NH Couple Score TILA Victory; Convincing Testimony Establishes Bank Failure To Provide Rescission Rights Notice In Mortgage Refinance Transaction

A U.S. Bankruptcy Court in New Hampshire recently found that Wells Fargo Bank violated the Federal Truth in Lending Act (TILA") on a refinancing loan it made to Nashua couple Mary Beth Sousa and her husband, William Sousa, Jr. where it failed prove that it provided the couple with two copies of notices of their right to rescind the mortgage transaction, thereby extending the period for rescission beyond the standard 3-day period. The court found that the couple properly rescinded the loan within the extended time period.

Notable in this case was, despite the fact that evidence was introduced in the case that the notice of right to cancel, signed by them, that contained an acknowledgment of receipt of the two copies, was given to them at the closing, the Sousas were able to rebut this evidence offering nothing more than their own testimony which, according to the court, "was consistent, persuasive, and was based on their specific recollections." The court also stated that the Sousas "convincingly testified that they left the closing with no paperwork and were never provided any, even after making several requests."

The following excerpt relates to the testimony of the sole witness called at trial by Wells Fargo, the attorney who handled the loan closing:

• Since the presumption was rebutted, Wells Fargo must prove its compliance with TILA disclosures. Wells Fargo called one witness, attorney Ragab. Ragab had no specific recollection of the closing or his dealings with the Sousas. Thus, he could not testify as to what occurred on the day of closing nor during his subsequent communications with the Sousas. Instead, Ragab's testimony was limited to the routine office procedures and practices at the Ginn Firm.
  
  The Court does not question Ragab's sincerity in recalling the practices of his former employer. Nonetheless, at the Sousas' closing, enough errors were made to suggest that, at least at this particular closing, office procedures may not have been followed due to a desire to correct errors in the documents.
  
  Wells Fargo argues that the closing errors have no relationship to the question of whether the TILA disclosures were produced. It is true that failing to revise a HUD-1, for example, cannot directly lead the Court to conclude that Wells Fargo did not provide two copies of the notice of right to cancel. But those errors make the Sousas' account much less unimaginable, as it was characterized by Wells Fargo. In fact Wells Fargo describes the scenario, i.e., where copies of the closing packet were never provided, where the Sousas never discussed the situation with family and friends, and where the Sousas never requested the copies either in writing or orally from Wells Fargo, as simply "unbelievable."
  
  The Court strongly disagrees. Ragab testified that, at the time of closing, he had worked at the Ginn firm for ten months and he had conducted approximately twenty-five closings a month. Considering the high volume of work and the noted errors at the Sousas' closing, the possibility of the Ginn Firm inadvertently failing to provide borrowers copies of their closing packet is hardly unimaginable. Furthermore, the Sousas started making their regular mortgage payments after the closing. Hence, it appears that after a month of trying to obtain their copies, they started making their mortgage payments and moved on with their lives. Though the Sousas could have been more zealous in pursuing the documents, their account is certainly plausible.

For the ruling, see In re Sousa, Bk. No. 06-11398-JMD, Adv. No. 07-1215-JMD (Bankr. D. NH, March 14, 2011).

Representing the Sousa was attorney Peter S. Wright, Jr., of the now-former Franklin Pierce Law Center (known now as the University of New Hampshire School of Law), Concord, New Hampshire.

Harmon Law Offices PC argued the case for Wells Fargo.