Truth in Lending Defense to Foreclosure
	General Rule. If you can legally rescind your loan under the Truth in Lending Act law, then you will be in the drivers seat. A foreclosure cannot be held because the deed of trust lien will be cancelled and you owe no interest since the date of origination.

If your home mortgage is a refinance (was not used to buy your home), then you may have a powerful defense where you can rescind your loan under the Truth in Lending Act (TILA)laws. Then the lender cannot foreclose.

Except that, if your loan is more than 3 years old, you generally cannot rescind under the TILA.

When does TILA recision apply?

1. If you refinanced the existing mortgage loan; and

2. The lender either:

a. did not give you proper notice at closing that you can rescind the loan; or

b. the lender did not properly disclose certain important terms of the loan.

If you have a right to rescind the loan under a TILA violation, then you can prevent the foreclosure because the deed of trust being foreclosed is no longer valid.

Truth in Lending errors include:

1. Is the annual percentage rate calculated correctly?

2. Is the total amount of payments correct?

3. Is the total amount financed correct? When a loan is loaded with broker fees, points,
insurance, title fees, and other assorted fees, often the TILA disclosures are not accurate.

4. Were you given the proper disclosures at the closing table?

In certain high interest rate and high closing cost loans, the High-Rate Home Equity Loan Protections (HOEPA) amendments to the Truth in Lending Act also apply. Additional disclosures are required. Many unfair loan provisions are not permitted, such as balloon payments, negative amortization, and most prepayment penalties. However, HOEPA applies only to loan which are either (1) the APR is 10% or more for junior liens or 8% more than the yield on comparable maturities (bond rates such as a 10 year bond rate); or (2) the total fees and points charged exceed 8% of the loan.

The effect of cancellation is that the rescission automatically voids the lien on your property. Then the lender no longer has a right to foreclose on your home.

If you are able to rescind, you must repay the lender the amount of the loan, but no interest. You will get credit as principal for the payments which you already made. Therefore the amount that you will have to pay back will be less than the amount which you borrowed.

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