Case Law - Forensic Loan Auditing and Litigation Support

Deutsche Bank v. Rolando Campbell

Deutsche Bank has some explaining to do. Why would they buy a nonperforming loan from MERS 142 days after a payment default?
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The instant foreclosure application states that defendant CAMPBELL defaulted on his mortgage payments by failing to make his April 1, 2007 and subsequent monthly loan payments. Yet, on August 20, 2007, 142 days subsequent to defendant CAMPBELL’s alleged May 1, 2007 payment default, plaintiff DEUTSCHE BANK was willing to take an assignment of the instant nonperforming loan from MERS, as nominee for FIRST FRANKLIN. Thus, the Court requires, upon renewal of this motion for summary judgment and an order of reference, a satisfactory explanation from an officer of the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11 as to why DEUTSCHE BANK purchased a nonperforming mortgage loan from MERS, as nominee for FIRST FRANKLIN.

DEUTSCHE BANK NATIONAL TRUST COMPANY, as trustee for First Franklin Mortgage Loan Trust 2006-FF 11, 3476 Stateview Boulevard Fort Mill, SC 29715, Plaintiff,
v.
ROLANDO CAMPBELL, et al., Defendants.
31764/07
Supreme Court of the State of New York, Kings County.
Decided December 16, 2008.
Tracy M Fourtner, Esq., Steven Baum PC, Buffalo NY, Plaintiff.
ARTHUR M. SCHACK, J.
Plaintiff’s motion for summary judgment and an order of reference for the premises located at 780 New Jersey Avenue, Brooklyn, New York (Block 4299, Lot 43, County of Kings) is denied without prejudice, with leave to renew upon providing the Court with: a copy of a valid assignment of the instant mortgage to plaintiff DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11 (DEUTSCHE BANK); a satisfactory explanation of the conflict of interest by plaintiff’s counsel, Steven J. Baum, P.C., with respect to the August 20, 2007 assignment of the instant mortgage and note from MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (MERS), as nominee for FIRST FRANKLIN, A DIVISION OF NATIONAL CITY BANK OF IN (FIRST FRANKLIN), by Darleen Karaszewski, Esq., the assignor, an attorney employed by Steven J. Baum, P.C., plaintiff’s counsel, and the simultaneous representation by Steven J. Baum, P.C., of assignee plaintiff DEUTSCHE BANK; and, an affidavit by an officer of the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11, explaining why plaintiff DEUTSCHE BANK purchased the instant nonperforming loan.

Background
Defendant ROLANDO CAMPBELL borrowed $420,000.00 from FIRST FRANKLIN on May 1, 2006. The note and mortgage were recorded in the Office of the City Register, New York City Department of Finance on June 2, 2006, at City Register File Number (CRFN) 2006000308921. MERS, the nominee of FIRST FRANKLIN for the purpose of recording the mortgage, purportedly assigned the mortgage and note to plaintiff DEUTSCHE BANK on August 20, 2007, effective August 10, 2007, with the assignment recorded on September 11, 2007, at CRFN 2007000467191. The assignment was executed by “Darleen Karaszewski, Esq. On [sic] behalf of MERS, by Corporate Resolution dated 7/19/07.” Neither a corporate resolution nor a power of attorney to Ms. Karaszewski were recorded with the assignment. Thus, the assignment is invalid and plaintiff DEUTSCHE BANK lacks standing to bring the instant foreclosure action.

Further, the assignor, Ms. Karaszewski, according to the Office of Court Administration’s Attorney Registration, has as her business address, “Steven Baum, P.C., 220 Northpointe Parkway, Suite G, Amherst, NY 14228-1894.” Two days after Ms. Karaszweski executed the invalid MERS assignment, August 22, 2007, plaintiff’s counsel, Steven J. Baum, P.C., commenced the instant action on behalf of purported assignee DEUTSCHE BANK, with the filing of a notice of pendency, and the summons and complaint in the Kings County Clerk’s Office. The Court is concerned that the simultaneous representation by Steven J. Baum, P.C. of both MERS and DEUTSCHE BANK is a conflict of interest in violation of 22 NYCRR § 1200.24, the Disciplinary Rule of the Code of Professional Responsibility, entitled “Conflict of Interest; Simultaneous Representation.”

The instant foreclosure application states that defendant CAMPBELL defaulted on his mortgage payments by failing to make his April 1, 2007 and subsequent monthly loan payments. Yet, on August 20, 2007, 142 days subsequent to defendant CAMPBELL’s alleged May 1, 2007 payment default, plaintiff DEUTSCHE BANK was willing to take an assignment of the instant nonperforming loan from MERS, as nominee for FIRST FRANKLIN. Thus, the Court requires, upon renewal of this motion for summary judgment and an order of reference, a satisfactory explanation from an officer of the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11 as to why DEUTSCHE BANK purchased a nonperforming mortgage loan from MERS, as nominee for FIRST FRANKLIN.

Discussion
The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. (Alvarez v Prospect Hospital, 68 NY2d 320, 324 [1986]; Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957]). Failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers. (Matter of Redemption Church of Christ v Williams, 84 AD2d 648, 649 [3d Dept 1981]; Greenberg v Manlon Realty, 43 AD2d 968, 969 [2d Dept 1974];Winegrad v New York University Medical Center, 64 NY2d 851 [1985]).

CPLR 3212 (b) requires that for a court to grant summary judgment the court must determine if the movant’s papers justify holding as a matter of law “that there is no defense to the cause of action or that the cause of action or defense has no merit.” The evidence submitted in support of the movant must be viewed in the light most favorable to the non-movant. (Marine Midland Bank, N.A. v Dino & Artie’s Automatic Transmission Co., 168 AD2d 610 [2d Dept 1990]). Once the movant has established his or her prima facie case, the party opposing a motion for summary judgment bears the burden of “produc[ing] evidentiary proof in admissible form sufficient to require a trial of material questions of fact . . . mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient” (Zuckerman v City of New York, supra at 562; see also Romano v St. Vincent’s Medical Center of Richmond, 178 AD2d 467, 470 [2d Dept 1991]; Tessier v New York City Health & Hospitals Corp., 177 AD2d 626 [2d Dept 1991]).

Summary judgment shall be granted only when there are no issues of material fact and the evidence requires the court to direct judgment in favor of the movant as a matter of law. (Friends of Animals, Inc., v Associated Fur Mfrs., 46 NY2d 1065 [1979]).

Plaintiff, in the instant action, moved for summary judgment and an order of reference on July 9, 2008. Defendant CAMPBELL appeared pro se, with opposition papers, in the Foreclosure Motion Part on August 7, 2008. The motion was adjourned to October 3, 2008 for oral argument before me. On October 3, 2008 the matter was adjourned to December 12, 2008.

