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COOPER v. FIRST GOVERNMENT MORTGAGE AND INVESTORS CORPORATION

November 4, 2002

BETTY COOPER ET AL., PLAINTIFFS,
V.
FIRST GOVERNMENT MORTGAGE AND INVESTORS CORPORATION ET AL., DEFENDANTS.



The opinion of the court was delivered by: Ricardo M. Urbina, United States District Judge

MEMORANDUM OPINION

DENYING THE PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT; DENYING DEFENDANT ALTEGRA'S MOTION FOR SUMMARY JUDGMENT; DENYING AS MOOT THE PLAINTIFFS' MOTION TO STRIKE

I. INTRODUCTION

The plaintiffs bring this action against various mortgage brokers, mortgage assignees, and settlement agents. The plaintiffs allege predatory and fraudulent lending tactics in violation of the District of Columbia Consumer Protection Procedures Act ("CPPA"), D.C. Code § 28-3901 et seq., the District of Columbia Mortgage Lender and Broker Act ("MLBA"), D.C. Code § 26-1101 et seq. (formerly D.C. Code § 26-1001), the Federal Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., TILA's corollary District of Columbia statute, D.C. Code § 28-3301, and the Home Ownership and Equity Protection Act ("HOEPA"), codified as amendments to numerous sections of TILA. The case is before the court on the plaintiffs' motion for partial summary judgment, defendant Altegra Credit Corporation's ("Altegra") motion for summary judgment, and the plaintiffs' motion to strike the errata sheet and second deposition of Marci Simmons, defendant Chase Title's ("Chase") corporate designee. For the reasons that follow, the court denies both motions for summary judgment and denies as moot the motion to strike.

II. BACKGROUND

The plaintiffs are a group of homeowners who refinanced their homes with defendant First Government Mortgage and Investors Corporation ("First Government") as their loan provider. Corrected Fifth Am. Compl. ("Compl.") ¶ 1. The plaintiffs allege that First Government engaged in a pattern of targeting low-income homeowners and inducing them to enter illegal, high-cost mortgage loans. Id. ¶ 3. In addition to First Mortgage, the defendants relevant to the pending motions are Altegra, a mortgage assignee, and Chase, a settlement agent. Id. ¶¶ 17-22.

One of the plaintiffs, Mrs. Josephine E. Curtis, age 79, bought her home with her husband in 1951. Id. ¶ 60. Mr. Curtis passed away in 1991 and Mrs. Curtis passed away at some point after the filing of the complaint. Id.; Altegra Undisp. Facts ¶ 1. Regina Williams, Mrs. Curtis' granddaughter, was added to the deed of the house without Mrs. Curtis' knowledge in 1998. Compl. ¶ 61. On January 29, 1999, Mrs. Curtis and Ms. Williams entered into a mortgage loan ("Curtis loan") for $61,500.00 with First Government. Pls.' Undisp. Facts ¶ 1. Chase acted as First Government's settlement agent for the Curtis loan. Id. ¶ 2. The points and fees calculated for this loan, pursuant to HOEPA, total $4,413.25, or 7.7% of the total loan amount. Id. ¶¶ 19-20; Pls.' Ex. 9.*fn1 The loan settlement statement lists various fees associated with the loan including fees for flood certification, a walk-through affidavit, and a judgment report fee. Pls.' Ex. 3.

According to Ms. Williams, neither she nor her grandmother read the documents they received at the loan closing. Williams Dep. at 100-02, 207-09. After the loan closing, Mrs. Curtis and Ms. Williams returned to Mrs. Curtis' home and Mrs. Curtis placed the loan documents in her lockbox. Id. Once provided by the plaintiffs in discovery, the loan documents included only one copy of the Notice of Right to Cancel form ("Notice form") and an acknowledgment signed by Mrs. Curtis that she had received two copies of the Notice form. Altegra Exs. 15, 17.

Altegra bought the Curtis loan on or about March 25, 1999, thereby becoming the mortgage assignee. Compl. ¶ 4. On December 6, 2000, Mrs. Curtis sent a notice of rescission to First Government and Altegra, pursuant to TILA. Compl. ¶ 68.

