MEMORANDUM OPINION

T.S. ELLIS, III, District Judge.

This is the latest chapter in a rather long-running TILA1 saga that bids fair to be the Jarndyce v. Jarndyce2 of TILA matters. At issue in this chapter is plaintiff Norman Bradford's motion for reconsideration of the July 22, 2011 Order dismissing his TILA rescission and wrongful failure to rescind claims. See Bradford v. HSBC Mortg. Corp., 799 F.Supp.2d 625 (E.D.Va.2011) (Order). The July 22 Order, focusing chiefly on the rescission claim, dismissed the TILA claims as time-barred as Bradford had filed his TILA action outside TILA's three-year statute of repose. See id. Bradford now seeks reconsideration of the July 22 Order insofar as it dismissed his claim that defendants wrongfully failed to grant his rescission request in violation of TILA, arguing that this claim was not time-barred. For the reasons that follow, the July 22 Order correctly dismissed the TILA wrongful failure to rescind claim because that claim — based on the erroneous premise that a borrower's notice to a lender of intent to rescind triggers the lender's duty to effect rescission — fails to state a claim on which relief can be granted. Accordingly, the motion for reconsideration must be denied.

I.

The facts and procedural history pertinent to the instant motion have been exhaustively detailed in prior memorandum opinions,3 but may be briefly summarized here. On September 20, 2006, Bradford signed a promissory note in favor of defendant HSBC Mortgage Corporation ("HSBC") to refinance the loan that facilitated the purchase of his primary residence in Ashburn, Virginia (the "Ashburn home"). At the time of closing, HSBC did not provide Bradford with "various mandatory TILA disclosures[.]" Bradford v. HSBC Mortg. Corp., 799 F.Supp.2d 625 (E.D.Va.2011). Several months after closing, HSBC sold the Note to defendant Ally Bank ("Ally"). In an October 16, 2008 letter to HSBC, Bradford purported to "exercise [his] right to rescind the mortgage transaction[.]" (Doc. 30-5). By letter to Bradford dated December 17, 2008, HSBC responded that "[t]here was no right to rescind" and thereby refused to honor Bradford's rescission request, even though Ally was the noteholder at that time. (Doc. 30-6).

Bradford filed the instant action on October 29, 2009, just months before Ally sold the note to Residential Funding Company, LLC ("RFC"). Counts I and II of Bradford's original complaint were based on the allegation that Bradford had a right to rescind the refinancing transaction pursuant to § 1635 of TILA, but sought different remedies. In particular, Count I alleged that Bradford was entitled to a court-ordered rescission of the transaction, and Count II alleged that Bradford was entitled to an award of damages for defendants' failure to honor his rescission request. On June 23, 2011, defendants HSBC, Ally, and RFC moved to dismiss Bradford's § 1635 claims pursuant to Rule 12(b)(6), Fed.R.Civ.P., on the ground that the claims were untimely asserted. On July 22, 2011, an Order issued dismissing both the § 1635 rescission claim and the § 1635 failure-to-rescind claim as untimely.4

On February 2, 2012 — over six months after the July 22 Order dismissing the § 1635 claims had issued — Bradford filed the instant motion for reconsideration in which he argues that dismissal of his § 1635 failure-to-rescind claim was incorrect on the ground that because defendants' refusal to honor Bradford's rescission request occurred within the three-year period and constituted a separate TILA violation, the untimeliness of his claim for rescission was not fatal to his claim for wrongful failure to rescind. Defendants5 respond that Bradford's reconsideration motion is procedurally deficient and that the July 22 Order was correct in its dismissal of Bradford's § 1635 failure-to-rescind claim as untimely. The reconsideration motion has been fully briefed and argued and is now ripe for disposition.

II.

