yourself that they have not put a letter in the mail rescinding the transaction the signature at the bottom of the form is a good practice.
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#51647 - 01/03/03 06:58 PM
Re: Rescission
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10K Club
Joined: Jul 2001
Posts: 83,393
Galveston, TX
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We did away with the confirmations after the Rodash and Curry cases (Andy, I can't find this one either, but I know that there was another case besides Rodash and that is why we quit). I think in another thread, some of the more experienced people saw an average of one rescission in about ten years. I was involved in one in about 15 years in compliance were there was actually a disbursement of funds. IMHO - The risk of a loan officer having the customer sign ahead of time and therefor voiding the rescission notice far outweighed the possiblity of a customer actually rescinding the transaction and we not finding out about their intent until after funding.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#51648 - 01/03/03 07:09 PM
Re: Rescission
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10K Club
Joined: Aug 2002
Posts: 47,532
Bloomington, IN
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I've seen 3 rescissions in the past 5 years. All 3 were within the 3 year period when I was at the CU.
Everywhere I've worked the confirmation has always been used. Old habits are hard to break.
If you find the case, I'd be very interested in seeing it. It may possibly teach this old dog a new trick.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#51649 - 01/03/03 07:15 PM
Re: Rescission
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Joined: Oct 2000
Posts: 27,752
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Elaine, I figured you knew what you were talking about, you usually do. I always remember Rodash for the fee issue and never looked beyond that as we don't generally have problems in this area.
Lissie, be sure to compare what they do to the form to the samples you have in Reg. Z's appendix. You don't want to lose any safe harbor provisions. Your regulators will also ask about changed forms upon their next visit.
_________________________
AndyZ CRCM My opinions are not necessarily my employers. R+R-R=R+R Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell
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#51650 - 01/03/03 09:34 PM
Re: Rescission
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Power Poster
Joined: Nov 2001
Posts: 7,985
FINALLY ABOVE the gnat line
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Rodash set the standard, but there have been a several since then. Wiggins vs. Avco Financial is the one I was thinking of.
_________________________
"Once you learn to read, you will be forever free." - Frederick Douglass
My Opinion Only.
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