I. What Is Mortgage Rescission?
Rescission is a way for a borrower to get out of a mortgage that was fraudulently or deceptively originated. For example, if the lender misrepresented the terms of the mortgage by failing to disclose a balloon payment, or the nature of the adjustable rate, or advised the borrower to inflate income to qualify for a larger loan – gasp! does this sort of thing ever happen? up until recently, all the time – the borrower may cancel the loan.
II. The Legal Foundation For Mortgage Rescission
The main statutory vehicle for rescission is the Truth in Lending Act (“TILA”), 15 § U.S.C. 1601 et seq., and its regulatory partner, Regulation Z, 12 C.F.R. 226.31, et seq.. TILA and Regulation Z are complicated, so it is easy for a creditor to violate them. The most common violations involve inadequate disclosures. See 15 U.S.C. §§ 1638(a)-(b)(1) for some of the required disclosures. Regulation Z has its own plethora of required disclosures.