Cancel That Mortgage!

31 Jul Cancel That Mortgage!

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Tender must be made after the mortgage is rescinded, although mortgage lenders usually require that it be at the same time or they go to court for a special order.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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L. Jed Berliner practices exclusively in consumer bankruptcy, foreclosure defense, and related consumer protection litigation such as credit card defenses and suing debt collectors. He established his Springfield, MA practice in 1988. Attorney Berliner is a regular and active contributor to the Bankruptcy Law Network, the Bankruptcy Roundtable, and the National Association of Consumer Bankruptcy Attorneys, three specialized consumer bankruptcy forums on the Internet, and is an informal mentor to regional practitioners. He is recognized by his peers as an expert in consumer bankruptcy issues. He thoroughly enjoys being rated "excellent" in his client surveys.

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