If a creditor fails to provide a borrower with a rescission notice or accurate material disclosures for certain residential mortgage loans, the rescission period is extended from three business days to three years. Two recent decisions from the Eighth Circuit conclude that borrowers must file a lawsuit to preserve the statute of limitations. Hartman v. Smith, 734 F.3d 752 (8th Cir. 2013) and Jesinoski v. Countrywide Home Loans, Inc., 729 F.3d 1092 (8th Cir. 2013).

  • The federal appeals courts are divided on whether a borrower timely exercises this right by sending the creditor a rescission notice within three years of consummation or whether the borrower must also file a lawsuit within three years.
  • The Eighth, Ninth, and Tenth Circuits hold that a rescission claim is untimely if a borrower fails to file a lawsuit within three years of consummation, even though the borrower previously sent the creditor a timely rescission notice. See Keiran v. Home Capital, Inc., 720 F.3d 721 (8th Cir. 2013); Rosenfield v. HSBC Bank, USA, 681 F.3d 1172 (10th Cir. 2012); and McOmie-Gray v. Bank of America Home Loans, 667 F.3d 1325 (9th Cir. 2012).
  • The Third and Fourth Circuits hold that a borrower is only required to send a rescission notice within three years. See Sherzer v. Homestar Mortgage Services, 707 F.3d 255 (3d Cir. 2013) and Gilbert v. Residential Funding LLC, 678 F.3d 271 (4th Cir. 2012).

One judge in Hartman dissented, and two judges in Jesinoski stated in concurring opinions that if they were not bound by the Keiran case, they would hold that a borrower’s rescission notice to a creditor within three years of consummation is sufficient to preserve the statute of limitations. The split among the circuit courts of appeals and within one circuit suggests that this issue might ultimately have to be resolved by the U.S. Supreme Court.

  • The Eighth Circuit includes Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota.
  • The Ninth Circuit is composed of  Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, Northern Mariana Islands, Oregon, Washington
  • The Tenth Circuit is composed of Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming.
  • The Third Circuit is composed of Delaware, New Jersey, Pennsylvania, and Virgin Islands
  • The Fourth Circuit is composed of Maryland, North Carolina, South Carolina, Virginia, and West Virginia.