In dispute at the threshold is the proper standard of review. Because Bradford's motion is directed at the July 22 Order's partial dismissal of his action, Bradford is correct that the motion is governed by Rule 54(b), Fed.R.Civ.P., which provides that:

Indeed, "[t]he Fourth Circuit has made clear that where ... the entry of partial summary judgment fails to resolve all claims in a suit, Rule 54[] — not Rule 59(e) or 60(b) — governs a motion for reconsideration[.]" Netscape Commc'ns Corp. v. ValueClick, Inc., 704 F.Supp.2d 544, 546-47 (E.D.Va.2010) (citing Am. Canoe Ass'n v. Murphy Farms, Inc., 326 F.3d 505, 514-15 (4th Cir.2003)). The July 22 Order granted defendants' motion to dismiss as to Bradford's § 1635 claims but allowed another claim to proceed. In this sense, the July 22 Order was not a final judgment or order as it did not decide all the parties' rights and liabilities. As a result, Bradford "is not required to make a showing of extraordinary circumstances" as would be required under Rules 59(e) and 60(b)(6). Netscape, 704 F.Supp.2d at 547. Instead, the decision to afford relief from the July 22 Order is discretionary and may be exercised "as justice requires." Touchcom, Inc. v. Bereskin & Parr, 790 F.Supp.2d 435, 463 (E.D.Va.2011) (quoting Fayetteville Invs. v. Commercial Builders, Inc., 936 F.2d 1462, 1473 (4th Cir.1991)). In short, as Bradford correctly argues, the task here in determining whether the July 22 Order properly dismissed Bradford's claim for wrongful failure to rescind under § 1635 "is to reach the correct judgment under law." Am. Canoe, 326 F.3d at 515.

III.

At issue on a motion for reconsideration is whether the July 22 Order correctly dismissed Bradford's claim that defendants wrongfully denied his request for rescinding the Ashburn home refinancing agreement in violation of TILA. Whether dismissal was proper depends, in turn, on whether Bradford, in his Third Verified Amended Complaint, stated a valid claim that HSBC, Ally, or RFC violated § 1635(b), the TILA provision concerning a borrower's exercise of rescission rights. Bradford asserts that these defendants violated § 1635(b) when they refused to void the security interest in the Ashburn home and return to Bradford all proceeds paid in connection with the Note within 20 days of receiving Bradford's notice of intent to rescind the mortgage refinancing transaction. Section 1635(b) provides that when a borrower "exercises his right to rescind" a secured transaction, "any security interest... becomes void upon such a rescission." 15 U.S.C. § 1635(b).6 The statute further provides that "[w]ithin 20 days after receipt of a notice of rescission," the lender must return to the borrower "any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction." Id. Finally, the statute notes that its prescribed procedures "shall apply except when otherwise ordered by a court." Id. Thus, the question presented is whether, on the basis of facts alleged in the Third Verified Amended Complaint, Bradford stated a claim that defendants' refusal to honor Bradford's request for rescission constituted a violation of § 1635(b).

At the heart of the instant dispute is what lender obligations, if any, are triggered under § 1635(b) by a borrower's notice of intent to rescind. Under defendants' reading of this statutory provision, a lender's receipt of notice that a borrower intends to rescind the transaction does not trigger an obligation under § 1635(b) that the lender must promptly void the security interest and return all proceeds that the borrower has paid. Bradford reads § 1635(b) differently. Under his understanding of the statute, a lender violates § 1635(b) if it does not void the security interest and return all money paid within 20 days of receiving the borrower's notice of intent to rescind. Although a literal reading of § 1635(b) might, at first blush, appear to support Bradford's understanding, a careful analysis of the statutory text in light of applicable precedent reveals that defendants are correct in their reading of § 1635(b).

It must be noted that the conclusion reached here — that a borrower's notice of rescission does not itself require the lender to rescind under § 1635 — applies only where, as here, the notice is sent outside of TILA's "three-day cooling-off period" that begins after the closing of the transaction. McKenna v. First Horizon Home Loan Corp., 475 F.3d 418, 421 (1st Cir.2007). This is so because, by default, a borrower has a vested right to rescind until "midnight of the third business day following the consummation of the transaction." 15 U.S.C. § 1635(a). Accord McKenna, 475 F.3d at 421 (observing that a borrower may rescind within this three-day period "for any reason or for no reason"). But, if the creditor has failed to deliver "the information and rescission forms required under [§ 1635] together with a statement containing the material disclosures required under [TILA]," then the borrower may rescind until the earlier of (i) that delivery or (ii) "three years after the date of consummation of the transaction[.]" Id. §§ 1635(a), 1635(f). Thus, the conclusion reached here does not extend to cases in which the borrower sends a rescission notice within the initial three-day period, as the right to in such cases is not contingent on the borrower's demonstration that the required TILA disclosures were not given at closing. With this limitation in mind, it is appropriate to set forth the reasons for the conclusion that mere notice is sent more than three days after closing.

