Servicers See More 'Right to Rescind' Notices Filed.(Conference notes)

Byline: Jennifer Harmon

Tampa, FL-Servicers are seeing increased cases where borrowers are trying to stall or stop foreclosures by filing "right to rescind" notices as violations of the Truth in Lending Act, according to speakers at the MBA's National Servicing Conference here.

During a panel on mortgage litigation, Terry Hutchens, president of the law firm of Hutchens, Senter & Britton, based in Fayetteville, N.C., said that debtors attorneys are claiming that the borrowers they represent were given inadequate documents at the time of closing and did not understand the loan, which judges are starting to honor.

He said it's worth it for servicers to work with the borrower and negotiate a settlement or loan modification with the borrower rather than take the case through expensive litigation, he said.

"The atmosphere has changed. We're not so vulnerable that we are rolling over in every case, but we have to consider doing things differently than we have in the past," said Mr. Hutchens. "It can cost as much as $200,000 if you have to take some of these cases to trial."

Shaun Ramey, a partner with Sirote & Permutt PC in Birmingham, Ala., said servicers must decide how to handle these new cases. Cities, states and counties are putting giant roadblocks up to fight foreclosures, he said.

"There are new claims and new defenses. Public nuisance lawsuits are coming up more and more because foreclosures are driving up the cost of mounting REO properties sitting around and the cost it takes to maintain them," Mr. Ramey told conference attendees.