Source: http://caselaw.findlaw.com/us-3rd-circuit/1623005.html
Timestamp: 2018-01-22 06:23:30
Document Index: 604473497

Matched Legal Cases: ['§ 1601', '§ 1601', '§ 1635', '§ 1635', '§ 1635', '§ 1331', '§ 1291', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1026', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1640', '§ 1635', '§ 1640', '§ 1640', '§ 1635', '§ 1640', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1026', '§ 78', '§ 5536', '§ 4', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1635', '§ 1640', '§ 1640']

SHERZER v. HOMESTAR MORTGAGE SERVICES HSBC USA CIT | FindLaw
SHERZER v. HOMESTAR MORTGAGE SERVICES HSBC USA CIT
Daniel R. SHERZER; Geraldine Sherzer, Appellants v. HOMESTAR MORTGAGE SERVICES; HSBC Bank USA; Dana Capital Group, Inc .; The CIT Group Consumer Finance, Inc.; Mercury Mortgage Partners.
Before SLOVITER, RENDELL and HARDIMAN, Circuit Judges.Matthew B. Weisberg [argued], Weisberg Law, Morton, PA, for Plaintiffs–Appellants. Sandra M. Di Iorio, Joe N. Nguyen, Nipun J. Patel, Henry F. Reichner [argued], Reed Smith, Philadelphia, PA, Edmund D. Krulewicz, Kellie A. Lavery, Reed Smith, Princeton, NJ, for Appellees Homestar Mortgage Services and HSBC Bank USA. Kirk D. Jensen [argued], Michael R. Williams, BuckleySandler, Washington, DC, for Amicus Appellee American Bankers Assn. Peter G. Wilson [argued], Rachel Rodman Consumer Financial Protection Bureau, Washington, DC, for Amicus Curiae Consumer Financial Protection Bureau.
This appeal arises under the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq. Congress enacted TILA in 1968 to promote the “informed use of credit.” Id. § 1601(a). To achieve this goal, TILA sought “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit.” Id. A consumer who does not receive the requisite disclosures regarding a loan secured by his principal dwelling may rescind the loan agreement. See id. § 1635.
If the lender fails to make the requisite disclosures before the loan commences, the three-day restriction on the right of rescission does not begin to run. A consumer who does not receive the requisite disclosures has a right to rescind that lasts until three days after the disclosures are received. Id. § 1635(a). That right of rescission is not perpetual, however, even if the consumer never receives all of the requisite disclosures. The right “expire [s] three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first .” Id. § 1635(f). This appeal requires us to decide what action an obligor must take to exercise the right of rescission before that three-year period expires.
The District Court had jurisdiction over the Sherzers' claims pursuant to 28 U.S.C. § 1331 and we have jurisdiction under 28 U.S.C. § 1291. We exercise plenary review over a judgment on the pleadings. Allstate Prop. & Cas. Ins. Co. v. Squires, 667 F.3d 388, 390 (3d Cir.2012). Judgment on the pleadings is appropriate if the Lenders, as the movants, establish that there is no issue of material fact and that they are entitled to judgment as a matter of law. See id. In considering the motion for judgment on the pleadings, the District Court was required to accept all of the Sherzers' allegations as true and draw all reasonable inferences in their favor. See id.
