Finding a legal escape clause
Attorney rescues homeowners from loans they can't afford
Marni Leff Kottle, Chronicle Staff Writer
Sunday, April 22, 2007
Pamela Simmons has something to offer California homeowners who've been burned by the
mortgage industry meltdown: a way out.
The lawyer, who with a partner runs a seven-person practice out of cramped space in an office park
next to the freeway in the Santa Cruz County town of Soquel, is using a little-known law to help
hundreds of homeowners dump loans that have become toxic.
Simmons, who turns 50 next week, has found a legal defense in the Truth in Lending Act, a wide-
ranging federal statute that was passed in 1968. She says that many lawyers -- and judges -- are
unfamiliar with the kind of protection the law offers consumers.
As part of the statute, a lender has to provide a borrower with a right-to-cancel form indicating that
the borrower has three days to review and cancel the loan. The lender is required to disclose on that
form when the three-day waiting period begins and ends.
Failure to properly fill out those dates may extend the cancellation period to as much as three
years, granting the borrower the right to rescind the loan and have closing costs, interest and other
fees deducted from the balance, Simmons said.
As the booming real estate market fueled a booming mortgage market, lenders got sloppy with the
right-to-cancel document, she said.
"There was a period of time just a few years ago where virtually every loan I looked at was
The strategy won't work for every borrower who is in over his or her head. For one thing, this part
of the law applies only to a homeowner who is refinancing a loan. And even if a loan is rescinded,
the borrower must find new financing in what has become a tight market.
Nevertheless, business is brisk for Simmons. The number of calls from desperate homeowners has
reached about 100 a month, she said, as the rapid appreciation that fueled the housing market in
the early part of