When the statutorily prescribed rescission process is traced from beginning to end, it becomes quite clear that the borrower's notice of intent to rescind, by itself, imposes no duties to rescind on the lender under § 1635(b). This statutory process begins by requiring a borrower who intends to rescind a secured transaction to deliver notice to the lender of his intent to rescind. Then, under § 1635(b), the lender has twenty days to decide whether it will (i) recognize the existence of a rescission right and privately arrange rescission with the borrower and any other interested parties, or instead (ii) dispute the existence of a rescission right and await the borrower's initiation of suit. Significantly, under § 1635(b) receipt of a notice to rescind, without more, does not obligate a lender to void the security interest and return the proceeds to the borrower; instead, delivery of the borrower's notice of intent to rescind merely "advance[s] a claim seeking rescission." Am. Mortg. Network, Inc. v. Shelton, 486 F.3d 815, 821 (4th Cir.2007) (citation omitted). Then, in the event that the lender does not voluntarily effect rescission, the borrower, after twenty days have passed since the delivery of notice of intent to rescind, may file an action seeking judicially enforced rescission under § 1635(b). Thereafter, pursuant to § 1635(b)'s grant of authority to order rescission, a court determines whether to order rescission and, if rescission is ordered, the manner in which rescission will be effected (e.g., what amount the TILA claimant must tender, when tender must take place, whether the tender will precede the voiding of the security interest, etc.). Finally, a court determines what additional relief may be awarded pursuant to §§ 1635(g) and 1640(a). Thus, only after a court recognizes that the borrower is entitled to rescission does § 1635(b) impose any affirmative obligation on a lender. It follows that a cause of action in damages for a lender's failure to effect rescission does not accrue where, as here, a borrower has sent the lender a notice of intent to rescind, but no court has yet ruled that he is entitled to rescission.

Although there is no controlling circuit precedent, analogous circuit authority firmly supports the result reached here, namely, that a borrower's notice to the lender of his intent to rescind does not automatically trigger the lender's obligation to effect rescission. In American Mortgage Network, Inc. v. Shelton,7 a borrower obtained a loan to refinance an existing loan on his primary residence. To obtain the loan, the borrower gave the lender a security interest in the residence, but shortly thereafter, the borrower sent the lender a notice of his intent to rescind the transaction. The lender responded by indicating that it "was prepared to unwind the transaction in accordance with TILA, upon receipt of confirmation from [the borrower] that he was prepared to return the net loan proceeds." 486 F.3d at 818.8 Unable to tender all proceeds, the borrower told the lender that it "was required under TILA to release its security interest on the house immediately without a specific agreement ... to return the net loan proceeds." Id. The lender brought an action against the borrower "seeking modification of the TILA rescission procedures and an order declaring its full compliance with TILA;" thereafter, the borrower "counterclaimed for declaratory relief and monetary damages" under TILA. Id. On summary judgment, the district court (i) granted the lender's claim for a declaratory judgment that it had complied with TILA and (ii) dismissed the borrower's TILA claims with prejudice. See Am. Mortg. Network, Inc. v. Shelton, No. 3:05cv83, 2006 WL 909415 (W.D.N.C. Apr. 6, 2006).

On appeal, the Fourth Circuit rejected the borrower's argument that § 1635(b) "require[es a lender] to unconditionally release the security interest within 20 days of notification of cancellation" irrespective of the borrower's "admitted inability to tender the balance due on the loan[.]" 486 F.3d at 820. A secured loan, the Fourth Circuit reasoned, is rendered void only when a creditor voluntarily voids the security interest or a court orders rescission. Id. at 821.9 In this respect, the Fourth Circuit concluded that a borrower's "unilateral notification of cancellation does not automatically void the loan contract" under TILA. Id. A contrary construction of § 1635(b) would give TILA claimants "the right to simply walk away with a windfall... without any further obligation," a result certainly not intended by Congress. Id. at 820. Ultimately, the Fourth Circuit concluded that the lender had "fully complied with all the requirements of TILA in connection with this loan" and affirmed the district court's judgment in all respects. Id. at 822.