The plaintiffs filed their original complaint in this court on March 13, 2000. After filing several amended complaints, the plaintiffs filed a Corrected Fifth Amended Complaint ("the complaint"). Defendant Altegra filed a cross claim against defendant Chase and another defendant. The parties have settled the majority of the claims advanced in the pleadings. The case is before the court on the plaintiffs' motion for partial summary judgment, defendant Altegra's motion for summary judgment, and the plaintiffs' motion to strike Marci Simmons' (defendant Chase's corporate designee) second deposition and errata sheet. In their motion for partial summary judgment, the plaintiffs argue that because the Curtis loan is subject to HOEPA, Altegra is liable for all violations of law committed by First Government. In contrast, Altegra argues that it is not liable as the loan assignee. Altegra further argues that it is not liable for rescission of the Curtis loan. Finally, Altegra argues that it is not liable pursuant to the CPPA. The court denies all of these motions.

III. ANALYSIS

A. Legal Standard for a Motion for Summary Judgment

Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Diamond v. Atwood, 43 F.3d 1538, 1540 (D.C. Cir. 1995). To determine which facts are "material," a court must look to the substantive law on which each claim rests. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A "genuine issue" is one whose resolution could establish an element of a claim or defense and, therefore, affect the outcome of the action. Celotex, 477 U.S. at 322; Anderson, 477 U.S. at 248.

In ruling on a motion for summary judgment, the court must draw all justifiable inferences in the nonmoving party's favor and accept the nonmoving party's evidence as true. Anderson, 477 U.S. at 255. A nonmoving party, however, must establish more than "the mere existence of a scintilla of evidence" in support of its position. Id. at 252. To prevail on a motion for summary judgment, the moving party must show that the nonmoving party "fail[ed] to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322. By pointing to the absence of evidence proffered by the nonmoving party, a moving party may succeed on summary judgment. Id.

In addition, the nonmoving party may not rely solely on allegations or conclusory statements. Greene v. Dalton, 164 F.3d 671, 675 (D.C. Cir. 1999); Harding v. Gray, 9 F.3d 150, 154 (D.C. Cir. 1993). Rather, the nonmoving party must present specific facts that would enable a reasonable jury to find in its favor. Greene, 164 F.3d at 675. If the evidence "is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (internal citations omitted).

B. The Court Denies the Plaintiffs' and Defendant Altegra's Motions for Summary Judgment on the HOEPA Claims in Count Six

In count six, the plaintiffs claim that the Curtis loan qualifies as a HOEPA loan and assert that Altegra is liable as an assignee of the Curtis loan for all violations of law asserted against the original lender, First Government. Both Altegra and Mrs. Curtis move for summary judgment on count six. The court denies the motions for the following reasons.

1. Legal Standards

a) TILA and HOEPA

In 1968, Congress enacted TILA, a federal statute that governs the terms and conditions of consumer credit by, inter alia, requiring lenders to disclose certain details about loans and loan fees and costs. 15 U.S.C. § 1601 et seq.; In re Crisomia, 2002 WL 31202722, at *3 (Bankr. E.D. Pa. Sept. 13, 2002). Congress intended TILA to assure a meaningful disclosure of credit terms so that consumers will not be misled as to the costs of financing. Id.

Faced with increasing reports of abusive practices in home mortgage lending, Congress enacted HOEPA in 1994 as an amendment to TILA. Pub.L. 103-325 (amending TILA at 15 U.S.C. § 1601-02, 1604, 1610, 1639-41, 1648); see also Jackson v. US Bank Nat'l Ass'n Trustee, 245 B.R. 23, 25 (Bankr.E.D.Pa. 2000); Vandenbroeck v. Contimortgage Corp., 53 F. Supp.2d 965, 968 (W.D.Mich. 1999). HOEPA requires lenders to provide borrowers with additional disclosures, "in conspicuous type size," with respect to certain home mortgages. 15 U.S.C. § 1639(a)(1). Congress intended HOEPA to result in greater disclosure to borrowers involved in "high cost" loans and to stop certain loan terms and practices. 15 U.S.C. § 1639; In re Crisomia, 2002 WL 31202722, at *3. In order to implement TILA and HOEPA, the Board of Governors of the Federal Reserve System introduced Regulation Z. 12 C.F.R. § 226.1 et seq.; Lopez v. Delta Funding Corp., 1998 WL 1537755, at * 7 (E.D.N.Y. Dec. 23, 1998). HOEPA defines certain mortgages as high cost when the mortgage reaches a "points and fees" trigger. 15 U.S.C. § 1602(aa); 12 C.F.R. § 226.32(a). More specifically, a high cost or HOEPA loan is:

1) a consumer credit transaction

2) with a creditor

3) that is secured by the consumer's principal dwelling

4) and is a second or subordinate residential mortgage, not a residential mortgage transaction, a reverse mortgage transaction, or a transaction under an open credit plan

5) and that satisfies either of the following two tests:

(a) the annual percentage rate ("APR") of interest for the loan transaction exceeds certain levels; or
(b) the total "points and fees" payable by the borrower at or before closing will exceed the greater of (i) 8% of the total loan amount; or (ii) $400.00.

