In the case Rand Corp. v. Yer Song Moua, the homeowners (Yer Song Moua and Manisy Moua) obtained an adjustable refinance home loan from Rand Corp. in order to redeem their property from foreclosure. At the closing table, the Mouas were required to sign a) a notice of the statutory three-day rescission period, which was set to begin the same date of the signing, b) a document stating that the three-day rescission period had already elapsed and was waived by the homeowners, and c) a statement the homeowners were required to reproduce in their own handwriting to the effect that they were waiving the three-day rescission period in order to meet the deadlines of the foreclosure redemption period.
Several months after the refinance loan closed escrow, the homeowners stopped making payments on the loan and, a year after closing, attempted to rescind it.
The lender rejected the rescission and foreclosed on the home. In the course of legal proceedings to eject the homeowners from the property, the lender alleged that the rescission period had been waived or was, at most, three days long.
The homeowners argued, among other things, that the lender’s failure to clearly and conspicuously notify the homeowners of the three-day rescission period under the Truth In Lending Act (TILA) extended the rescission period to three years.
At trial, the court summarily ruled for the lender.
The trial court’s decision, however, was reversed on appeal. The appellate court found that on April 22, 2005, the lender had required the homeowners to sign a rescission notice stating that it was April 22, 2005, and another document certifying that it was April 26, 2005, rendering the rescission period lapsed. The appeals court stated that "requiring borrowers to sign statements which are contradictory and demonstrably false is a paradigm for confusion," and ruled the confusing statements violated TILA’s rescission period disclosure requirement.
The violation, in turn, extended the rescission period from three days to three years. The matter was sent back to the trial court for further proceedings consistent with the appeals court’s ruling.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.
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