Watkins v. SunTrust Mortg., Inc., No. 10-1915

Decided Dec. 14, 2011

When Edward and Danielle Watkins refinanced their home loan with SunTrust Mortgage, they were given a notice of a right to rescind. This notice substantially complied with Model Form H–8 (in accordance with 12 C.F.R. pt. 226) rather than Model Form H–9. H–9 applied specifically to rescissions of refinancing agreements while H–8 dealt with rescissions generally.

Eighteen months later, Watkins had fallen behind on paying the loan and SunTrust informed him of its intent to foreclose. Watkins responded by demanding a rescission of transaction because the form used was improper. When SunTrust refused to rescind, Watkins filed an action for declaratory judgment of his right to rescind and for statutory damages of $2,000. The district court, however, dismissed the action for failure to state a claim upon which relief could be granted.

Watkins appealed, relying heavily on precedent from the Seventh Circuit that found a TILA violation where a lender provided both H–8 and H–9 information because “hypertechnicality reigns in TILA cases.” The Fourth Circuit disagreed. The court held that the language of H–8 and H–9 were nearly identical and that both complied with the mandates of Regulation Z, where rescission information requirements are laid out.

Judge Wynn dissented. He pointed to Congressional intent and even prior Fourth Circuit precedent to argue that “to insure that the consumer is protected, as Congress envisioned requires that the provisions of the Act and the regulations implementing it be absolutely complied with and strictly enforced.” Because SunTrust unequivocally agreed that it used the wrong form, and because TILA is to be “strictly enforced,” Judge Wynn would have found a violation and reversed the lower court.

Full Opinion

-C. Alexander Cable

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