Truth in lending a lever against foreclosure
By Cathy Moran, California bankruptcy lawyer on Mar 21, 2008 in Foreclosure Issues, Surrendering Property
Many of the same miserable exploding ARM loans that bring clients into my office contain Truth in Lending Act violations. The right to rescind a transaction that violated TILA is an arrow in my quiver for saving a house.
Absent some legal theory that challenges the lender’s right to foreclose, we are left with the argument that the lender ought to be bright enough not to want yet another REO property. Yet you can’t go wrong underestimating the logic at work in the mortgage market these days. If I can’t find a TILA violation, I’m often telling clients that living in the house payment free til foreclosure is the highest and best use for the property.
The right to rescind a loan for a TILA violation has a three year statute of limitations. Beyond that three year period, the violation provides far fewer avenues to resist foreclosure. If you recently refinanced into a bad loan, get an experienced attorney to review the transaction for Truth in Lending violations.
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