The Sherzers and their amicus, the Consumer Financial Protection Bureau (CFPB), argue that § 1635 “establishes a private, non-judicial mechanism for consumers to rescind mortgage loans by providing notice to their lenders.” Br. of CFBP at 11. Under this view, an obligor who has not received material disclosures can exercise his right to rescission and rescind his loan agreement simply by sending written notice to the lender within the three-year period. After notice has been sent, the lender and the borrower incur certain obligations under § 1635(b). Specifically, the lender must return any money or property that it received as downpayment, and must take any actions necessary to show that it no longer has a security interest in the property. See 15 U.S.C. § 1635(b). If the lender does not comply with § 1635(b)—because, for example, it contends that all relevant disclosures have been made such that the obligor had no right to rescind the agreement—the obligor may file an action to recover the money and property owed and to quiet title. Under this view, rescission of the loan agreement occurs when a valid notice of rescission is sent, not when a court enters an order enforcing the obligor's rights. The subsequent legal action would simply determine whether a valid rescission had occurred, and, if so, the court would enforce the respective obligations of the parties. This interpretation of § 1635 accords with the Eleventh Circuit's description of the rescission process in Williams v. Homestake Mortgage Co., 968 F.2d 1137, 1139–40 (11th Cir.1992) (explaining that rescission occurs automatically upon notice), and would lead to the same result reached by the Fourth Circuit in Gilbert v. Residential Funding LLC, 678 F.3d 271, 277–78 (4th Cir.2012) (holding that a consumer need only send notice of rescission within three years of the closing date).1
The Lenders and their amici—the American Bankers Association, Consumer Bankers Association, and Consumer Mortgage Coalition—argue that a consumer's unilateral notice of rescission does not automatically rescind a loan agreement. See Rosenfield v. HSBC Bank, USA, 681 F.3d 1172, 1188 (10th Cir.2012); Yamamoto v. Bank of N.Y., 329 F.3d 1167, 1172 (9th Cir.2003); Large v. Conseco Fin. Servicing Corp., 292 F.3d 49, 54–55 (1st Cir.2002). The Lenders argue that when there is a dispute regarding the propriety of rescission, the obligor must file suit within three years of the closing date to exercise his right of rescission or he will be forever time-barred. This view has been adopted by the Ninth and Tenth Circuits. See Rosenfield, 681 F.3d at 1188; McOmie–Gray v. Bank of Am. Home Loans, 667 F.3d 1325, 1326 (9th Cir.2012). Under this view, rescission occurs when the parties agree or when a court enters an order of rescission. According to the Lenders, the Supreme Court “implicitly recognized” that an obligor must both send written notice and file suit within three years of the closing date in Beach v. Ocwen Federal Bank, 523 U.S. 410, 411–13, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998).
In determining what the Sherzers had to do to rescind their loan agreement pursuant to § 1635, we begin with the statutory text. United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). When “the statute's language is plain, the sole function of the courts is to enforce it according to its terms.” Id. (internal quotation marks omitted). Here, the language of the statute provides that an obligor exercises his right of rescission when he sends notice to the creditor; it says nothing about a court filing.
Sections 1635(a) and (b) explicitly address both how the right of rescission is exercised and when the rights and corresponding obligations flowing therefrom are incurred by the parties to the loan. Section 1635(a) provides that “the obligor shall have the right to rescind the transaction ․ by notifying the creditor, in accordance with regulations of the Bureau, of his intention to do so.” 15 U.S.C. § 1635(a) (emphasis added). Regulation Z, in turn, specifies that the obligor must notify his lender “by mail, telegram, or other means of written communication.” 12 C.F.R. §§ 1026.15(a)(2), 1026.23(a)(2). Neither § 1635(a) nor Regulation Z states that the obligor must also file suit; both refer exclusively to written notification as the means by which an obligor exercises his right of rescission.
An obligor's right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor․
Id. § 1635(f) (emphasis added); see also Beach, 523 U.S. at 417 (“[Section 1635(f) ] says nothing in terms of bringing an action but instead provides that the ‘right of rescission [under the Act] shall expire’ at the end of the time period.”); McOmie–Gray, 667 F.3d at 1327 (“Section 1635 does not explicitly establish a time limit in which borrowers must bring suit for rescission if a lender does not comply with the rescission request. Indeed, it ‘says nothing in terms of bringing an action’ or ‘a suit's commencement.’ “ (quoting Beach, 523 U.S. at 417)). In contrast, statutes that circumscribe the time for bringing suit—statutes of limitation and statutes of repose alike—typically refer either to causes of action or the commencement of a civil action.3 Thus, the absence of any reference to causes of action or the commencement of suits in § 1635 also suggests that rescission may be accomplished without a formal court filing.
Second, § 1635(g), which was added as part of the 1980 amendments to TILA, states that “in addition to rescission the court may award relief under section 1640 of this title for violations of this subchapter not relating to the right to rescind.” This provision was added simply to clarify that an obligor who rescinds pursuant to § 1635 is not precluded from also seeking damages under 15 U.S.C. § 1640. See Brown v. Nationscredit Fin. Servs. Corp., 349 F.Supp.2d 1134, 1137 (N.D.Ill.2005) (“Prior to the [1980] amendment, some courts did not allow plaintiffs to concurrently sue for rescission under § 1635 and damages under § 1640, but instead required borrowers to elect one of the two remedies.”); S.Rep. No. 96–368, at 29 (1979) (“[T]he bill explicitly provides that a consumer who exercises his right to rescind may also bring suit under the Act for other violations not relating to rescission. The Act is currently ambiguous on this issue, and this section codifies the majority position of the courts.”); see also Vallies v. Sky Bank, 591 F.3d 152, 163 n. 17 (3d Cir.2009) (“Section 1635 provides the rescission remedy independently, explicitly, and in addition to civil damages under § 1640.” (citing 15 U.S.C. § 1635(g))); Andrews v. Chevy Chase Bank, 545 F.3d 570, 576 (7th Cir.2008) (“Section 1635(g) is a simple remedial cross-reference; it provides that rescission plaintiffs may also seek damages under § 1640. It does no more.”). Thus, § 1635(g) sheds no light on what an obligor must do to exercise his right of rescission.
