In Kentucky, two issues are common in most Kentucky foreclosures redemption and rescission. Redemption gives a homeowner who went through a foreclosure sale the ability to repurchase their house if the sale was for a low amount. Under KRS 426.530, if the property sold for less than two-thirds (2/3) of its appraised value, the homeowner can redeem it. You can purchase it back from the new owner within six (6) months from the day of sale. You must pay the purchase money plus ten percent (10%) per annum interest, and reasonable costs incurred by the purchaser. This includes maintenance or repair of the foreclosure property, including but not limited to utility expenses, insurance, association fees, taxes. It also consists of the costs to conform to the foreclosure property to the minimum standards of local codes.
The homeowner only needs to pay the redemption to the court clerk, and then the commissioner will immediately convey the property back. Redemption is why lenders often bid 70% of the mortgage when they bid at foreclosures. Offering over 66% cuts off the rights of the homeowner to redeem the property from foreclosure.
Kentucky Foreclosure Rescission and Truth in Lending Act (TILA)
If you refinance your home within three years before the sale, TILA gives you grounds to rescind a home mortgage. One common closing mistake is the failure to provide borrowers two copies of the notice of right to cancel. Even if the note and mortgage are to one spouse only, the other spouse also has the right to be given notice. Under the Truth in Lending Act, if the loan is invalid, the loan default is also invalid, which stops a foreclosure action. Invoking the right of rescission is just one of many rights and defenses. However, there are several defenses to help you save a home.
First, you must gather all of the paperwork and documents you used to purchase your home or refinance it. You must provide a copy of your taxes, pay stubs, any prior bankruptcy, and proof of citizenship. You also must explain where the down payment comes from, prove that you intend to live there, along with numerous other items. These documents all went into the loan decision. This is very important because if the lender misrepresents facts such as the actual cost or fees, a rescission is possible.
The Purpose of the Truth in Lending Act
The reason for TILA is to protect borrowers from hidden fees and fraudulent or deceitful practices. It prevents the sloppy paperwork you commonly find in early mortgage loans. The Truth in Lending Act gives borrowers the benefit of the doubt. The TILA right of rescission will temporarily stop foreclosure actions and may allow a borrower to walk away from the foreclosure. Although damages under the statute are often small, a lender may offer a modification or workout as a response.
The reason you went through all that paperwork in buying the home is to ensure compliance with laws like the Truth in Lending Act (TILA). When defending a foreclosure, it’s time to check and confirm the lender is in compliance with these laws. The truth in lending act requires the mortgage lender to obtain specific information and documents and disclose them to the homeowner. For instance, TILA requires mortgage companies and banks to provide two copies of the right to cancel—one copy for each spouse or co-debtor. If two copies are not provided at closing, a homeowner or borrower has three years to rescind the transaction. Plus, the borrower may recover damages.
Nick Thompson Foreclosure Attorney
Kentucky foreclosures redemption and rescission are two methods to help stop a sale and prevent a deficiency or tax debt. We are recognized in Avvo (who ranks us 10 out of 10) and in Google (who ranks us 5 out of 5) as one of the highest-ranked bankruptcy and foreclosure attorney in Kentucky for 2012, through 2020 based on the ratings from other attorneys and clients. Threebestrated.com ranks us as one of the top 3 offices for bankruptcy and foreclosure in Louisville and obtaining consistently favorable results for clients. We represent distressed homeowners in Kentucky and southern Indiana.
Are you facing foreclosure? Contact my office right away to start the conversation. Nick C. Thompson, Attorney: 502-625-0905