Plaintiff appeared on December 12, 2008 for oral argument, but defendant CAMPBELL defaulted. However, the Court is required to review, as noted above, the motion papers to determine if plaintiff made a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. (Alvarez v Prospect Hospital, supra; Zuckerman v City of New York, supra; Sillman v Twentieth Century-Fox Film Corp., supra). The Court’s review of plaintiff’s moving papers demonstrates that plaintiff DEUTSCHE BANK fails to make such a showing. Therefore, the Court denies the instant motion.

Plaintiff DEUTSCHE BANK must have “standing” to bring this action. The Court of Appeals (Saratoga County Chamber of Commerce, Inc. v Pataki, 100 NY2d, 901, 812 [2003]), cert denied 540 US 1017 [2003]) held that “[s]tanding to sue is critical to the proper functioning of the judicial system. It is a threshold issue. If standing is denied, the pathway to the courthouse is blocked. The plaintiff who has standing, however, may cross the threshold and seek judicial redress.” In Carper v Nussbaum, 36 AD3d 176, 181 (2d Dept 2006), the Court held that “[s]tanding to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant’s request.

” If a plaintiff lacks standing to sue, the plaintiff may not proceed in the action. (Stark v Goldberg, 297 AD2d 203 [1d Dept 2002]). “Since standing is jurisdictional and goes to a court’s authority to resolve litigation [the court] can raise this matter sua sponte.” (Axelrod v New York State Teachers’ Retirement System, 154 AD2D 827, 828 [3d Dept 1989]).

In the instant action, the August 20, 2007 assignment from MERS to DEUTSCHE BANK is defective. Therefore, DEUTSCHE BANK has no standing to bring this action. The recorded assignment by “Darleen Karaszewski, Esq. On [sic] behalf of MERS, by Corporate Resolution dated 7/19/07,” has neither the corporate resolution nor a power of attorney attached and recorded.

Real Property Law (RPL) § 254 (9) states: Power of attorney to assignee. The word “assign” or other words of assignment, when contained in an assignment of a mortgage and bond or mortgage and note, must be construed as having included in their meaning that the assignor does thereby make, constitute and appoint the assignee the true and lawful attorney, irrevocable, of the assignor, in the name of the assignor, or otherwise, but at the proper costs and charges of the assignee, to have, use and take all lawful ways and means for the recovery of the money and interest secured by the said mortgage and bond or mortgage and note, and in case of payment to discharge the same as fully as the assignor might or could do if the assignment were not made. [Emphasis added]

To have a proper assignment of a mortgage by an authorized agent, a power of attorney is necessary to demonstrate how the agent is vested with the authority to assign the mortgage. “No special form or language is necessary to effect an assignment as long as the language shows the intention of the owner of a right to transfer it [Emphasis added].” (Tawil v Finkelstein Bruckman Wohl Most & Rothman, 223 AD2d 52, 55 [1d Dept 1996]; see Suraleb, Inc. v International Trade Club, Inc., 13 AD3d 612 [2d Dept 2004]).

To foreclose on a mortgage, a party must have title to the mortgage. The instant assignment is a nullity. The Appellate Division, Second Department (Kluge v Fugazy, 145 AD2d 537, 538 [2d Dept 1988]), held that a “foreclosure of a mortgage may not be brought by one who has no title to it and absent transfer of the debt, the assignment of the mortgage is a nullity.” The Appellate Division, First Department, citing Kluge v Fugazy, (Katz v East-Ville Realty Co., 249 AD2d 243 [1st Dept 1998]), instructed that “[p]laintiff’s attempt to foreclose upon a mortgage in which he had no legal or equitable interest was without foundation in law or fact.”

It is clear that plaintiff DEUTSCHE BANK, with the invalid assignment of the instant mortgage and note from MERS, lacks standing to foreclose on the instant mortgage. The Court, in Campaign v Barba (23 AD3d 327 [2d Dept 2005]), held that “[t]o establish a prima facie case in an action to foreclose a mortgage, the plaintiff must establish the existence of the mortgage and the mortgage note, ownership of the mortgage, and the defendant’s default in payment [Emphasis added].” (See Household Finance Realty Corp. of New York v Wynn, 19 AD3d 545 [2d Dept 2005]; Sears Mortgage Corp. v Yahhobi, 19 AD3d 402 [2d Dept 2005]; Ocwen Federal Bank FSB v Miller, 18 AD3d 527 [2d Dept 2005]; U.S. Bank Trust Nat. Ass’n v Butti, 16 AD3d 408 [2d Dept 2005]; First Union Mortgage Corp. v Fern, 298 AD2d 490 [2d Dept 2002]; Village Bank v Wild Oaks Holding, Inc., 196 AD2d 812 [2d Dept 1993]).

Even if plaintiff can cure the assignment defect, plaintiff’s counsel then has to address the conflict of interest in the representation of both the assignor of the instant mortgage, MERS, and the assignee of the instant mortgage, DEUTSCHE BANK. 22 NYCRR § 1200.24, of the Disciplinary Rules of the Code of Professional Responsibility, entitled “Conflict of Interest; Simultaneous Representation,” states in relevant part:
(a) A lawyer shall decline proffered employment if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, or if it would be likely to involve the lawyer in representing differing interests, except to the extent permitted under subdivision (c) of this section. (b) A lawyer shall not continue multiple employment if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the lawyer’s representation of another client, or if it would be likely to involve the lawyer in representing differing interests, except to the extent permitted under subdivision (c) of this section.(c) in the situations covered by subdivisions (a) and (b) of this section, a lawyer may represent multiple clients if a disinterested lawyer would believe that the lawyer can competently represent the interest of each and if each consents to the representation after full disclosure of the implications of the simultaneous representation and the advantages and risks involved. [Emphasis added]
The Court needs to know if both MERS and DEUTSCHE BANK were aware of the simultaneous representation by plaintiff’s counsel, Steven J. Baum, P.C., and whether both consented. If plaintiff moves to renew its motion for summary judgment and an order of reference, the Court needs an affirmation by Steven J. Baum, Esq., the principal of Steven J. Baum, P.C., explaining if both MERS and DEUTSCHE BANK consented to simultaneous representation in the instant action with “full disclosure of the implications of the simultaneous representation and the advantages and risks involved.

” The Appellate Division, Fourth Department, the Department in which both Ms. Karaszewski and Mr. Baum are registered, (In re Rogoff, 31 AD3d 111 [2006]) censured an attorney, for inter alia, violating 22 NYCRR § 1200.24, by representing both a buyer and sellers in the sale of a motel.

