(Reuters) – The U.S. Supreme Court on Monday agreed to decide what process struggling homeowners need to follow if they want to back out of mortgages issued when lenders fail to adhere to a federal disclosure law.
The court will weigh whether homeowners need to write a letter to their lender or file a lawsuit in order to benefit from a provision of the federal law, known as the Truth in Lending Act. The law allows consumers to rescind mortgages for up to three years after the agreement was made if the lender does not notify them of various details about the loan, including finance charges and rate of interest.
The provision is typically used by homeowners who are struggling to pay their mortgages. Lawyers for consumers say mortgage companies routinely violated the law in the years prior to the 2008 financial crisis.