A Christmas Story from the District of Minnesota

Plaintiff Margaret J. Coleman is a 68-year-old woman who lives with her 15-year-old granddaughter, a 19-year-old woman with special needs, and 22-year-old who was formerly her foster child in a single family home she has owned for nearly 40 years. That is, she has lived there for an awfully long time but a lender allegedly coaxed her into a loan she could not possibly afford, secured by a mortgage that put her continued stay in her home in doubt.

Earlier this month, however, U.S. District Court Judge Schiltz granted Coleman’s motion for summary judgment on her Truth in Lending Act rescission claim and HOEPA (Homeowners Equity Protection Act) claim. (Coleman was represented by Amber Hawkins of the Legal Aid Society of Minneapolis who has been representing homeowners in more or less similar situations for years.)

Next in the lawsuit comes the daunting prospect of rescinding a three-year old loan. The defendant lender (and other players/defendants in the transaction?) lose any payments they received in connection with the loan (loan origination fee, other closing fees, interest payments, etc). And they have to pay Coleman’s attorneys’ fees, but Coleman faces the obligation of returning the money she received in the transaction. The mortgage on her home, however, is void due to the Court’s judgment in her favor. So Coleman faces a substantial unsecured debt, but not the threat of losing her home. Apparently a reverse mortgage may be considered as part of the strategy to reach the rescission goal — to “undo” the transaction and put borrower and lender both back to the “status quo ante.”