The Court, at 112, found that the attorney, “failed to make appropriate disclosures to either the sellers or the buyer concerning dual representation.” Further, the Court, at 113, censured the attorney, after it considered the matters submitted by respondent in mitigation, including: that respondent undertook the dual representation at the insistence of the buyer, had no financial interest in the transaction and charged the sellers and the buyer one half of his usual fee. Additionally, we note that respondent cooperated with the Grievance Committee and has expressed remorse for his misconduct.

Next, if a power of attorney is used for an agent to act as MERS’ assignor of the instant mortgage and loan to DEUTSCHE BANK, the power of attorney presented to the Court must be an original or a copy certified by an attorney, pursuant to CPLR § 2105. CPLR § 2105 states that “an attorney admitted to practice in the court of the state may certify that it has been compared by him with the original and found to be a true and complete copy.” (See Security Pacific Nat. Trust Co. v Cuevas, 176 Misc 2d 846 [Civ Ct, Kings County 1998]).

Last, the Court requires a satisfactory explanation from an officer of the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF 11 as to why in the middle of our national subprime mortgage financial crisis, plaintiff DEUTSCHE BANK purchased from MERS, as nominee of FIRST FRANKLIN, the instant nonperforming loan. The Court wonders if DEUTSCHE BANK violated a corporate fiduciary duty to the noteholders of the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11with the purchase of a loan that defaulted 142 days prior to its assignment from MERS to FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11, rather than keep the mortgage loan on FIRST FRANKLIN’s books.

The Court is not sure that the noteholders of the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11 are aware that DEUTSCHE BANK purchased the instant “toxic” nonperforming mortgage loan for the Trust. It could well be that MERS, as nominee for FIRST FRANKLIN, with the acquiescence of DEUTSCHE BANK, transferred the instant nonperforming loan, as well as others, to the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11, as part of what former Federal Reserve Board Chairman Alan Greenspan referred to in his October 23, 2008 testimony, before the House Oversight Committee, as “a once in a century credit tsunami.”

Conclusion
Accordingly, it is
ORDERED that the motion of plaintiff DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11, for summary judgment and an order of reference for the premises located at 780 New Jersey Avenue, Brooklyn, New York (Block 4299, Lot 43, County of Kings) is denied without prejudice, and it is further

ORDERED that leave is granted to plaintiff DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11, to renew its motion for summary judgment and an order of reference for the premises located at 780 New Jersey Avenue, Brooklyn, New York (Block 4299, Lot 43, County of Kings), upon presentation to the Court, within sixty (60) days of this decision and order of: (1) a valid assignment of the instant mortgage and note to plaintiff,
DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11; (2) an affirmation from Steven J. Baum, Esq., the principal of Steven J. Baum, P.C., explaining if both MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., the assignor of the instant mortgage and note, and DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11, the assignee of the instant mortgage and note, pursuant to 22 NYCRR § 1200.24, consented to simultaneous representation in the instant action, with “full disclosure of the implications of the simultaneous representation and the advantages and risks involved” explained to them; and, (3) an affidavit from an officer of the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11, explaining why plaintiff DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11 purchased a nonperforming loan from MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., as nominee for FIRST FRANKLIN, A DIVISION OF NATIONAL CITY BANK OF IN.
This constitutes the Decision and Order of the Court.

IndyMac Bank F.S.B. v. Yano-Horoski

OPINION
Jeffrey Arlen Spinner, J.S.C

This is an action wherein the Plaintiff claims foreclosure of a mortgage dated August 4, 2004 in the original prin-cipal amount of $ 292,500.00 recorded with the Clerk of Suffolk County, New York in Liber 20826 of Mortgages at Page 285. The mortgage secures an adjustable rate note of the same amount with an initial [**315] interest rate of 10.375%. The mortgage encumbers real property commonly known as 8 Oakland Street, East Patchogue, Town of Brookhaven, New York and described as District 0200 Section 979.50 Block 05.00 Lot 001.000 on the Tax Map of Suffolk [*2] County. Plaintiff commenced this action by filing a Summons, Verified Complaint and Notice of Pen-dency on July 27, 2005. The Notice of Pendency was extended by Order dated April 28, 2008 and a Judgment of Fo-reclosure & Sale was granted on January 12, 2009.

Thereafter and in accordance with the Laws of 2008, Ch. 472, Sec. 3-a and in view of the fact that the loan at issue was deemed to be "sub-prime" or "high cost" in nature, Defendant seasonably requested that the Court convene [***2] a settlement conference. That request was granted and a conference was commenced on February 24, 2009 which was continued five times in a series of unsuccessful attempts by the Court to obtain meaningful cooperation from Plaintiff. In view of Plaintiff's intransigence in its continuing failure and refusal to cooperate, both with the Court and with Defendant's multiple and reasonable requests, the Court directed that Plaintiff produce an officer of the bank at the adjourned conference scheduled for September 22, 2009.

At the conference held on September 22, 2009, Karen Dickinson, Regional Manager of Loss Mitigation for Indy-Mac Mortgage Services, division of OneWest Bank F.S.B. ("IndyMac") appeared on behalf of Plaintiff. IndyMac pur-ports to be the servicer of the loan for the benefit of Deutsche Bank who, it is claimed, is the owner and holder of the note and mortgage (though the record holder is IndyMac Bank F.S.B., an entity which no longer is in existence). At that conference, it was celeritously made clear to the Court that Plaintiff had no good faith intention whatsoever of resolving this matter in any manner other than a complete and forcible devolution of title from Defendant. [***3]

Although IndyMac had prepared a two page document entitled "Mediation Yano-Horoski" which contained what purported to be a financial analysis, Ms. Dickinson's affirmative statements made it abundantly clear that no form of mediation, resolution or settlement would be acceptable to Plaintiff. IndyMac asserts the total amount due it to be in excess of $ 525,000.00 and freely concedes that the property securing the loan is worth no more than $ 275,000.00.

Although Ms. Dickinson insisted that Ms. Yano-Horoski had been offered a "Forbearance Agreement" in the recent past upon which she quickly defaulted, it was only after substantial prodding by the Court that Ms. Dickinson conceded, with great reluctance, that it had not been sent to Defendant until after its stated first payment due date and hence, Defendant could not have consummated it under any circumstances (Defendant, through Plaintiff's duplicity, found herself to be in the unique and uncomfortable position of being placed in default of the "agreement" even before she had received it). Plaintiff flatly rejected an offer by Plaintiff's daughter to purchase the house for its fair market value (a so-called "short sale") with third [***4] party financing. Plaintiff refused to consider a loan modification utilizing any more than 25% of the income of Plaintiff's husband and daughter (both of whom reside in the premises with her), the excuse being that "We can't control what non-obligors do with their money" (the logical follow up to this statement is how does the bank control what the obligor does with her money?).