In light of the Fourth Circuit's reasoning in Shelton, it cannot be that a borrower's notice of intent to rescind is at once insufficient to render the security interest void (as the Fourth Circuit held), and yet also sufficient to require that the lender void the security interest on its own (as Bradford argues). Recognition of such a requirement and the resulting prospect of damages liability against a lender that refuses to honor a rescission request would, in substantial effect, make rescission automatic upon delivery of that notice, a result squarely foreclosed in Shelton. In this sense, just as "it was not the intent of Congress to reduce the mortgage company to an unsecured creditor or to simply permit the debtor to indefinitely extend the loan without interest,"10 it also was not the intent of Congress to threaten damage awards against lenders who, upon receiving a borrower's notice of intent to rescind, do not resign themselves to becoming unsecured creditors or to granting indefinite, interest-free loan extensions. Thus, because a borrower's notice of intent to rescind does not automatically unwind the secured transaction, it follows that § 1635(b) cannot require that a lender unilaterally void the security interest and return all loan payments merely because the lender has received such notice.

Several district-court decisions in this circuit and elsewhere accord with the result reached here, namely, that mere notice of intent to rescind does not obligate a lender under § 1635(b) to effect rescission.11 Other courts have reached a contrary result,12 although much of this disagreement appears in unpublished decisions.13 Most courts of appeals that have reached such a contrary result have done so only in dicta,14 but the First Circuit has squarely held, as a matter of first impression in that circuit, that a lender's failure to effect rescission within twenty days of receiving a borrower's notice of intent to rescind is actionable under § 1635(b). In Belini v. Washington Mutual Bank, FA, the First Circuit understood § 1635(b) as "plac[ing] certain requirements upon a creditor: upon receiving a debtor's valid notice of rescission, the creditor must, within twenty days, return all money paid by the debtor and must void the security interest." 412 F.3d 17, 25 (1st Cir.2005). Given this, the First Circuit concluded that "[s]hould the creditor not take these steps within twenty days, then the [creditor] has generally violated a `requirement' of section 1635 and can be held liable for damages under section 1640." Id. This understanding of § 1635(b), which Bradford urges should be adopted here, suffers from several critical flaws that ultimately render it unpersuasive.

First, Bradford's understanding is foreclosed by the Fourth Circuit's analogous and binding decision in Shelton. As noted supra, to adopt Bradford's understanding of § 1635(b) would effectively make rescission automatic by other means (i.e., a statutory requirement that lenders in receipt of a borrowers' notice of intent to rescind must effect rescission) in direct contradiction of the Fourth Circuit's ruling in Shelton. Indeed, it cannot be that § 1635(b) was intended to work at cross-purposes with itself by keeping a security interest intact even after a borrower notices his intent to rescind, but also requiring that a lender void the security interest and return all loan proceeds. This observation has gone unaddressed by decisions of other courts that have attempted to reconcile, on the one hand, the holding that a notice of intent to rescind does not automatically effect rescission with, on the other, their understanding of § 1635(b) that such notice requires immediate rescission by the lender. These courts see no conflict inasmuch as, in their view, § 1635(b) prohibits only a lender's wrongful failure to grant a borrower's rescission request.15 But § 1635(b) contains no such wrongfulness requirement, and indeed, the statute supplies no meaningful guidance on what might render a lender's refusal to grant a borrower's rescission request wrongful.16 In the end, the inability to reconcile Bradford's understanding of § 1635(b) with the Fourth Circuit's central holding in Shelton points persuasively to the conclusion that his understanding should not be adopted here.

Additionally, Bradford's understanding that § 1635(b) requires a lender to effect rescission once it receives a borrower's notice of intent to rescind is wholly inconsistent with § 1635(b)'s vesting of equitable discretion in courts to decide whether and how to effect rescission. It is well-settled that a district court may "in exercising its powers of equity ... den[y] rescission or base[] the unwinding of the transaction on the borrowers' reasonable tender of the loan proceeds" depending on the particular circumstances of the case. Shelton, 486 F.3d at 821.17 Indeed, § 1635(b) expressly gives a district court this power to deny rescission or modify the procedures by which rescission is effected. See 15 U.S.C. § 1635(b) ("The procedures prescribed by this subsection shall apply except when otherwise ordered by a court.") (emphasis added). Because § 1635(b) merely prescribes "procedural requirements"18 that a district court may adapt at its discretion, it is clear that mere notice of intent to rescind does not trigger a lender's obligation to effect rescission immediately given that a lender cannot know with certainty ex ante whether a court will deny rescission or modify the procedure for effecting rescission.19 In other words, § 1635(b) cannot, at once, be a set of default procedures a court may equitably alter after a borrower's notice of intent to rescind and, at the same time, require a lender to effect rescission immediately upon receiving such notice. Thus, because § 1635(b) provides a flexible set of procedures rather than an inflexible set of rules, a lender cannot violate § 1635(b) unless the lender fails to comply with the rescission procedure that a court has ordered.20

