A new ruling from the Supreme Court will make it even more important for credit unions to provide thorough Truth in Lending disclosures as part of their mortgage closing process.
In Jesonoski v. Countrywide Home Loans, the court unanimously agreed with homeowners Larry and Cheryle Jesonoski that U.S. law only required they notify Bank of America in writing within three years of closing that they were rescinding their mortgage because of disclosure problems.
The law did not, as Bank of America argued, require the homeowners to have sued within three years to rescind, the court said.
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"Section 1635(a) explains in unequivocal terms how the right to rescind is to be exercised," wrote Justice Antonin Scalia for the court. "It provides that a borrower "shall have the right to rescind . . .by notifying the creditor, in accordance with regulations of the Board, of his intention to do so" (emphasis added).
The language leaves no doubt that rescission is affected when the borrower notifies the creditor of his intention to rescind, according to the court.
It follows that so long as the borrower notifies within three years after the transaction is consummated, his rescission is timely, the court said. The statute does not also require him or her to sue within three years.
Analysts speaking to media outlets said the ruling would have only a limited impact now. However, it would likely take on more importance if another economic downturn led more homeowners to leave mortgages on properties that had fallen below their loan balances.
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