A recent unanimous Supreme Court ruling was a victory for homeowners who believe they aren’t being treated fairly by lenders. 

The court found that homeowners don’t need to file a lawsuit in order to cancel a mortgage – all they need to do is send a letter. All borrowers have to do if they feel that their lenders have violated the federal Truth in Lending Act is inform lending firms via letter that they are canceling. The case centered on the plight of Larry and Cheryle Jesinoski, a Minnesota couple who refinanced their home in 2007 with a company that is now owned by Bank of America. They claimed that Countrywide Home Loans, Inc., the Bank of America subsidiary, failed to provide certain disclosures required by federal law. 

The issue of how to move forward with a cancelation has been a common one among borrowers, Bloomberg noted. The Jesinoskis sent a letter noting that they had not received two disclosure forms required by federal law, and that they intended to rescind their mortgage. This after they refinanced their Eagan, Minnesota, home for $611,000. When Bank of America refused to cancel the mortgage, the couple sued.

The couple sent the lender a written notice of rescission within the three year limit, but a federal judge ruled they should have filed a lawsuit in order to cancel their mortgage, the Associated Press explained. The 8th U.S. Circuit Court of Appeals, and the Supreme Court stepped in to resolve the split between the two lower courts. Ultimately, the higher court unanimously found that a written notice should be enough.

Scalia shuts down lender’s argument in brief explanation
Justice Antonin Scalia explained for the court that while the law does place a time limit on rescission, it does not note how the cancelation should be initiated, according to Bloomberg. 

“So long as the borrower notifies within three years after the transaction is consummated, his rescission is timely,” he wrote. “The statute does not also require him to sue within three years.”

SCOTUSblog called the length of the courts agreement on the case “remarkable,” explaining that the opinion portion just makes the fifth page, and that after a description of the facts and proceedings, it only contained six paragraphs of analysis. Now that the Supreme Court has made its position known, the case will return to lower courts, where Bank of America will be given the opportunity to argue that the couple had received all of the required disclosure forms, Bloomberg explained. 

Initially, the lender had argued that the allowance of written rescission notices would give borrowers an opportunity to make “frivolous” claims in order to back out of mortgages. SCOTUSblog explained. It was noted that homeowners who have foregone payment for sometime could take advantage of written notices to simply cancel mortgages they no longer wanted to be bound to. However, this wasn’t enough to convince the Supreme Court that a lawsuit should be required to rescind a mortgage. 

“We’re pleased that the court unanimously upheld consumers’ statutory right to rescind certain home loans when lenders have violated the rules,” said David Frederick of Kellogg, Huber, Hansen, Todd, Evans & Figel

Larry Platt, an industry lawyer with K&L Gates, told The Wall Street Journal that lenders have had trouble determining how borrowers should be allowed to rescind their mortgages. Often, cancelation requests come when a borrower is trying to find a way to avoid foreclosure. While people have been able to rescind their mortgages for some time, Platt noted that for decades, the provision wasn’t used often to avoid foreclosure. Following the financial crisis, people began to use rescission as a tool for foreclosure avoidance.