After an hour-long oral argument, the justices appeared conflicted on the decision. Justice Elena Kagan summarized the court's predicament when she said it was a "puzzling feature" of the law that it did not state what happens when a homeowner and lender disagree about whether a mortgage should be rescinded, according to Reuters.
allows homeowners to rescind a mortgage for up to three years after it was made if the lender does not comply with TILA, which includes disclosing information about the loan such as finance charges and interest rates.
The mortgage industry argues that a notice is not enough to cancel a mortgage under TILA. They say by allowing borrowers to do this would strip creditors of their security interest in a loan “instantaneously and unilaterally” even if the creditor had been fully compliant with the law, according to a letter sent by leading financial groups.
Lawyers of the Jesinoskis, the plaintiff in the case, said Bank of America refused to acknowledge the couple’s rescission and said their letter was not a valid form of a rescission request. The lawyers also contend mortgage companies repeatedly violated the law in the years prior to the housing bust .
Bank of America acquired the Jesinoskis' mortgage from its subsidiary, Countrywide Home Loans.
The Minnesota couple is appealing a circuit court decision that ruled in favor of Countrywide. The Jesinoskis obtained a $611,000 mortgage in 2007 from Countrywide and filed their notice right before the three-year period and filed the suit a year later.
The case is Jesinoski v. Countrywide, U.S. Supreme Court, No. 13-684.
Click here to read the entire oral argument.
Click here to read the questions presented to the Supreme Court.
The U.S. Supreme Court heard arguments this week on what process struggling borrowers need to follow if they want to cancel a mortgage under the Truth in Lending Act (TILA). At issue, is whether borrowers should be required to file a suit or merely a notice of intent to rescind in order to back out of mortgages under the law.