US Appeals Court: Not Necessary To File TILA Mortgage Rescission Suit w/in 3 Yrs Of Loan Closing, Provided Notice To Rescind Is Given Within That Time

An excerpt from a legal alert from the Consumer Financial Services Group of the law firm Ballard Spahr:

• In a decision that possibly opens the door for renewed foreclosure delays, the U.S. Court of Appeals for the Fourth Circuit has held that a lawsuit seeking rescission is timely where the consumer provided notice of rescission to the subservicer within three years of closing but did not file suit until after the three-year deadline had passed.
  
  
• The May 3, 2012, decision in Gilbert v. Residential Funding LLC is the first by a federal appellate court to hold that a borrower need only send notice of rescission within the three-year period to validly exercise a right to rescind.

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• The Fourth Circuit’s decision represents a victory for the Consumer Financial Protection Bureau, which had filed an amicus brief in Wolf v. Federal National Mortgage Association, another Fourth Circuit appeal involving the same rescission issue. In its brief, the CFPB took the position that notice within the three-year period is all that is required to validly exercise a right to rescind. The CFPB has filed amicus briefs taking the same position in the Third, Eighth, and 10th Circuits. (To read our blog posts on the CFPB’s amicus briefs, click here and here.)

For more, see Borrower May Sue after Three Years To Rescind Mortgage Loan, 4th Circuit Rules.

For the ruling, see Gilbert v. Residential Funding LLC, No. 10-2295 (4th Cir. May 3, 2012).