The Court found IndyMac's position to be deeply troubling, especially since a plethora of sub-prime loans in this County's Foreclosure Conference Part have been successfully modified with the lender's reliance upon the income of non-obligors [**316] who reside in the premises under foreclosure. The Plaintiff also summarily rejected an offer by both Plaintiff's husband and daughter to voluntarily obligate themselves for payment upon the full indebtedness, thus committing their individual incomes expressly to the purpose of a loan modification. It should be noted here that Defendant did not even request any waiver or "forgiveness" of the indebtedness aside from some tinkering with the interest rate, just a [*3] modification of terms so as to enable her to repay the same. It was evident from Ms. Dickinson's opprobrious demeanor [***5] and condescending attitude that no proffer by Defendant (short of consent to foreclosure and ejectment of Defendant and her family) would be acceptable to Plaintiff. Even a final and desperate offer of a deed in lieu of foreclosure was met with bland equivocation. In short, each and every proposal by Defendant, no matter how reasonable, was soundly rebuffed by Plaintiff. Viewed objectively, it is apparent that Plaintiff's conduct in this matter falls within the definitions set forth in 22 NYCRR § 130-1.1(c)(2), which might well warrant the imposition of monetary sanctions.

On the Court's own motion, a hearing was held on November 18, 2009 in order to explore the issues herein. At the hearing, Ms. Dickinson appeared as well as Mr. Horoski. IndyMac claimed a balance due, as of September 22, 2009 of $ 527,437.73 which included an escrow overdraft of $ 46,627.88 for taxes advanced since the date of default but did not include attorney's fees and costs.. Plaintiff was unable to tell the Court the amount of the principal balance owed. Mr. Horoski advised the Court that according to two letters received from Plaintiff, the principal balance was said to be $ 285,381.70 as of February 9, 2009 [***6] and $ 283,992.48 as of August 10, 2009. Plaintiff stated was that Defendant must have made payments though it was conceded that in fact no payment had been made. Plaintiff insisted that it had remained in regular contact with Defendant in an effort to reach an amicable resolution, that it had extended two modification offers to Defendant which she did not accept and further, that due to her financial status she was not qualified for any modification, even under the Federal HAMP guidelines. Plaintiff denied that it had "singled out" Defendants, simply stating that her status was such that she fell outside applicable guidelines. All of these assertions were disputed by Defendant.

That having been said, the Court is greatly disturbed by Plaintiff's assertions of the amount claimed to be due from Defendant. The Referee's Report dated June 30, 2008, which has its genesis in a sworn affidavit by a representative of Plaintiff (presumably one with knowledge of the account), reflects a total amount due and owing of $ 392,983.42. The principal balance is reported to be $ 290,687.85 with interest computed at the rates of 10.375% from November 1, 2005 through August 31, 2006 ($ 25,118.62), 12.50% [***7] from September 1, 2006 to February 28, 2007 ($ 18,018.66), 12.375% from March 1, 2007 to March 31, 2008 ($ 39,126.39) and 11.375% from April 1, 2008 to June 24, 2008 ($ 7,700.24) totalling $ 89,963.91. Plaintiff also claims $ 20.00 in non-sufficient funds charges, $ 295.00 in property inspection fees and $ 12,016.66 for tax and insurance advances. The Judgment of Foreclosure & Sale dated January 12, 2009 was granted in the amount of $ 392,983.42 with interest at the contract rate from June 24, 2008 through January 12, 2009 and at the statutory rate thereafter plus attorney's fees of $ 2,300.00 and a bill of costs in the amount of $ 1,705.00.

Even computing the accrual of pre-judgment interest of $ 18,299.18 (using Plaintiff's per diem rate in the Referee's Report) together with post-judgment [**317] interest at a statutory 9% through November 19, 2009 (an additional $ 31,740.90), the application of simple addition yields a total amount due of $ 447,028.50. This figure is $ 80,409.23 less than the $ 527,437.73 asserted by Plaintiff to be due and owing from Defendant. The Court is astounded that Plaintiff now claims to be owed an escrow advance amount of $ 46,627.88 when, under oath, its officer [***8] swore that as of June 24, 2008 that amount was actually $ 34,611.22 less. Moreover, it now appears that the elusive principal balance is either $ 290,687.85, $ 285,381.70 or $ 283,992.48.
[HN1] It is the province and indeed the obligation of the trial court to assess and to determine issues [*4] re-garding credibility, Morgan v. McCaffrey 14 AD3d 670, 789 N.Y.S.2d 274 (2nd Dept. 2005). In the matter before the Court, the pendulum of credibility swings heavily in favor of Defendant. When the conduct of Plaintiff in this proceed-ing is viewed in its entirety, it compels the Court to invoke the ancient and venerable principle of "Falsus in uno, falsus in omni" (Latin; "false in one, false in all") upon Defendant which, after review, is wholly appropriate in the context presented, Deering v. Metcalf 74 NY 501 (1878). Regrettably, the Court has been unable to find even so much as a scintilla of good faith on the part of Plaintiff. Plaintiff comes before this Court with unclean hands yet has the insufferable temerity to demand equitable relief against Defendant.

The Court, over the course of some six substantive appearances in seven months, has been afforded more than ample opportunity to assess the demeanor, credibility [***9] and general state of relevant affairs of Defendant and Plaintiff. Although not actually relevant to the disposition of this matter, the Court is constrained to note that Defendant is afflicted with multiple health problems which outwardly manifest in her experiencing great difficulty in ambulation, necessitating the use of mechanical supports. Moreover, Defendant's husband, Mr. Gregory Horoski, suffers from a myriad of serious medical conditions which greatly impede most aspects of his daily existence. Nonetheless, both of these persons, together with their adult daughter who resides with them and who is substantially and gainfully employed, receive income which they are more than willing to commit, in good faith, toward repayment of the debt to Plaintiff and indeed, despite their physical challenges, they have appeared at each and every scheduled conference before this Court. At each appearance, they have assiduously attempted to resolve this controversy in an amicable fashion, only to be callously and arbitrarily turned away by Plaintiff. This has been so even in spite of the Court's continuing albeit futile endeavors at brokering a settlement.

