Unfair Lending Practices

September 9, 2015 By Elliot S. Schlissel

There are a variety of federal and state statutes which can be utilized by homeowners to fight foreclosure lawsuits. These laws were enacted to protect homeowners from illegal or improper practices by financial institutions. There are two federal laws designed to protect homeowners against unfair lending practices. These laws specifically deal with residential mortgages. The first statute is the Truth in Lending Act. This law is sometimes referred to as “TILA”. The second statue designed to protect homeowners is the Home Ownership and Equity Protection Act. This statute is often referred to as “HOEPA”. Both of these federal statutes give a homeowner the ability to sue for monetary damages. In addition, homeowners can also sue for financing costs paid by them. Under some circumstances both of these statutes allow a homeowner to have the mortgage canceled. If the mortgage is canceled, the foreclosure lawsuit will come to an end if the homeowner can make arrangements to refinance the balance of the principle due to the lender.

Rescission of a Loan

Rescission of a loan means canceling the loan. There is a concept under TILA of retroactively canceling or rescinding a loan. The technical term for this is extended rescission. A lender has to give you three days notice under certain circumstances to rescind or cancel a loan. However, your right to rescind or cancel the loan can be extended up to three years if you can show the lender violated portions of TILA. The three year period can be extended even in the event a foreclosure lawsuit has been initiated. This means in a foreclosure lawsuit if you can show a material violation of either TILA or HOEPA you can cancel the loan and by taking this action you can be successful in defending the foreclosure lawsuit. It should be noted the most common types of loans covered by either TILA or HOEPA are refinanced loans and HELOCs.