Extended Rescission Limited To 3 Years

Hi Paul,

I have been trying to save my home and have followed your website since May 2008. I have a interest only option arm that I had a forensic auditor review and found multiple truth and lending violations. I then found an attorney who was going fight Countrywide for me to rescind the loan, or interest, etc. however he gave up on Countrywide and their antics a few months into it and refunded my retainer.I have since been working with NACA -Neighborhood Assistance Corporation of America who has just informed me that they have gotten Countrywide to agree to a fixed rate of 5% for the life of the loan.

I am not late, nor have I ever been late on a payment, but have only been able to afford the minimum payment since the loan was started 4 years ago. Therefore my principal balance has gone up, and of course my home value has gone down. So here is my question-

Does it make any sense to take the 5% interest rate without a principal reduction? I am probably 40k upside down. While the 5% fixed is very attractive (also I filed chapter 7 bk 3.08 and did not reaffirm the home) does it make any sense to stay in a home that is so upside down? I know the market is bound to come back but that could take many many years before I get right side up!

But on the other hand if I dont take the deal I wont be able to buy another home for some time due to the bk and credit. Just want your opinion. I am having a hard time knowing there are truth and lending violations and all of that interest money should be rescinded but cant find an attorney that can make that happen and I am so worn out from all of this I just dont know what to do anymore.

The 5% fixed sounds great, but the negative equity is just such a bummer- and I know alot of folks are in the same boat. What do you think?

Thanks

Rae Jean

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Hi Rae Jean,

The extended right to rescind under 1635(f) of the TILA is strictly limited to three-years.  This was actually decided in a Supreme Court case in Beach v. Ocwen Fed. Bank, 523 U.S. 410, 118 S. Ct. 1408, 140 L. Ed. 2d 566 (1998) where the Court concluded:

“We respect Congress’s manifest intent by concluding that the Act permits no federal right to rescind, defensively or otherwise, after the 3-year period of §1635(f) has run.  Accordingly, we affirm the judgment of the Supreme Court of Florida.”

So, a rescission notice would need to have been sent to the creditor within a three-year time frame [it should be noted that a bankruptcy filing may toll that period for up to sixty-days if the bankruptcy was filed prior to the three-year expiration] and then the creditor has twenty-days to rescind the loan, and a lawsuit for failure to rescind could be brought up to one-year after that twenty-day period ends.  If it’s been four-years, then it sounds like rescinding the loan may no longer be an option.

Yes, I believe 5% fixed is a great rate and a lot of folks are in the same boat and many of them would be thrilled to receive such an offer.  You are one of the fortunate ones who have been offered a helpful loan modification.  No, it might not include a principal reduction, but if it is affordable then I’d go for it.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.