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Ninth Circuit Allows Lawsuit Alleging Bank Withheld Correct TILA Notice to Go Forward - Balderas v. Countrywide at al.

January 12, 2012

Our Upland predatory lending attorneys, led by partner Vincent Howard, were interested to see a recent Ninth Circuit decision about a Truth in Lending Act case taking place right here in southern California. In Balderas v. Countrywide et al., Victor and Belen Balderas accuse Countrywide Home Loans, the now-defunct home loan company made famous and bankrupt by its specialty in subprime lending, of pressuring them into taking out a loan that Countrywide employees knew they couldn't afford, misrepresented their income to get and failed to adequately document. Among their allegations is that they never received the legally required written notice of their right to cancel the loan under TILA, which would extend their right of rescission from three days to three years. The district court ruled that the Balderases had indeed gotten the notice and dismissed the case, but the Ninth Circuit reversed and sent it back for more proceedings.

The Balderases' complaint says they were cold-called by a Countrywide mortgage broker offering to refinance their home into a fixed-rate mortgage and allow them to cash out $50,000. A different Countrywide employee filled out a loan application form on the couple's behalf, overstating their income by $40,000 a year, and showed up at their home asking them to sign it. The Balderases do not read English, so they acceded when the loan officer told them it was "an informal document the bank needed." Three days later, the mortgage broker came to the home with a notary public and a slew of English-language loan documents, claiming Countrywide needed their signatures that night and refusing to leave without them. They tried to delay the closing until their daughter could translate for them, but after six hours with the broker pressuring them, they signed. Two days later, they called the broker and asked to cancel the loan, which he would not. They also called Countrywide, which incorrectly said it was too late to cancel.

The Balderases filed a TILA lawsuit, alleging their Notice of Right to Cancel was defective because it was missing the closing date and last date to cancel. The federal district court dismissed their lawsuit, finding that they did get an adequate notice. That finding was based on a letter from Countrywide that the Balderases submitted to the court. Countrywide attached to its letter a Notice of Right to Cancel that was filled out properly, and the judge used this as a basis to rule that the Balderases had gotten proper notice.

The Ninth Circuit reversed, noting that this "ersatz document production" creates hazards for the courts. In fact, the majority wrote, the Notice attached to the letter proves only that the Balderases signed a proper notice that was in Countrywide's possession; it does not prove that the couple themselves had a proper notice. This created a rebuttable presumption that the Balderases received proper notice, the court said -- but it's improper to use evidentiary presumptions during early pleadings. Thus, it said, Countrywide's argument that the Balderases didn't submit enough facts to rebut that presumption fails because pleadings are not the time for submitting facts. The Balderases should have a chance to make the case before a jury that they had a different notice, the court said. It also rejected Countrywide's argument that it must have "delivered" the TILA notice because the Balderases had it long enough to sign it, but the Ninth observed that delivery generally means being allowed to keep the thing delivered. Thus, it resurrected the lawsuit and returned it to district court.

This ruling is welcomed by Vincent Howard and all of our Anaheim predatory lending lawyers here at Howard Law, P.C. Countrywide became notorious a few years ago for its alleged high-pressure or outright illegal sales tactics, including reports of presenting English-language documents to people who speak another language. Bank of America, which purchased Countrywide after it failed, has agreed to several legal settlements of claims based on this kind of illegal behavior. Even if there's no TILA violation in this case, California state law expressly forbids bait-and-switch loans that are negotiated in one language and legally formalized in another -- which means this couple may have a state-law case as well. As Cerritos predatory lending attorneys, we wish them luck.

If you believe your family was deceived or pressured into taking out a bad loan and you'd like to discuss your legal options, call Vincent Howard and the experienced lawyers at Howard Law, P.C. You can reach us at 1-800-872-5925 or send us a message online.

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