A ruling by the Supreme Court on Tuesday made it a little easier for consumers to back out of mortgages under the Truth In Lending Act when lenders fail to disclose full terms of the deal.
Reuters reports that the court found [PDF] homeowners only need to write a letter to the lender and not file a lawsuit in order to benefit from a provision in the Truth in Lending law that allows borrowers to rescind a mortgage.
Under the law, consumers can rescind a mortgage for up to three years after it was made if the lender does not notify them of various details about the loan including finance charges and interest rates.
Reuters reports that the provision is typically used by homeowners who are struggling to pay their mortgages.
Tuesday’s ruling was a victory for a Minnesota couple who borrowed $611,000 from Countrywide Home Loans in 2007 to refinance their mortgage.
The couple sent a letter to the lender outlining their intention to rescind the mortgage before the end of the three-year period. When Bank of America, which by that time owned Countrywide, said the request was invalid, the couple filed a lawsuit.
Lawyers for consumers tell Reuters that mortgage companies routinely violated the law in the years prior to the 2008 financial crisis, but lenders contend that a simple letter is not enough if the bank in question disputes the homeowners’ claim.
Justice Antonin Scalia wrote on behalf of the court on Tuesday that the language of the law “leaves no doubt that rescission is effected when the borrower notifies the creditor of his intention to rescind.”
The process for rescission has been a heavily disputed topic for courts. In fact, a lower-court’s decision in the Minnesota couple’s case sided with Countrywide. The Supreme Court’s ruling reverses the lower-courts decision.
Supreme Court rules for homeowners over mortgage dispute [Reuters]
by Ashlee Kieler via Consumerist