US Bank, N.A. v. Naifeh

When a home loan borrower defends a lender’s suit, based on a demand for rescission under the Truth in Lending Act, the lender’s lien is not automatically invalidated; instead, the court must decide whether correct TILA disclosures were given and whether the borrower should be required to tender back the borrowed sums before the lien is invalidated.  Borrower defaulted, then sent a TILA notice of rescission of his loan within 3 years after consummation of his home loan.  After US Bank foreclosed, it sued to cancel a series of instruments borrower recorded against the property purporting to convey the property free and clear of the US Bank deed of trust.  This decision holds that while, under Jesinoski v. Countrywide Home Loans, Inc. (2015) 135 S.Ct. 790, rescission is effective and beats the statute of limitations, when the lender sues and the borrower defends based on having rescinded the loan, the court is called upon first to decide whether the required TILA disclosures were properly given (in which case, the borrower has only 3 business days to rescind, so a notice of rescission sent two years or more later would be untimely and ineffective) and whether the statutory rescission procedure should be altered to require the borrower to tender payment before the lender’s lien is invalidated.

California Court of Appeal, First District, Division 5 (Needham, J.); July 19, 2016; 2016 WL 3944575

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