In Jesinoski v. Countrywide Home Loans, et al. (No. 13-684), the U.S. Supreme Court has eased the process by which a borrower may seek to walk away from his home mortgages, holding that the borrower, in order to avail himself of the more limited three year right of rescission provided under the Truth in Lending Act, 15 U.S.C. § 1601-1677 ("TILA"), need only provide his lender with written notification of an intent to rescind his home mortgage loan in order to initiate that rescission process.

In addition to the unconditional three day right of rescission given to a borrower post-loan closing, TILA also provides that borrower with an additional post-closing period of three years to rescind the loan if the lender failed to provide all TILA-mandated disclosures at closing. Prior to Jesinoski, Federal courts were split as to when and how a borrower could exercise this more limited rescission right. Some read TILA as only requiring the borrower to provide the lender with notice of this exercise, while others took the position that the borrower must file suit against the lender within the three year period in order to do so.

In Jesinoski, the Supreme Court resolved this confusion. For a unanimous Court, Justice Antonin Scalia wrote "The language [of TILA] leaves no doubt that rescission is effected when the [homeowner] notifies the creditor of his intention to rescind. It follows that, so long as the borrower notifies within three years after the transaction is consummated, his rescission is timely. [TILA] does not also require him to sue within three years."

While affirming the simpler method of seeking rescission of a home mortgage loan, banks, mortgage servicers, and other mortgage lenders likely need not fear an onslaught of rescission notifications in the wake of Jesinoski. For a borrower seeking to escape any home mortgage loan entered into prior to the 2008 financial crisis, the deadline to employ this rescission right has long since expired. Instead of resurrecting potential issues of the past housing slump, this decision will have the most bearing in the next one.

In insuring that the home mortgage loans they issue comply with all applicable laws, rules, and other regulations, including the TILA disclosures at issue in Jesinoski, financial institutions have become much more diligent since 2008, especially in light of the Consumer Financial Protection Bureau's aggressive rule making agenda with respect to mortgage lending. Despite this, however, these institutions should foresee that rescission will once again once again become a tactic employed by borrowers seeking to escape underwater mortgages. Employing this tactic will be even easier now in light of Jesinoski. As such, all financial institutions must not only observe their compliance with all TILA-required disclosure requirements, but also insure that their internal operations can expeditiously respond to notices of rescission based on any alleged compliance failures, as TILA gives them only a twenty day period to respond to such notices.