Where the rescission notice is sent prior to the commencement of the nonjudicial foreclosure, but not litigated until later the higher tolerance under TILA applies

The mortgagee was granted summary judgment in Beukes v. GMAC Mortgage, LLC, No. 12-2146, (8th Cir. May 14, 2015) on the borrower’s TILA rescission claim on two grounds. First, the suit seeking to rescind the mortgage was time barred because it was brought more than three years from the date the loan was made. Second, the suit was barred because if the finance charge was understated it fell within the applicable tolerance. While the appeal was pending before the 8th Circuit, the Supreme Court decided _Jesinoski v. Countrywide Home Loans, Inc_., — U.S. —-, 135 S.Ct. 7 190 L.Ed.2d 650 (2015), which resolved the first ground. But the reviewing court concluded that the second ground justified the dismissal. The disputed issue was how to measure whether the finance charge disclosed by the mortgagee was accurate. TILA, the court observed, tolerates some variation between the amount disclosed as the finance charge and the actual finance charge. Generally, the finance charge will be deemed accurate if the amount disclosed does not vary from the actual finance charge by more than an amount equal to one-half of one percent of the total amount of credit extended. That amounted to $1235 in this case. A different rule with a narrower tolerance for variation applies for the purposes of exercising any rescission rights after the initiation of any judicial or nonjudicial foreclosure process. In that situation, a disclosure is treated as accurate if the amount disclosed as the finance charge does not vary from the actual finance charge by more than $35 or is greater than the amount required to be disclosed. In this case, the borrowers contended that the lender’s disclosure understated the finance charge by $944.31. Nonjudicial foreclosure proceedings were initaited on March 18, 20 by publishing the first of six notices that the property would be foreclosed by sale. The borrowers purported to exercise their right of rescission by mailing their notice to the lender on January 21, 20 before the initiation of foreclosure proceedings. Because the borrowers’ did not attempt to exercise rescission rights after the initiation of a foreclosure process, the lower tolerance range did not apply, and the general rule governed instead. The finance charge disclosed did not vary from the actual finance charge by more than one-half of one percent of the total amount financed so it was treated as accurate. Accordingly, the right to rescind expired three business days after delivery of the disclosures.

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