The following article is reprinted from Basis Points® , Vol. 2, Issue 11, Copyright © 2003, with the permission of CounselorLibrary.com, LLC. All Rights Reserved. Further reproduction is prohibited without permission.

Beware! Just because you get your home mortgage borrower to sign a statement that she received her TILA disclosures does not mean that you are home free. She will not be prohibited from later claiming that she did not receive the disclosures, so you'd better have additional evidence that you provided them to her.

After Mildred Bumpers sent a notice of her intent to rescind her mortgage loan with Bank One, Bank One filed an adversary proceeding in her bankruptcy case, seeking a declaration that Bumpers did not have the right to rescind her loan. Dolphin Mortgage, a mortgage broker, arranged for the loan from LL Funding Corp., a subsidiary of Liberty Lending Corporation, and the loan was later assigned to Bank One. Bumpers alleged she did not receive Truth in Lending Act disclosures in a form she could keep from LL Funding or Bank One and that the disclosure statements from Dolphin were inconsistent with the disclosures held by Bank One.

The bankruptcy court granted Bank One's motion for summary judgment, finding that Bumpers' signature acknowledging receipt of TILA disclosures constituted conclusive proof that the documents were delivered to her. The bankruptcy court found that the inconsistent disclosures given to Bumpers by Dolphin and LL Funding did not give her the right to rescind the loan because the disclosures were not provided by the same party or by parties who were agents.

The U.S. District Court for the Northern District of Illinois found that the bankruptcy court erred when it found that Bumpers' signature on documents acknowledging receipt of TILA disclosures constituted conclusive proof of delivery. The district court found that TILA Section 1641(b), which contains the "conclusive proof" standard, provides an exception when TILA Section 1635(c) applies.

In this case, the court said, Section 1635(c) applied. That provision governs the rights of a debtor when giving a security interest in his or her principal residence, and provides that written acknowledgment of receipt of TILA disclosures creates a rebuttable presumption of delivery. The court found that Bumpers should have been given the right to provide evidence to the bankruptcy court to rebut the presumption of delivery.

As for the conflicting disclosures, the district court found that the bankruptcy court was correct in concluding that the conflicting disclosures did not give Bumpers the right to rescind her loan. The court acknowledged that LL Funding could not be responsible for incorrect statements given to Bumpers by Dolphin absent evidence that Dolphin was an agent of LL Funding.

For more information, look for In re Bumpers (Bank One, N.A. v. Bumpers), 2003 WL 22119929 (N.D. Ill. September 11, 2003).

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