In sum, nothing in the text of the statute supports the view that “it is the filing of an action in a court ․ that is required to invoke the right limited by the TILA statute of repose,” Rosenfield, 681 F.3d at 1183 (rejecting the notice-only view). See Gilbert, 678 F.3d at 277 (“Simply stated, neither 15 U.S.C. § 1635(f) nor Regulation Z says anything about the filing of a lawsuit, and we refuse to graft such a requirement upon them.”). But see Large, 292 F.3d at 54–55 (suggesting that the “natural reading of [the] language [in § 1635(b) ] is that the security interest becomes void ․ either because the creditor acknowledges that the right of rescission is available, or because the appropriate decision maker has so determined,” but failing to explain what statutory language “natural[ly]” supports that reading).4 Adopting the interpretation of the statute advocated by the Lenders would require us to infer that the statute contains additional, unwritten requirements with which obligors must comply—an inference that seems particularly inappropriate in light of the fact that TILA is a remedial statute that we must construe liberally. See Ramadan v. Chase Manhattan Corp., 156 F.3d 499, 502 (3d Cir.1998). We thus join the Fourth Circuit in holding that an obligor exercises his right of rescission by sending the creditor valid written notice of rescission, and need not also file suit within the three-year period.5 See Gilbert, 678 F.3d at 278; see also Williams, 968 F.2d at 1139–40 (discussing whether a court may modify procedures for rescission, and explaining in the course of that discussion that rescission occurs automatically upon notice).
Unlike these courts, we do not read Beach to answer the question presented in this appeal. Beach addressed whether obligors who failed to provide notice of rescission within the three-year period may nevertheless assert rescission as an affirmative defense in foreclosure proceedings. Beach, 523 U.S. at 411–13. The borrowers in Beach refinanced their house in 1986, and took no action between 1986 and 1989 that could be construed as exercising their right to rescind. They simply stopped making mortgage payments five years after the closing, and the bank began foreclosure proceedings. Id. at 413. During the foreclosure proceedings, the borrowers asserted as an affirmative defense that the bank had failed to provide certain material disclosures. Id. at 413–14. They argued that because § 1635(f) is a statute of limitations, it bars only the commencement of a suit, not the defensive use of rescission. Id. at 415.
In addressing the borrowers' claims, the Supreme Court considered “whether § 1635(f) is a statute of limitation, that is, whether it operates, with the lapse of time, to extinguish the right which is the foundation for the claim or merely to bar the remedy for its enforcement.” Id. at 416 (internal quotation marks and alteration omitted). It held that § 1635(f) does not merely limit the time for filing a suit; instead, it provides that the right of rescission itself lasts for three years. Id. at 417 (explaining that § 1635(f) is phrased in terms of the duration of the right). As a result, obligors who have not exercised their right of rescission within the three-year period cannot later assert rescission as an affirmative defense. See id. at 417–19. Thus, under Beach, an obligor must exercise his right of rescission within three years of the commencement of the loan; the right is extinguished once that period has passed. Id. at 419.
Critical to this appeal, nowhere in Beach does the Court address how an obligor must exercise his right of rescission within that three-year period. This omission is unsurprising since the obligors in Beach did not claim to have taken any action to rescind their loan before the bank initiated foreclosure proceedings. See Gilbert, 678 F.3d at 278 (“The Beach Court did not address the proper method of exercising a right to rescind or the timely exercise of that right.”); Calvin v. Am. Fid. Mortg. Servs., Inc., 2011 WL 1672064, at *2 (N.D.Ill. May 3, 2011) (“Beach determined only that the right to rescission expired after three years for purposes of its assertion as a defense as well as for bringing suit. Beach did not discuss how the right must be asserted within the three-year period.” (internal citation omitted)). Nevertheless, the Lenders argue that certain language in the opinion implies that, when rescission is disputed, obligors must file suit within three years of the closing.
