Borrowers need only notify creditors in writing of their intention to rescind their mortgages within three years, the U.S. Supreme Court ruled Tuesday, which could make it easier for underwater owners to walk away from their mortgages.
The ruling by the Supreme Court on Tuesday overturned a September 2013 ruling in the 8th Circuit that held that Larry and Cheryle Jesinoski of Eagan, Minn., were required to sue Countrywide Home Loans Inc. to have their mortgage financing rescinded within three years of the transaction closing under the Truth In Lending Act.
According to Law360, the Jesinoskis argued that TILA only requires borrowers to give notice in writing within those three years.
The entire high court agreed with the Jesinoskis.
"The language leaves no doubt that rescission is effected when the borrower notifies the creditor of his intention to rescind. It follows that, so long as the borrower notifies within three years after the transaction is consummated, his rescission is timely. The statute does not also require him to sue within three years," Justice Antonin Scalia wrote for the court in a unanimous opinion.
This ruling means that TILA does not in fact require borrowers to file a lawsuit to rescind a mortgage within three years of the home loan's issuance.
Rather, all they have to do is file a notice that they intend to walk away from the loan.
According to Law360, the law also provides a more expanded rescission right in situations where borrowers do not receive mandated disclosures. There, the law provides three years from the closing date to provide such notice but with proof that the documents were not provided.
“The Jesinoskis mailed respondents written notice of their intention to rescind within three years of their loan’s consummation. Because this is all that a borrower must do in order to exercise his right to rescind under the Act, the court below erred in dismissing the complaint," Justice Scalia wrote.