Cancel That Mortgage!
By L. Jed Berliner, Massachusetts Bankruptcy Attorney on Jul 31, 2008 in Benefits of Bankruptcy, Massachusetts
Borrowers have three days to cancel a mortgage after signing the papers. That three days is extended to three years (four years in Massachusetts), if the papers have certain problems. The extension can even be forever, meaning that it can be used as a defense called recoupment, to oppose a foreclosure.
Cancellation is also called rescission. One can rescind the mortgage if the designated problems exist. But, a notable but, one must return the principal amount borrowed less all payments made. This is called “tender.” The credit for payments made includes payments for interest, attorney fees, broker fees, and closing costs. The remaining amount to be returned can still be a lot, unless you’ve made payments for quite some time.
Tender must be made after the mortgage is rescinded, although mortgage lenders usually require that it be at the same time or they go to court for a special order. The money to tender can come from a refinancing, but one needs equity to do a refinancing.
Next, I’ll discuss some of the problems which allow cancellation, or rescission, and how bankruptcy can help with the obligation to tender, or return, the unpaid principal amount.
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