Finally, Bradford's understanding of § 1635(b) is textually foreclosed because any right to damages for a lender's failure to rescind necessarily depends on the TILA claimant's entitlement to rescission, which does not arise until either the lender or a court recognizes that the claimant is so entitled. As the Fourth Circuit held in Shelton, a borrower cannot "exercise[] his right to rescind" within the meaning of § 1635(b) until that right "is available in the particular case, either because the creditor acknowledges that the right of rescission is available, or because the appropriate decision maker has so determined." 486 F.3d at 821 (quoting Large v. Conseco Fin. Servicing Corp., 292 F.3d 49, 54-55 (1st Cir.2002)). Until a judicial determination that a TILA claimant is entitled to rescission issues, the claimant has "only advanced a claim seeking rescission" if the lender denies that a rescission right exists. Shelton, 486 F.3d at 821 (quoting Large, 292 F.3d at 55). Put differently, notice of a borrower's intent to rescind does not automatically entitle the borrower to rescission, but instead merely begins "an on-going process consisting of a number of steps" by which it is determined (i) whether the right to rescission is available to the borrower, and if so, (ii) how that right will be enforced. Yamamoto, 329 F.3d at 1173.21 Because TILA claimants' entitlement to "damages under 15 U.S.C. § 1640 is ... wholly dependent upon, and flows directly from, their entitlement to rescissory relief,"22 any right to damages for a violation of § 1635(b) does not exist until a borrower has a right to rescission. Given this, it follows that as a textual matter, a lender cannot yet be obligated under § 1635(b) to rescind, because that the borrower has not yet "exercise[d] his right to rescind" merely by giving notice of intent to rescind to the lender. 15 U.S.C. § 1635(b).23

To recapitulate, the text and structure of § 1635(b) and the Fourth Circuit's decision in Shelton point persuasively to the conclusion that a borrower's notice to a lender of the borrower's intent to rescind does not, without more, trigger the lender's obligation to effect rescission.24 This result serves TILA's purposes by ensuring that lenders are not required to grant — prematurely and without assurance of repayment — requests for rescission that appear dubious, while at the same time encouraging lenders presented with apparently meritorious rescission requests to act on those requests promptly.25 Thus, a cause of action under § 1635(b) does not arise simply because a borrower has sent a lender such notice.

IV.

Because § 1635(b) does not trigger a lender's obligation to rescind simply by reason of the lender's receipt of a borrower's notice of intent to rescind, it is plain that Bradford failed to state a claim that any defendant violated § 1635(b) at any point. At the time Bradford sent his rescission request to HSBC, § 1635(b) did not require HSBC (the former noteholder and then-current servicer)26 or Ally (an assignee and the then-current noteholder)27 to effect rescission unilaterally or indeed to take any action in response to the notice. Nor did service of the instant action on HSBC, Ally, or RFC trigger an obligation under § 1635(b) to effect rescission unilaterally. Moreover, now that any right Bradford might have had to rescission has been extinguished by the lapse of the statute of repose, § 1635(b) cannot impose any obligations on any of these defendants. See Wolf v. Fed. Nat'l Mortg. Ass'n, 830 F.Supp.2d 153, 161, 2011 WL 5881764, at *5 (W.D.Va.2011) (observing that "it would be anomalous to give a plaintiff Only three years to tile a claim seeking to enforce a rescission request, but up to four years to seek damages based on such a request").28 In sum, Bradford's claim for wrongful refusal to effect rescission Tills to state a valid claim as it is based on the false premise that a borrower's notice of intent to rescind requires a lender — in the absence of a court determination — to void the security and refund the borrower's payments. Thus, dismissal of Bradford's § 1635(b) failure-to-rescind claim was proper,29 and the motion to reconsider that dismissal must be denied.

An appropriate order will issue.