In the past few months we have seen a huge increase in the number of defaults of residential mortgages, specifically those involving "sub-prime" borrowers and what I would like to call "predatory lending" practices. Thee defaults continue to lead to foreclosures, short sales, subsequent property devaluation, and other related adverse circumstances. Many borrowers will end up in bankruptcy or credit counseling, often reaching out to attorneys for direction. Unfortunately, most lawyers have never heard of the Truth In Lending Act, let alone know anything about it.

The Truth In Lending Act, promulgated by Regulation Z, allows many borrowers in financial distress rescind there predatory loan. Most people are familiar with the "three-day right to cancel" period after signing a refinance loan secured by a principle dwelling. Lenders even provide documentation that clearly identifies the procedure for canceling the loan and the time in which it can be done. What the documentation fails to explain is that if any one of three key aspects of the loan package is not properly completed, the three day period is extended.

Basically, a rescission is a do over in an attempt to put the injured party back to their original position. When a person rescinds a loan during the three day period the loan is simply not funded. The borrower simply keeps their existing loan.

What is of real value to a person facing a foreclosure or other mortgage related hardship is a rescission can be done years after the loan has closed. For those borrowers all closing costs (including brokers fees) and ALL interest paid to date on the loan are returned to the borrower.