As a relevant aside, the scenario presented [***10] here raises the specter of a much greater social problem, that of housing those persons whose homes are foreclosed and who are thereafter dispossessed. It is certainly no secret that Suffolk County is in the yawning abyss of a deep mortgage and housing crisis with foreclosure filings at a record high rate and a corresponding paucity of emergency housing. While foreclosure and its attendant eviction are clearly the inevitable (and in some cases, proper) result in a number of these situations, the Court is persuaded that this need not be the case here. In this matter, Defendant is plainly willing to make arrangements for repayment and both her husband and daughter are likewise willing to allocate their respective incomes in order to reach the same end. Were Plaintiff amenable, she would presumably continue to maintain the property's physical plant, pay taxes thereon and the property would [**318] retain or perhaps increase its market value. Plaintiff would receive a regular income stream, albeit with a reduced rate of interest and without sustaining a loss of several hundred thousand dollars. In addition, no neighborhood blight would occur from the boarding of the property after foreclosure [***11] which would, in turn, avert problems of litter, dumping, vagrancy and vandalism as well as a corresponding decline in the property values in the immediate area. In short, a loan modification would result in a proverbial "win-win" for all parties involved. To do otherwise would result in virtually certain undomiciled status for two physically unhealthy persons and their daughter, leading to an additional level of problems, both for them and for society.

Since [HN2] an action claiming foreclosure of a mortgage is one sounding in equity, Jamaica Savings Bank v. M.S. Investing Co. 274 NY 215, 8 N.E.2d 493 (1937), the very commencement of the action by [*5] Plaintiff invokes the Court's equity jurisdiction. [HN3] While it must be noted that the formal distinctions between an action at law and a suit in equity have long since been abolished in New York (see CPLR 103, Field Code Of 1848 §§ 2, 3, 4, 69), the Supreme Court nevertheless has equity jurisdiction and distinct rules regarding equity are still extant, Carroll v. Bullock 207 N.Y. 567, 101 N.E. 438 (1913). Speaking generally and broadly, it is settled law that [HN4] "Stability of contract obligations must not be undermined by judicial sympathy..." Graf v. Hope Building Corporation 254 NY 1, 171 N.E. 884 (1930). [***12] However, it is true with equal force and effect that equity must not and cannot slavishly and blindly follow the law, Hedges v. Dixon County 150 U.S. 182, 192, 14 S. Ct. 71, 37 L. Ed. 1044 (1893). Moreover, as succinctly decreed by our Court of Appeals in the matter of Noyes v. Anderson 124 N.Y. 175, 26 N.E. 316 (1890) "A party having a legal right shall not be permitted to avail himself of it for the purposes of injustice or oppression..." 124 NY at 179.

In the matter of Eastman Kodak Co. v. Schwartz 133 NYS2d 908 (Sup. Ct., New York County, 1954) , Special Term stated that [HN5] "The maxim of "clean hands" fundamentally was conceived in equity jurisprudence to refuse to lend its aid in any manner to one seeking its active interposition who has been guilty of unlawful, unconscionable or ine-quitable conduct in the matter with relation to which he seeks relief." 133 NYS2d at 925, citing First Trust & Savings Bank v. Iowa-Wisconsin Bridge Co. 98 F 2d 416 (8th Cir. 1938), cert. denied 305 U.S. 650, 59 S. Ct. 243, 83 L. Ed. 420 (1938), reh. denied 305 U.S. 676, 59 S. Ct. 356 83 L. Ed. 437 (1939); General Excavator Co. v. Keystone Driller Co. 64 F.2d 39 (6th Cir. 1933), cert. granted 289 U.S. 721, 298 U.S. 721, 53 S. Ct. 791, 77 L. Ed. 1472 (1933), aff'd [***13] 290 U.S. 240, 54 S. Ct. 146, 78 L. Ed. 293, 1934 Dec. Comm'r Pat. 639 (1934).

In attempting to arrive at a determination as to whether or not equity should properly intervene in this matter so as to permit foreclosure of the mortgage, the Court is required to look at the situattion in toto, giving due and careful con-sideration as to whether the remedy sought by Plaintiff would be repugnant to the public interest when seen from the point of view of public morality, see, for example, 55 NY Jur. Equity § 113, Molinas v. Podloff 133 N.Y.S.2d 743 (Sup. Ct., New York County, 1954). [HN6] Equitable relief will not lie in favor of one who acts in a manner which is shocking to the conscience, Duggan v. Platz 238 A.D. 197, 264 N.Y.S. 403 (3rd Dept. 1933), mod. on other grounds 263 NY 505, 189 NE 566 (1934), neither will equity be available to one who acts in a manner that is oppressive or [**319] unjust or whose conduct is sufficiently egregious so as to prohibit the party from asserting its legal rights against a defaulting adversary, In re Foreclosure Of Tax Liens 117 NYS2d 725 (Sup. Ct. Kings County, 1952), aff'd on other grounds 286 A.D. 1027, 145 N.Y.S.2d 97 (2nd Dept. 1955), mod. on other grounds on reargument 1 AD2d 95, 148 NYS2d 173 (2nd Dept. 1955), [***14] appeal granted 1 A.D.2d 784, 149 N.Y.S.2d 227 (2nd Dept. 1956).

The compass by which the questioned conduct must be measured is a moral one and the acts complained of (those that are sufficient so as to prevent equity's intervention) need not be criminal nor actionable at law but must merely be willful and unconscionable or be of such a nature that honest and fair minded folk would roundly denounce such actions as being morally and ethically wrong, Pecorella v. Greater Buffalo Press Inc. 107 AD2d 1064, 468 NYS2d 562 (4th Dept. 1985). Thus, where a party acts in a manner that is offensive to good conscience and justice, he will be completely without recourse in a court of equity, regardless of what his legal rights may be, Eastman Kodak Co. v. Schwartz 133 NYS2d 908 (Sup. Ct., New York County, 1954), York v. Searles 97 AD 331, 90 NYS 37 (2nd Dept. 1904), aff'd 189 NY 573, 82 NE 1134 (1907).

An objective and painstaking examination of the totality of the facts and circumstances herein [*6] leads this Court to the inescapable conclusion that the affirmative conduct exhibited by Plaintiff at least since since February 24, 2009 (and perhaps earlier) has been and is inequitable, unconscionable, vexatious [***15] and opprobrious. The Court is constrained, solely as a result of Plaintiff's affirmative acts, to conclude that Plaintiff's conduct is wholly unsupportable at law or in equity, greatly egregious and so completely devoid of good faith that equity cannot be permitted to intervene on its behalf. Indeed, Plaintiff's actions toward Defendant in this matter have been harsh, repugnant, shocking and repulsive to the extent that it must be appropriately sanctioned so as to deter it from imposing further mortifying abuse against Defendant. The Court cannot be assured that Plaintiff will not repeat this course of conduct if this action is merely dismissed and hence, dismissal standing alone is not a reasonable option. Likewise, the imposition of monetary sanctions under 22 NYCRR § 130-1.1 et. seq. is not likely to have a salubrious or remedial effect on these proceedings and certainly would not inure to Defendant's benefit.