Some of the language upon which the Lenders rely has no obvious relevance to whether rescission is effected by sending notice or through filing suit. For example, the Lenders highlight the following statement: “[T]he Act permits no federal right to rescind, defensively or otherwise, after the 3–year period of § 1635(f) has run.” Beach, 523 U.S. at 419; see also Rosenfield, 681 F.3d at 1187 (emphasizing this statement); McOmie–Gray, 667 F.3d at 1328 (same). This passage is consistent with the view that obligors must file suit within three years, but it is also consistent with our view that they need only send notice of rescission to their lenders during that period, if that is how the right of rescission is exercised. The most that can be gleaned from the oft-quoted statement is that, however the right of rescission is to be exercised, it must be done within three years.
Section 1635(f) ․ takes us beyond any question whether it limits more than the time for bringing a suit, by governing the life of the underlying right as well. The subsection says nothing in terms of bringing an action but instead provides that the ‘right of rescission [under the Act] shall expire’ at the end of the time period. It talks not of a suit's commencement but of a right's duration, which it addresses in terms so straightforward as to render any limitation on the time for seeking a remedy superfluous.
Beach, 523 U.S. at 417 (alterations in original); see also Rosenfield, 681 F.3d at 1181 (emphasizing this statement); McOmie–Gray, 667 F.3d at 1328 (same). The Lenders are correct that some of this passage could be read as inconsistent with the notice-only view; if obligors could exercise their right of rescission simply by sending written notice within three years, and then file a suit to enforce the rights flowing from rescission after the three-year period has passed, then a “limitation on the time for seeking a remedy” would not be “superfluous.” But portions of the passage could be used as support for our notice-only view, as well. The Court explicitly observed that § 1635(f) “says nothing in terms of bringing an action,” Beach, 523 U.S. at 417, and this silence supports the Sherzers' view that § 1635 operates as a private enforcement mechanism. In any event, because the Court was not considering the method by which an obligor must exercise his right of rescission, the passage provides only tenuous support for either view. In resolving the question at issue here, we rely on the statutory language, not on the debatable implications of dicta.
The Lenders and their amici also suggest that it would be problematic for a court to recognize that rescission has occurred after the three-year period has passed because the obligor would no longer have a “right of rescission” to enforce at the time of the suit. E.g. Br. of ABA at 7 (“Perhaps more fundamentally, courts have never assumed the role of enforcing a right that has already been extinguished.”). But while the obligor no longer has the right of rescission after the three-year period has passed, he does have the right to the return of his property and to clear title—the rights flowing from rescission—and it is these rights that permit him to bring suit.
According to the Lenders' amici, under the notice-only interpretation, the lender's security interest would become instantly void by law even when the obligor sends an invalid notice. This concern has also been expressed by the Ninth Circuit. See Yamamoto, 329 F.3d at 1172 (“[I]t cannot be that the security interest vanishes immediately upon the giving of notice. Otherwise, a borrower could get out from under a secured loan simply by claiming TILA violations, whether or not the lender had actually committed any.”). The noticeonly holding we adopt today will not lead to such a result. Rescission of the loan agreement occurs when an obligor with a valid TILA claim provides the lender with written notice. That notice may be ineffective because the obligor has, in fact, received all material disclosures. It may also be ineffective because it is fraudulent—if, for example, the obligor does not have the intent or the ability to return the loan proceeds that he has received from the lender.7 If the borrower fails to exercise a valid right to rescission, the lender maintains its security interest in the property and does not incur any obligations toward the borrower. A lender who believes an obligor's notice of rescission is invalid may choose to file suit to resolve any uncertainty.
Second, the Lenders' amici contend that allowing obligors to rescind by written notice alone may cloud title held by banks on foreclosure, a concern noted by the Supreme Court in Beach. 523 U.S. at 418–19. If obligors were required to bring suit to exercise the right of rescission, both the lender and the obligor could know with more certainty the status of the loan agreement (whether is has been rescinded, or may be in the future) and the secured property (whether the lender has a security interest in it). Three years after the closing date of the loan, if the obligor had not filed suit demanding rescission, he would never be able to claim that rescission should have occurred. Ten years after the closing date, if the lender initiates foreclosure proceedings, it could be confident that the obligor would not be able to claim as a defense that the agreement had actually been rescinded.