15 U.S.C. § 1602(aa); Lopez, 1998 WL 1537755, at * 5. A mortgage loan that satisfies these requirements is a HOEPA loan and is therefore subject to HOEPA's requirements or protections. Id. HOEPA's requirements include, for example, certain disclosures, prohibition of an increased rate of interest upon default, prohibition of pre-payment penalty, and assignee liability for violations of the lender. 15 U.S.C. § 1639, 1641.

b) Assignee Liability for HOEPA Loans

TILA protects borrowers from predatory lending tactics by providing a cause of action against creditors and assignees of creditors who engage in such tactics. 15 U.S.C. § 1601 et seq. TILA imposes two different standards of care for assignees. 15 U.S.C. § 1641. Assignee liability regarding non-HOEPA transactions under TILA is limited to violations that are "apparent on the face of the disclosure statement." 15 U.S.C. § 1641(a), (e); Bryant v. Mortgage Capital Res. Corp., 197 F. Supp.2d 1357, n. 22 (N.D.Ga. 2002) (quoting 15 U.S.C. § 1641(a)); In re Murray, 239 B.R. 728, 733 (E.D.Pa. 1999). Congress has provided a definition of "apparent on the face":

For the purposes of this section, a violation is apparent on the face of the disclosure statement if — (A) the disclosure can be determined to be incomplete or inaccurate by a comparison among the disclosure statement, any itemization of the amount financed, the note, or any other disclosure of disbursement; or (B) the disclosure statement does not use the terms or format required to be used by this subchapter.

15 U.S.C. § 1641(e)(2) (emphasis added).

In contrast to the "apparent on the face" standard, Congress intended to subject high cost mortgage (HOEPA loan) assignees to a more expansive standard of liability than provided pursuant to TILA. Bryant, 197 F. Supp.2d at 1364. The legislative history of HOEPA demonstrates that Congress enacted HOEPA to force the high cost mortgage market to police itself. Id. (citing S. Rep. No. 103-169, at 28 (1993), reprinted in 1994 U.S.C.C.A.N. 1881, 1912, and 1993 WL 444316 ("HOEPA Leg. Hist.")). Accordingly, Congress made assignees subject to "all claims and defenses, whether under [TILA] or other law, that could be raised against the original lender." HOEPA Leg. Hist. at *11; see also In re Rodrigues, 278 B.R. 683, 688 (Bankr. D.R.I. 1999); In re Murray, 239 B.R. at 733; Vandenbroeck, 53 F. Supp.2d at 968. The provision for assignee liability for HOEPA loans, in all cases except rescission, provides as follows:

Any person who purchases or is otherwise assigned a mortgage referred to in section 1602(aa) of this title shall be subject to all claims and defenses with respect to that mortgage that the consumer could assert against the creditor of the mortgage, unless the purchaser or assignee demonstrates, by a preponderance of the evidence, that a reasonable person exercising ordinary due diligence, could not determine, based on the documentation required by this subchapter, the itemization of the amount financed, and other disclosure of disbursements that the mortgage was a mortgage referred to in section 1602(aa) of this title.

15 U.S.C. § 1641(d)(1) (emphasis added).

In sum, HOEPA subjects mortgage assignees to increased liability for HOEPA loans. 15 U.S.C. § 1641(d)(1). For HOEPA loans, liability is not limited to violations apparent on the face of loan documents, as detailed in section 1641(a), but rather liability exists unless the assignee proves that a reasonable person exercising ordinary due diligence could not determine, based on the documentation required by this subchapter, the itemization of the amount financed, and other disclosure of disbursements that the loan was a HOEPA loan, as detailed in section 1641(d)(1). 15 U.S.C. § 1641(a), (d)(1). Courts have interpreted section 1641(d)(1)'s due diligence requirement as placing the burden on an assignee to prove, by a preponderance of the evidence, that the ...


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