This Court is of the opinion that cancellation of the indebtedness and discharge of the mortgage, when taken together, constitute the appropriate equitable disposition under the unique facts and circumstances presented herein.
After careful consideration, it is the determination [***16] of this Court that the indebtedness evidenced by the Adjustable Rate Note dated August 4, 2004 in the original principal amount of $ 292,500.00 made by Diana J. Ya-no-Horoski in favor of IndyMac Bank F.S.B. should be cancelled, voided and set aside. In addition, the Mortgage which secures the Adjustable Rate Note, given to Mortgage Electronic Registration Systems Inc. As Nominee For IndyMac Bank F.S.B. dated August 4, 2004 and recorded with the Clerk of Suffolk County on August 16, 2004 in Liber 20826 of Mortgages at Page 285, as assigned by Assignment recorded with the Clerk of Suffolk County in Liber 21273 of Mortgages at Page 808 should be cancelled and discharged of record. Further, Plaintiff, its successors and assigns should be forever barred and prohibited from any action to collect upon the Adjustable Rate Note. In addition, the Judgment of Foreclosure & Sale granted on January 12, 2009 and entered on January 23, 2009 should be [**320] vacated and set aside and the Notice of Pendency should be cancelled and discharged of record. For this Court to decree anything less than the foregoing would be for the Court to be wholly derelict in the performance of its obligations.

Upon the Court's own motion, it is ORDERED that the Adjustable Rate Note in the amount of $ 292,500.00 dated August 4, 2004 made by Diana J. Yano-Horoski in favor of IndyMac Bank F.S.B. shall be and the same is hereby cancelled, voided, avoided, nullified, set aside and is of no further force and effect; and it is further ORDERED that the Mortgage in the amount of $ 292,500.00 which secures said Adjustable Rate Note given by Diana J. Yano-Horoski to Mortgage Electronic Registration Systems Inc. As Nominee For IndyMac Bank F.S.B. dated August 4, 2004 and recorded with the Clerk of Suffolk County on August 16, 2004 in Liber 20826 of Mortgages as Page 285, as assigned to IndyMac Bank F.S.B. by Assignment recorded with the Clerk of Suffolk County in Liber 21273 of Mortgages at Page 808 shall be and the same is hereby vacated, cancelled, released and discharged of record; and [*7] it is further ORDERED that the Plaintiff, its successors and assigns are hereby barred, prohibited and foreclosed from attempt-ing, in any manner, directly or indirectly, to enforce any provision of the aforesaid Adjustable Rate Note and Mortgage or any portion thereof as against Defendant, her heirs or successors; and it is further ORDERED that the Judgment of Foreclosure & Sale granted under this index number on January 12, 2009 and entered in the Office of the Clerk of Suffolk County on January 23, 2009 shall be and the same is hereby vacated and set aside; and it is further ORDERED that the Notice of Pendency filed with the Clerk of Suffolk County on July 27, 2005 under sequence no. 172456, which was extended by Order dated September 2, 2008 shall be and the same is hereby cancelled, vacated and set aside; and it is further ORDERED that the Notice of Pendency filed with the Clerk of Suffolk County on August 29, 2008 under sequence no. 199616, shall be and the same is hereby cancelled, vacated and set aside; and it is further ORDERED that the Clerk of Suffolk County shall cause a copy of this Order & Judgment to be filed in the Land Records so as to effectuate of record each and every one of the provisions hereinabove set forth with respect to cancel-lation of the instruments and items of record; and it is further ORDERED that Plaintiff shall pay to the Clerk of Suffolk County, within ten (10) days from the date of entry he-reof, any and all fees and costs required to effect cancellation of record of the Mortgage, Notices [***19] of Pendency and any other fees so levied; and it is further ORDERED that within ten (10) days of the date of entry hereof, Plaintiff's counsel shall serve a copy of this Order upon the Clerk of Suffolk County and the Defendant.

This shall constitute the Decision, Judgment and Order of this Court.
Dated: November 19, 2009
Riverhead, New York

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Appeal from the United States District Court for the Western District of North Carolina, at Charlotte.

Carl Horn, III, Chief Magistrate Judge.
(3:05-cv-00083)

Argued: March 15, 2007
Decided: May 14, 2007
Before WILKINSON and MOTZ, Circuit Judges, and Henry E. HUDSON, United States District Judge for the
Eastern District of Virginia, sitting by designation.
Affirmed by published opinion. Judge Hudson wrote the opinion, in
which Judge Wilkinson and Judge Motz joined.

COUNSEL
ARGUED: Brett E. Dressler, SELLERS, HINSHAW, AYERS, DORTCH & LYONS, P.A., Charlotte, North Carolina, for Appellants. Kenneth B. Oettinger, Jr., WOMBLE, CARLYLE, SANDRIDGE & RICE, P.L.L.C., Charlotte, North Carolina, for Appellee. ON BRIEF: Robert C. Dortch, SELLERS, HINSHAW, AYERS, DORTCH & LYONS, P.A., Charlotte, North Carolina, for Appellants.

OPINION

HUDSON, District Judge:
This declaratory judgment dispute presents a number of issues concerning the procedural requirements associated with the right of rescission under the Truth in Lending Act (TILA), 15 U.S.C. § 1601, et seq. American Mortgage Network, Inc. (”Amnet”) petitioned the district court for a declaratory finding that its processing of appellants Michael and Pamela Shelton’s notice of cancellation of their home refinancing loan was consistent with TILA. In addition to seeking damages for TILA violations, the Sheltons counterclaimed for rescission and urged the district court to declare that Amnet’s failure to unconditionally release their security interest warranted forfeiture of the loan principal under TILA. The district court disagreed and
awarded summary judgment for Amnet. Because we find that Amnet complied with all applicable provisions of TILA, we affirm the judgment of the district court.

Amnet is a residential mortgage lender that conducts business throughout the United States. Amnet sells the loans it makes on the secondary market to banks and institutional investors. In December 2004, Michael D. Shelton (”Shelton”), a selfemployed real estate appraiser, borrowed approximately $317,000 from Amnet to refinance an existing note on his primary residence. His wife, Pamela Shelton, was not a co-borrower and did not execute any of the loan documents. However, she executed a Deed of Trust in Amnet’s secure the loan. There is no dispute that Shelton was provided with all required TILA disclosures and a HUD-1 statement at the time of closing.