The same is not true if obligors are only required to send written notice to rescind. An obligor who has sent a written notice of rescission to his lender but received no response will not be able to wait indefinitely before filing a lawsuit to enforce the rescission, recover his property, and obtain the release of the security interest because statutes of limitation will constrain his ability to file suit. See Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 545 U.S. 409, 414, 125 S.Ct. 2444, 162 L.Ed.2d 390 (2005) (explaining that, if a federal statute does not expressly supply a limitations period, courts “generally ‘borrow’ the most closely analogous state limitations period”); Agency Holding Corp. v. Malley–Duff & Assocs., Inc., 483 U.S. 143, 146–50, 107 S.Ct. 2759, 97 L.Ed.2d 121 (1987) (borrowing statute of limitations from an analogous federal statute) .8 Thus, if the obligor mails a notice of rescission but takes no action for ten years, the lender can at least be assured that the obligor will not be able to file a timely court action. If, however, ten years after the letter was sent the lender initiates foreclosure proceedings, the obligor may be able to raise the fact of rescission as a defense. See Beach, 523 U.S. at 415 (explaining that “as a general matter a defendant's right to plead ‘recoupment,’ a ‘defense arising out of some feature of the transaction upon which the plaintiff's action is grounded,’ survives the expiration of the period provided by a statute of limitation that would otherwise bar the recoupment claim as an independent cause of action.” (internal citations omitted)). Permitting obligors to assert defenses related to rescission years after the three-year period has passed would be costly,9 and the Lenders and their amici contend that this would effectively create the same problem that the Supreme Court sought to avoid in Beach. See id. at 418–19 (recognizing that “a statutory right of rescission could cloud a bank's title on foreclosure,” and so “Congress may well have chosen to circumscribe that risk” by refusing to allow parties to exercise their right of rescission defensively after the three-year period has passed).
The practical problem faced by the Court in Beach was much broader than the problems the Lenders and their amici argue a written notice regime will create. In Beach, the question was whether obligors who have not taken any action to rescind their loan may nevertheless assert rescission as a defense in foreclosure proceedings. If obligors had been permitted to take that kind of action, it would have created tremendous uncertainty for the banks with respect to their interest in the secured property. During foreclosure proceedings, any obligor might claim that he did not receive the requisite disclosures, and the bank might lose its interest in the secured property. Here, in contrast, the uncertainty is substantially more cabined because it would exist only as to those loans for which obligors have sent the bank written notice of rescission within the three-year period. Additionally, lenders in these circumstances have options to resolve that uncertainty. Once alerted to the cloud on its title, a lender could sue to confirm that the obligor's rescission was invalid or do nothing and assume the risk that a court might later rule that the rescission was valid.
1. In Gilbert, the Fourth Circuit held that an obligor can exercise his right to rescission simply by sending written notice of his intent to rescind within the three-year period. If the borrower has sent timely written notice, then he can file suit to enforce his right to rescission after the three-year period has passed. The loan agreement is not technically rescinded until a court enters an order granting a rescission. Gilbert, 678 F.3d at 277 (distinguishing between “the issue of whether a borrower has exercised her right to rescind” and “the issue of whether rescission has, in fact, been completed and the contract voided,” and explaining that “[t]o complete the rescission and void the contract ․ [e]ither the creditor must acknowledge that the right of rescission is available and the parties must unwind the transactions amongst themselves, or the borrower must file a lawsuit so that the court may enforce the right to rescind.” (internal quotation marks omitted)).
2. Regulation Z uses similar language, except that it refers to “[w]hen a consumer rescinds a transaction,” as opposed to “when an obligor exercises his right to rescind.” 12 C.F.R. §§ 1026.15(d), 1026.23(d) (stating that the “security interest ․ becomes void” and that the “creditor shall return” money or property given). The reference to a consumer rescinding the transaction—as opposed to a court granting rescission—further supports the view that rescission occurs upon transmission of valid written notice.
