Our Rubidoux foreclosure defense lawyers know technical flaws in foreclosure paperwork have gotten a lot of media attention lately. The robo-signing scandal was at its heart about fraudulent paperwork, and as a result, more state court judges have been willing to seriously consider allegations of wrongdoing by lenders, or even dismiss improperly supported cases. So we were interested to see a Massachusetts case in which technical flaws were not enough to cancel a mortgage. In Fuller v. Deutsche Bank National Trust, David and Betsy Fuller of Massachusetts built a home in 1991 and lived there for 12 years before they refinanced and later fell behind on payments. After Deutsche Bank started foreclosure proceedings and rejected their attempt to rescind the mortgage, the Fullers filed for Chapter 13 bankruptcy.
The Fullers also filed a complaint against the bank in bankruptcy court, seeking to rescind the mortgage under Massachusetts law. They argued that the lender had failed to put the correct closing date and rescission date on the loan paperwork, and also that the lender did not provide them with required disclosures on high-cost loans. The bankruptcy court granted Deutsche Bank summary judgment. After various motions and appeals were denied, the Fullers appealed to the First Circuit.
They had no better luck in the appeals court. They argued that they were not given adequate notice of their right to rescind, which by law must be given "clearly and conspicuously" and include the date when the right to rescind ends. The forms they submitted to the court had a blank space where that date should be, and also listed the closing date incorrectly as the day before the actual closing. Deutsche Bank submitted paperwork with these problems fixed, in handwriting. After noting that one party is almost certainly lying, the First declined to reach that issue. Under a previous decision in Melfi v. WMC Mortgage Corp., notice may be adequate when the borrower is given effective notice, even though there may be technical deficiencies. In this case, the court said, the Fullers dated their signatures with the correct date, and thus knew when the three-day rescission period started. It also noted that the four-year statute of limitations on that law expired before the Fullers filed their claim.
The Fullers also argued that they were not given "high cost home loan" disclosures required by Massachusetts law right away; they were provided these only at the closing. Again, the First was not impressed. While Deutsche Bank admitted that the paperwork was not provided right away, the First said, the paperwork was provided, and it allowed rescission only within three days. Instead, the court notes, the Fullers waited five years to pursue their claim. Thus, the bankruptcy court's rulings were upheld.
As Laguna Beach foreclosure defense attorneys, we think this underscores the importance of knowing your situation and your rights before you sign a mortgage (or any other important contract). The Fullers may feel that they were misled by their mortgage lender, but there isn't much legal remedy for over-promising that falls short of actual deception. And as this case shows, the Truth in Lending Act (and the Massachusetts law based on it) provides only a three-day window for changing your mind. The Fullers may still be able to get some relief from their mortgage debt through their bankruptcy, depending on their situation. As Pomona foreclosure defense lawyers, we know Chapter 13 bankruptcy can be helpful to homeowners who just need a little time to catch up and can keep making payments in the future.
Based in Anaheim, Howard Law PC helps clients keep their homes out of avoidable foreclosures that the bank has no interest in avoiding. To tell us your story and learn more about how we can help, send us an email or call 1-800-872-5925.