The record further revealed that, in July 2004, the Sheltons signed a contract to purchase a custom-built home. In order to place him in a more creditworthy position to finance his new home, the Sheltons
sought to consolidate a number of debts including the preexisting loan secured by their residence. Their residence, located in Gastonia, North Carolina, had been purchased in March 2000 for $253,000.
The building permit for the Sheltons’ custom-built home was issued on December 13, 2004. The Sheltons went to settlement on their new home on April 29, 2005, and moved in on May 1, 2005. It is undisputed that the debt service on both the mortgage secured by the custom home and the preexisting Amnet loan at issue in this case was beyond the financial means of the Sheltons. It is also clear that among the closing documents signed by Shelton in connection with the Amnet loan was an Occupancy Agreement in which he represented that he would occupy the house secured by that refinancing as his primary residence throughout the twelve-month period immediately following the loan closing.

Approximately one month after executing the closing documentson the refinancing in controversy, the Sheltons received a package of documents fro Amnet. The cover letter accompanying the package
stated that “the Truth-In-Lending Disclosure Statement was inadvertently under-disclosed in the amount of prepaid finance charges.” (J.A. 14.) The letter further revealed that Shelton had been charged
$100 more than the amount disclosed on the TILA form. The package did not contain a refund check for $100 as indicated. The package also included a single copy of a Notice of Right to Cancel, a copy of
the same TILA financial disclosures given to Shelton at closing, and a copy of the Errors & Omissions Compliance Agreement that Shelton signed at closing. The Errors & Omissions Compliance Agreement
required Shelton to execute a reformed loan document to cure the previous clerical error.

In support of his counterclaim alleging noncompliance with TILA, Shelton points out a number of perceived discrepancies in the Notice of Right to Cancel. Shelton believes that he was entitled to receive four copies of the notice document. The package apparently contained only one copy while the cover letter referenced three copies. Although Shelton was himself in the real estate business, he purported to find the Notice of Right to Cancel confusing because a removable sticker covered the line designated for signature to effectuate cancellation. Lastly, Shelton did not believe that the $100 discrepancy was in fact a clerical error and questioned why the $100 check was not included in the package. Disturbed by these discrepancies, the Sheltons decided to cancel the transaction. Amnet does not dispute that Shelton timely executed the cancellation documents indicating a desire to rescind the transaction. Three days later, on January 31, 2005, Shelton retained an attorney to represent him in connection with the loan rescission. In the interim, Amnet
acknowledged receipt of Shelton’s decision to rescind the loan transaction. Within 20 days of receipt of the notice of cancellation, Amnet confirmed that it was prepared to unwind the transaction in accordance
with TILA, upon receipt of confirmation from Shelton that he was prepared to return the net loan proceeds, i.e., the original principal amount of the loan less all amounts charged to Shelton in connection
with the transaction. The net loan proceeds totaled $313,468.39. Amnet was subsequently advised by Shelton’s attorney that his client was unable to return the net loan proceeds.1 The Sheltons offered
instead to sell the house to Amnet for the difference between an appraised value of the house, $370,000, and the net loan proceeds, $313,468.39. Amnet declined the offer and countered that it did not
believe that the Sheltons’ offer to sell their house to Amnet constituted a proper tender under TILA. Shelton’s counsel replied that, in his opinion, Amnet was required under TILA to release its security
interest on the house immediately without a specific agreement on the Sheltons’ part to return the net loan proceeds. Amnet refused to release its security interest without any provision for repayment of the
loan proceeds. Shortly thereafter, the Sheltons retained new counsel, who notified
Amnet by letter that Amnet had forfeited the loan proceeds by refusing to unconditionally release its security interest within 20 days of cancellation of the loan as required by TILA. Shelton admitted in his deposition that he did not disclose the existence of the Amnet loan when he applied for the loan on the custom home. Am. Mortgage Network, Inc. v. Shelton, No. 3:05CV83H, 2006
WL 909415, at *2 (W.D.N.C. Apr. 6, 2006).

Unable to consensually unwind the loan transaction, Amnet filed this lawsuit seeking modification of the TILA rescission procedures and an order declaring its full compliance with TILA. The Sheltons
counterclaimed for declaratory relief and monetary damages.2 During the course of the ensuing discovery, several facts emerged that were pertinent to the trial court’s analysis. First, it appeared to the trial court that Shelton significantly overstated his income in the initial loan application submitted on his
behalf by Waterford Financial Services, Inc. (”Waterford Financial”). The application stated that Shelton’s annual income in 2004 was $97,200. Subsequent examination of Shelton’s 2004 tax return
revealed an income of $34,236. According to Amnet, if Shelton’s application had disclosed his actual 2004 net income, he would not have qualified for the loan. Second, the Uniform Residential Appraisal Report received from Waterford Financial and purportedly prepared by an independent appraiser was in fact prepared by an appraiser operating under Shelton’s supervision. Although the appraiser was technically an independent contractor, he had been trained by Shelton and worked exclusively for Shelton’s company. The report estimated the fair market value of the house as of November 15, 2004, to be $370,000.
Amnet contends that the appraisal was inflated and that a “truly independent” appraiser assessed its fair market value at closer to $300,000. Irrespective of the numbers, it appeared to be uncontroverted
that the Sheltons’ appraiser was not independent. Third, despite signing an Occupancy Agreement at closing, representing that he intended to occupy the house as his primary residence throughout the twelve-month period immediately following the loan closing, Shelton was in fact in the process of building another home that would serve as his primary residence. The Sheltons could not afford to finance the custom home and continue payments on the Amnet loan. The Sheltons asked the trial court to cancel the Deed of Trust and allow them an indefinite period of time to sell the house to a buyer at a price of their choosing.

