Rate "Lock In" Agreement Subject To Three-Day TILA Notice
Question: Is a separate agreement whereby a borrower pays a fee for a locked-in interest rate itself subject to the three-day cancellation right under the Truth In Lending Act?
Answer: Yes, according to the Ninth Circuit in Jones v. e*Trade Mortgage Corporation, 05 C.D.O.S. 1283.
Here, the bank sent the borrowers a separate agreement under which they paid $400 for a locked-in interest rate. The bank approved the loan and then sent the borrowers the required three-day cancellation notice under TILA. The borrowers backed out and demanded the return of the $400 fee. The bank refused, and the district court dismissed the borrowers' complaint for failure to state a TILA claim.
The Ninth Circuit reversed, holding that the rate lock-in agreement was not a "separate transaction to be distinguished from the loan itself." In other words, it declined to separate the loan into "several transactions [that permit] the lender to extract money from the borrower who exercises his statutory right of decision."
In communicating with us through this blog, you should not provide any confidential information to us concerning any potential or actual legal matter you may have. Before providing any such information to us, you must obtain approval to do so from one of our lawyers.
By choosing to communicate with us without such prior approval, you understand and agree that Sheppard Mullin will have no duty to keep confidential any information you provide.