Relief under TILA Focus on rescission what constitutes a violation Tender requirement Tolerances Unfair & Deceptiv

1. MBA REGULATORY COMPLIANCERECENT TRENDS IN TILA ANDSTATE UNFAIR AND DECEPTIVE TRADE PRACTICES ACT CLAIMSReid S. Manley, Esquire Birmingham, Alabama Burr Forman LLP

2. Relief under TILA • Focus on rescission • what constitutes a violation • Tender requirement • Tolerances • Unfair & Deceptive Trade Practices Act claims

3. RELIEF UNDER TILA FOR PRIVATE LITIGANTS • Damages • Attorneys Fees • Rescission • Statutory Cap for class actions

4. STATUTE OF LIMITATIONS FOR TILA CLAIMS • DAMAGES • RESCISSION

5. RESCISSION • Material disclosures • APR • Finance charge • Amount financed • Total of payments • Payment schedule

6. WHAT CONSTITUTES A VIOLATION • Can borrower rescind loan if there is a “technical” violation?

7. COURTS ARE SPLIT • Melfi v. WMC Mortgage Corp., 568 F.3d 309 (1st Cir. 2009) • Vs. • Hamm v. Ameriquest Mort. Co., 506 F.3d 525 (7th Cir. 2007)

8. Melfi • “technical deficiencies do not matter if the borrower receives a notice that effectively gives him notice as to the final date of rescission and has the three full days to act

9. HAMM • “We have held that, when it comes to TILA, ‘hypertechnicality reigns.’

10. Semar v. Platte Valley Federal Savings & Loan Ass., 791 F.2d 699 (9th Cir. 1986)—”Technical or minor violations of TILA or Reg. Z, as well as major violations, impose liability on the creditor and entitle the borrower to rescind.”

11. RESCISSION • 15 U.S.C.A. SECTION 1635 • 3 step process • Regulation Z: Within 20 calendar days after receipt of notice of rescission, creditor shall return money and terminate security interest.

12. RESCISSION • Requirement of “Tender.” • Some courts require tender (or demonstration borrower has ability to tender) before lender releases lien: • Utilize court’s “equitable powers.” • Moore v. Wells Fargo, 597 F. Supp. 2d 612 (E.D. Va. 2009). • American Mortg. Network v. Shelton, 486 F.3d 815 (4th Cir. 2007).

13. RESCISSION • Requirement of “Tender.” • Some courts hold that tender is only necessary after lender releases lien. • Lippner v. Deutshe Bank Nat. Trust Co., 544 F. Supp. 2d 695 (N.D. Ill. 2008). • Velzquez v. HomeAmerican Credit, Inc., 254 F. Supp. 2d 1043, 1045-1046 (N.D. Ill. 2003).

14. RESCISSION & TENDER IN BANKRUPTCY • If termination of security interest is required first, lenders end up as unsecured creditors. • In re Jaaskelainen, 391 B.R. 627 (Bankr. D. Mass. 2008), overruled byWells Fargo v. Jaaskelainen, 407 B.R. 449 (D. Mass. 2009). • Clay v. Johnson, 77 F. Supp. 2d 879 (N.D. Ill. 1999). • In re Williams, 291 B.R. 636 (Bankr. E.D. Pa. 2003).

15. RESCISSION & FORCLOSURE • Rescission is complete defense to foreclosure. • Interplay between: • 15 U.S.C. § 1605(f) (1/2 of 1 percent) & • 15 U.S.C. § 1635(i)(2) ($35).

16. RESCISSION & FORCLOSURE • When does “foreclosure process” begin? • McCutcheon v. America’s Servicing, 560 F.3d 143 (3rd Cir. 2009). • Letter warning of foreclosure does not begin process. • Glucksman v. First Franklin Fin. Corp., 601 F. Supp. 2d 511 (E.D.N.Y. 2009). • Letter stating loan in “special status” and report to CRAs that “foreclosure initiated” may begin process.

17. Unfair & Deceptive Trade Practice Laws • Application to mortgage loans • States are split • Some hold exempt from UDTPA laws due to deference to federal statutes and regulations controlling the general area. • Jordan v. NovaStar Mortgage, No. 1:080-cv-3587-CAP (N.D. Ga. Sept. 1, 2009). • Virginia – Va. Code Ann. § 59.1-199 (2006). • West Virginia – W. Va. Code Ann. § 46A-1-105 (2005).

18. Unfair & Deceptive Trace Practice Laws Some states permit UDTPA claims against mortgage lenders: • Williams v. Countrywide Home Loans, Inc., 504 F. Supp. 2d 176 (S.D. Tex. 2007). • Cole v. Echevarria, McCalla, Raymer, Barrett & Frappier, 965 So. 2d 1228 (Fla. Dist. Ct. App. 2007). • In re Russell, 72 B.R. 855 (Bankr. E.D. Pa. 1987).