3. See Beach, 523 U.S. at 416 (“[M]ost statutes of limitation provide either that ‘all actions ․ shall be brought within’ or ‘no action ․ shall be brought more than’ so many years after ‘the cause thereof accrued.’ “ (quoting Note, Developments in the Law—Statutes of Limitations, 63 Harv. L.Rev. 1177, 1179 (1950))); Lieberman v. Cambridge Partners, L.L.C., 432 F.3d 482, 490 (3d Cir.2005) (“Unlike a statute of limitations, a statute of repose is not a limitation of a plaintiff's remedy, but rather defines the right involved in terms of the time allowed to bring suit.” (quoting P. Stolz Family P'ship v. Daum, 355 F.3d 92, 102 (2d Cir.2004))); see also, e.g., 15 U.S.C. § 78i(f) (“No action shall be maintained to enforce any liability created under this section, unless brought within one year after the discovery of the facts constituting the violation and within three years after such violation.”) (recognized as a statute of repose in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 360 n. 6, 363, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991)); 42 Pa. Cons.Stat. Ann. § 5536(a) (“[A] civil action or proceeding ․ must be commenced within 12 years after completion of construction of such improvement to recover damages ․”) (recognized as a statute of repose in Luzadder v. Despatch Oven Co., 834 F.2d 355, 358 (3d Cir.1987)).
4. The Lenders' amici argue that rescission, as it is generally understood, “is a court-ordered ‘unwinding’ of a contract,” which necessarily “involves a judicial termination of a party's contractual obligations.” Br. of ABA at 7 (quoting Jones v. InfoCure Corp., 310 F.3d 529, 535 (7th Cir.2002) (discussing whether parties were entitled to the equitable remedy of rescission)). This is only partly true. Historically, two types of rescission have been available to parties in other contexts: rescission in equity and rescission at law. See Omlid v. Sweeny, 484 N.W.2d 486, 490 & n. 3 (N.D.1992) (distinguishing between rescission at law and rescission in equity); Dan B. Dobbs, Law of Remedies § 4.8 (2d ed.1993) (same). The first, rescission in equity, does involve a court-ordered unwinding of a contract. See Omlid, 484 N.W.2d at 490 n. 3 (explaining that “the contract continues to exist until set aside by the equity decree” (quoting Hugh S. Koford, Comment, Rescission at Law and in Equity, 36 Calif. L.Rev. 606, 606 (1948))). But the second, rescission at law, operates akin to the way the Sherzers suggest that § 1635 operates: it occurs automatically when parties have taken the requisite action, and any subsequent suit is brought to enforce the rights flowing from rescission. Williams, 968 F.2d at 1140 (describing § 1635(b) as a “reordering of common law rules governing rescission”); see also Peterson v. Highland Music, Inc., 140 F.3d 1313, 1322 (9th Cir.1998) ( “When a party gives notice of rescission, it has effected the rescission, and any subsequent judicial proceedings are for the purpose of confirming and enforcing that rescission.”); Omlid, 484 N.W.2d at 490 n. 3; Jones v. Bohn, 311 N.W.2d 211, 213 (S.D.1981). Thus, little can be inferred from the way that rescission operates in other contexts, as the interpretations proffered by both parties have historical analogues.
5. We disagree, to some extent, with the Fourth Circuit's characterization of the rescission process. As noted above, the court in Gilbert distinguished between “the issue of whether a borrower has exercised her right to rescind” and “the issue of whether rescission has, in fact, been completed and the contract voided.” 678 F.3d at 277. It determined that borrowers need only send written notice within three years to exercise the right of rescission. Borrowers who had timely exercised their right of rescission could file suit after the three-year period had passed. Id. at 277–78. It also explained, however, that rescission does not occur automatically; the actual rescission of the loan agreement occurs when the parties agree to rescission or when the court enters an order granting rescission. Id. at 277. We find that the statutory language of §§ 1635(a) and (b) suggests that rescission occurs at the time the obligor exercises his right to rescission, and hold today that the contract is voided at the time valid notice is sent, pursuant to 15 U.S.C. § 1635(b). We agree, however, with the Fourth Circuit's determination that the § 1635(f) bar does not preclude consumers from filing suit after the three-year period has passed, as long as they send written notice of rescission within that three-year period.
8. The CFPB suggests that, in determining whether an obligor seeking to enforce his rights has filed suit in a timely manner, courts may borrow from the one-year statute of limitations in § 1640 or from analogous state statutes of limitations. Br. of CFPB at 26 n. 6; see, e.g., In re Hunter, 400 B.R. 651, 661–62 (Bankr.N.D.Ill.2009) (borrowing from § 1640); Graham Cnty. Soil & Water Conservation Dist., 545 U.S. at 422 (borrowing from state limitations period). Because the Sherzers filed suit six months after sending the notice of rescission, we do not reach the question of what statute of limitations would apply in this context.