The Sheltons argue that the above-described alleged misrepresentations, which were found by the district court to constitute inequitable conduct, were material facts “hotly in dispute.” The Sheltons maintain
that the resolution of these factual disputes was critical to the issues of rescission and forfeiture. In their view, the trial court erred by refusing to conduct an evidentiary hearing to address these disputed
facts. We disagree. Despite the Sheltons’ protestation, many of the facts underlying the inequitable conduct were uncontroverted. For example, Shelton’s 2004 tax return reflected income far below that represented to Amnet. There is also no dispute that the appraiser who conducted the appraisal on the property was affiliated with Shelton and operated under his supervision. Although we do not believe that Shelton’s
inequitable conduct necessarily controlled the outcome of this case, it was appropriately considered by the trial judge.3 As the United States Court of Appeals for the District of Columbia noted in Brown v. National Permanent Federal Savings & Loan Ass’n, 683 F.2d 444 (1982), “[a]lthough the right to rescind is [statutory], it remains an equitable doctrine subject to equitable considerations.”4 Id. at 447. In this case, both parties seek equitable relief. The Sheltons elected to cancel the loan transaction and seek the release of Amnet’s security interest in their property, pursuant to Title 15, United States Code, § 1635(b). This subsection of TILA reads as follows: When an obligor exercises his right to rescind under subsection (a) of this section, he is not liable for any finance or other charge, and any security interest given by the obligor,
including any such interest arising by operation of law, The trial court characterized the Sheltons’ misstatements as not only materially false, but sufficiently egregious to potentially warrant criminal
prosecution. See Am. Mortgage Network, Inc., 2006 WL 909415, at *2 n.3. 4In Mars v. Spartanburg Chrysler Plymouth, Inc., 713 F.2d 65 (4th Cir. 1983), this Court held that the provisions of TILA must be “absolutely
complied with and strictly enforced.” Id. at 67. This was not to imply, however, that the Act’s requirements should not be reasonably construed and equitably applied. becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has
delivered any property to the obligor, the obligor may retain possession of it. Upon the performance of the creditor’s obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value. Tender shall be made at the location of the property or at the residence of the obligor, at
the option of the obligor. If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his part to pay for it. The procedures prescribed by this subsection shall apply except when otherwise ordered by a court. 15 U.S.C. § 1635(b). The Sheltons construe § 1635(b) as requiring Amnet to unconditionally release the security interest on the Sheltons’ residence within 20 days of notification of cancellation, regardless of the Sheltons’
admitted inability to tender the balance due on the loan, or reasonable value thereof.5 In fact, the Sheltons argue that the trial court erred in not declaring the loan balance forfeited by reason of Amnet’s refusal
to unconditionally remove the mortgage lien. In essence, the Sheltons claim the right to simply walk away with a windfall of $313,468 without any further obligation. This construction not only offends traditional
notions of equity, but misinterprets the procedural requirements of § 1635(b). 5This Court does not believe that the Sheltons’ offer to sell their residence to Amnet for an amount determined by a non-independent
appraiser constituted “reasonable value.” Amnet was not in the business of selling real estate.

In Powers v. Sims & Levin, 542 F.2d 1216 (4th Cir. 1976), this Court rejected the argument that § 1635 compelled a creditor to remove a mortgage lien in the absence of the debtor’s tender of the loan proceeds. Id. at 1220. This Court held in Powers that, “when rescission is attempted under circumstances which would deprive the lender of its legal due, the attempted rescission will not be judicially enforced unless it is so conditioned that the lender will be assured of receiving its legal due.” Id. at 1222. We further noted in Powers that “Congress did not intend to require a lender to relinquish its security interest when it is now
known that the borrowers did not intend and were not prepared to tender restitution of the funds expended by the lender in discharging the prior obligations of the borrowers.” Id. at 1221. The same rationale controls the case at hand. The trial court, in exercising its powers of equity, could have either denied rescission or
based the unwinding of the transaction on the borrowers’ reasonable tender of the loan proceeds. The equitable goal of rescission under TILA is to restore the parties to the “status quo ante.” See Yamamoto
v. Bank of New York, 329 F.3d 1167, 1172 (9th Cir. 2003); Williams v. Homestake Mortgage Co., 968 F.2d 1137, 1140 (11th Cir. 1992).

The Sheltons appear to misconstrue the procedural mechanics of § 1635. Clearly it was not the intent of Congress to reduce the mortgage company to an unsecured creditor or to simply permit the debtor
to indefinitely extend the loan without interest. This Court adopts the majority view of reviewing courts that unilateral notification of cancellation does not automatically void the loan
contract. As the Ninth Circuit observed in Yamamoto, “[o]therwise, a borrower could get out from under a secured loan simply by claiming TILA violations, whether or not the lender had actually committed
any.” Yamamoto, 329 F.3d at 1172. “The natural reading of [§ 1635(b)] is that the security interest becomes void when the obligor exercises a right to rescind that is available in the particular case, either because the creditor acknowledges that the right of rescission is available, or because the appropriate decision maker has so determined. . . . Until such decision is made, the [borrowers] have only advanced a claim seeking rescission.” Large v. Conseco Fin. Servicing Corp., 292 F.3d 49, 54-55 (1st Cir. 2002). This Court declines to
adopt the reasoning of the Eleventh Circuit in Williams v. Homestake Mortgage Co., espousing the minority position that rescission is automatic, but holding that the voiding of a security interest may be judicially
conditioned on debtor’s tender of amount due under the loan. See Williams, 968 F.2d at 1141-42.
Once the trial judge in this case determined that the Sheltons were unable to tender the loan proceeds, the remedy of unconditional rescission was inappropriate. Although the better practice may have
been for the trial judge to set terms for rescission by allowing the Sheltons a time certain to tender the net loan proceeds, it was unnecessary under the facts of this case. Aside from the Sheltons’ acknowledged
inability to repay the loan, almost a year had passed from the date of exercising the cancellation of the loan. During that year, the Sheltons made no payments of principal or accrued interest on the loan. The trial court properly exercised its discretion in denying rescission. Lastly, the Sheltons contend the trial court improperly granted summary judgment in finding that Amnet’s Notice of Right to Cancel complied with TILA. The Sheltons maintain that there was a genuine issue as to whether Amnet provided “clear and conspicuous” notice of their right to rescind under TILA. They highlight a number of purported
irregularities in the correction package sent by Amnet following notification that Amnet had inadvertently under-disclosed the amount of prepaid finance charges by $100. Specifically, the Sheltons allege that pertinent portions of the Notice of Right to Cancel were obstructed by removable “Sign Here”
stickers. They assert that the stickers obscured the cancellation signature blocks and the language indicating where to sign in order to rescind the transaction. It is, however, interesting to note that the
Sheltons executed the cancellation documents almost immediately upon receipt and returned them to Amnet in a timely manner. The Sheltons also complain that they received only one copy of the new Notice of Right to Cancel as opposed to the four copies they argue are required by statute — two for each of the Sheltons. See 12 C.F.R. § 226.23(b) (”[A] creditor shall deliver two copies of the notice of the right to rescind to each consumer entitled to rescind.”)
Although this Court believes that Amnet substantially complied with all requirements of TILA in notifying the Sheltons of their right of rescission, this Court need not address each alleged hyper-technical violation. Here, Amnet had no obligation under TILA to provide a renewed notice of right of rescission or to reopen the cancellation period. This obligation is only triggered under TILA when the financial discrepancy is over $100. See 15 U.S.C. § 1605(f)(1)(A); 12 C.F.R. § 226.18(d)(1)(i). The notice provided to the Sheltons in this case was strictly voluntary and therefore needed not meet the technical requirements of 12 C.F.R. § 226.23(b). In summary, we find that Amnet fully complied with all of the requirements of TILA in connection with this loan. The trial court properly denied rescission, given the appellants’ inability to tender payment of the loan amount. For the foregoing reasons, we affirm the judgment of the trial court.
AFFIRMED