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Supreme Court Gives a Boost to Homeowners With Second Thoughts

A unanimous Supreme Court gave a boost on Tuesday to homeowners who seek to back out of a loan because the lender failed to properly disclose all the terms.

The ruling was a victory for Larry and Cheryle Jesinoski of Eagan, Minnesota. They borrowed $611,000 from Countrywide Home Loans in 2007 to refinance their mortgage. Exactly three years later, they mailed a letter to the lender saying they wanted to rescind the loan. They said Countrywide failed to give them the required number of copies of their rights under the federal Truth in Lending Act.

Bank of America, which had by then acquired Countrywide, said their request was invalid. So the Jesinoskis sued, but they lost in the lower courts, which ruled that the couple waited too long to file their lawsuit. The courts said the law requires borrowers seeking to back out to sue within three years of the date when the loan was granted.

The federal lending law gives a borrower three days to back out of a loan. After that, if the lender fails to comply with all the terms of the law, the right to rescind expires three years after the date of the loan. The lower courts said the couple failed to sue within the three-year period. But the Supreme Court ruled that the law requires consumers only to make written notice that they intend to rescind. It does not require filing a lawsuit.

— Pete Williams
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