Brunelle v. Bank of New York Mellon

Summary

The New Hampshire Supreme Court affirmed an order permitting foreclosure unless the plaintiffs tendered the amount required to effect rescission of their mortgage transaction under the Truth in Lending Act. The court held that sending a rescission notice did not automatically void the mortgage or eliminate the lender’s foreclosure remedy, and that courts may condition rescission on the borrower’s return of loan proceeds. The court concluded that the trial court acted within its discretion because the disclosure defect did not prejudice the plaintiffs.

Holdings

1. A borrower's mere assertion of the right to rescind does not automatically void the mortgage or eliminate the lender's foreclosure remedy. The security interest becomes void only when the right to rescind is established by agreement or court order.
2. Section 1635(b) does not require a creditor to file a declaratory judgment action within twenty days to dispute a borrower's notice of rescission, and failure to file such an action does not constitute agreement that the right to rescind was available.
3. A court has authority under the Truth in Lending Act and Regulation Z to modify the rescission procedures and condition rescission on the borrower's prior return or tender of the principal when necessary to restore the parties substantially to their pre-transaction positions.

Questions Presented

1. Whether a borrower's notice of rescission automatically voids the lender's security interest and eliminates the lender's foreclosure remedy.
2. Whether a creditor must file a declaratory judgment action within twenty days after receiving a rescission notice to dispute the borrower's claimed right to rescind.
3. Whether the Truth in Lending Act and Regulation Z authorize a court to condition rescission on the borrower's tender of the loan proceeds.
4. Whether the trial court properly exercised its discretion to condition rescission under the circumstances.

Disposition

affirmed