TILA 3 Years to Rescind: D. Minn. Reversed

Defendant/Homeowners obtained a loan to redeem after the foreclosure sale of their home, getting a $245,000 loan from Plaintiff Rand with an interest rate starting at 13.99% and, after one year, going up to 14.99%. Defendants fell behind on the new loan, were foreclosed, and failed to redeem. Prior to eviction, Defendants sought to rescind, well after the normal 3-day rescission period for such loans. They relied primarily on alleged defects in the disclosures they received, which, if found, would extend the rescission period up to 3 years under the Truth-in-Lending Act (TILA).

The key issue: is it misleading or confusing to have borrowers sign a form at closing on two different signature lines, one of which (a) acknowledges they have a right to cancel for three days; and the other (b) confirms that the three-day rescission period has passed and they elected not to rescind?

The Eighth Circuit answered in the affirmative and reversed the District Court’s grant of summary judgment in favor of the Plaintiff Rand.

In this economic climate, lenders have faced and will continue to face significant headwinds when matched against borrowers’ TILA claims, even more so when the loans are high interest so-called HOEPA loans, such as the one in this case.

Rand Corp. v. Moua, et al., 8th Circuit Court File No. 07-2544.