Banks Push Fed to Curb Borrowers’ Right to Rescind Mortgages

Via Bloomberg By Carter Dougherty – Dec 15, 2010.

Mortgage firms are pressing the Federal Reserve to curb homeowners’ right to invalidate loans based on flawed documents — a right consumer groups say is one of the few weapons borrowers have to battle unfair lending.

Consumer groups and industry lawyers say a rule under consideration by the central bank would make it harder for borrowers to exercise their right of “rescission,” which forces a lender to relinquish a lien on a mortgaged property. They said the number of rescissions has grown in recent years as a result of the foreclosure crisis and allegations that mortgage documents were fabricated or processed improperly.

Ken Markison, regulatory counsel at the Mortgage Bankers Association, said the change would save lenders money. “Greater clarity will help avoid unnecessary litigation and reduce costs,” Markison said.

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