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Palmer v. GMAC Commercial Mortgage

June 25, 2009

SHAUNA PALMER, PLAINTIFF,
v.
GMAC COMMERCIAL MORTGAGE, DEFENDANT.



The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge

MEMORANDUM OPINION

This lawsuit arises out of a home mortgage loan transaction between Plaintiff Shauna Palmer and Defendant Homecomings Financial LLC ("Homecomings").*fn1 Palmer refinanced her existing home mortgage loan in April 2007, and she alleges that Homecomings violated various statutes and regulations by, among other things, charging her fees that were unrelated to the work performed in connection with her loan. She seeks reformation or rescission of the loan as well as damages. Homecomings has responded by filing a Motion to Dismiss, which the parties have fully briefed. Homecomings also filed a [5] Motion to Establish Reasonable Rescission Procedures in response to Palmer's claim under the Truth in Lending Act, which the Court shall address separately below. After a thorough review of the parties' submissions, applicable case law and statutory authority, and the record of the case as a whole, the Court shall GRANT-IN-PART and DENY-IN-PART Homecomings's [6] Motion to Dismiss, and dismiss Counts II, III, and IV, for the reasons that follow.

I. BACKGROUND

The following facts are drawn from the well-pleaded allegations in Palmer's Amended Complaint, which the Court must accept as true for purposes of Homecomings's Motion to Dismiss. See Scandinavian Satellite Sys. v. Prime TV Ltd., 291 F.3d 839, 844 (D.C. Cir. 2002). The Court shall supplement these facts with information drawn from Palmer's loan documents, which Homecomings has attached to its Motion to Dismiss. The Court may consider these documents without converting Homecomings's Motion to Dismiss into one for Summary Judgment because the loan documents are referenced in, and form the basis of, the allegations in Palmer's Amended Complaint. See Vanover v. Hantman, 77 F. Supp. 2d 91, 98 (D.D.C. 1999) ("where a document is referred to in the complaint and is central to the plaintiff's claim, such a document attached to the motion papers may be considered without converting the motion to one for summary judgment"), aff'd, 38 Fed App'x 4 (D.C. Cir. 2002).

On April 26, 2007, Palmer refinanced her existing first mortgage loan on her home in Washington, D.C., with a loan from Homecomings. See Am. Compl. ¶ 23. The amount of the loan was $427,500.00 at an interest rate of 8.8127. See Def.'s Mot., Ex. 1.A (Adjustable Rate Note); id., Ex. 1.C (4/12/07 Financing Agreement).*fn2 Palmer paid $19,000 in points and fees in connection with the loan. Id., 1.D (4/26/09 HUD-1 Settlement Statement). As a result of this transaction, Palmer received $182,970.83 in cash at closing. Id. Palmer alleges generally that the terms of the loan were unlawful, the terms were undisclosed to her, and that she was not properly notified of her legal right to rescind the loan transaction within three days of its consummation. Am. Compl. ¶¶ 26-32.

II. LEGAL STANDARD

The Federal Rules of Civil Procedure require that a complaint contain "'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the... claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); accord Erickson v. Pardus, 551 U.S. 89, 93 (per curiam). Although "detailed factual allegations" are not necessary to withstand a Rule 12(b)(6) motion to dismiss, to provide the "grounds" of "entitle[ment] to relief," a plaintiff must furnish "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Id. at 1964-65; see also Papasan v. Allain, 478 U.S. 265, 286 (1986). Instead, a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, __ U.S. __, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556).

In evaluating a Rule 12(b)(6) motion to dismiss for failure to state a claim, the court must construe the complaint in a light most favorable to the plaintiff and must accept as true all reasonable factual inferences drawn from well-pleaded factual allegations. In re United Mine Workers of Am. Employee Benefit Plans Litig., 854 F. Supp. 914, 915 (D.D.C. 1994); see also Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir. 1979) ("The complaint must be 'liberally construed in favor of the plaintiff,' who must be granted the benefit of all inferences that can be derived from the facts alleged."). However, as the Supreme Court recently made clear, a plaintiff must provide more than just "a sheer possibility that a defendant has acted unlawfully." Iqbal, 129 S.Ct. at 1950. Where the well-pleaded facts set forth in the complaint do not permit a court, drawing on its judicial experience and common sense, to infer more than the "mere possibility of misconduct," the complaint has not shown that the pleader is entitled to relief. Id. at 1950.

III. DISCUSSION

Palmer's Amended Complaint includes claims for relief under four statutes: (1) the Home Ownership and Equity Protection Act, 15 U.S.C. § 1639, (2) the District of Columbia Home Loan Protection Act, D.C. Code § 26-1151.01, (3) the Truth in Lending Act, 15 U.S.C. § 1601, et seq., and (4) the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601, et seq. The Court shall address each of Palmer's claims in the order they were briefed by the parties.

A. The Home Ownership and Equity Protection Act

The Home Ownership and Equity Protection Act ("HOEPA"), 15 U.S.C. § 1639, provides various protections for borrowers involved in "high cost" loan transactions. See Cooper v. First Gov't Mortg. & Investors Corp., 238 F. Supp. 2d 50, 54 (D.D.C. 2002). Palmer alleges that Homecomings violated HOEPA by "engag[ing] in a pattern or practice of making loans to borrowers with high cost mortgage loans without regard to their ability to pay." Am. Compl. ¶ 38. Palmer also alleges that "Homecomings has adopted underwriting standards that do not adequately measure ability to repay, allows exceptions to its guidelines, and does not have sufficient verification procedures to ensure that borrower income is adequately determined and considered." Id. ¶ 37. In response, Homecomings argues that Palmer's HOEPA claim must be dismissed because her loan is not a "high cost" loan that triggers the coverage of HOEPA. See Def.'s Mot. at 3. The Court agrees with Homecomings.*fn3

HOEPA applies to "high cost" loans which, by definition, must meet one of two criteria:

(A) the annual percentage rate at consummation of the transaction will exceed by more than 10 percentage points the yield on Treasury securities having comparable periods of maturity on the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor; or

(B) the total points and fees payable by the consumer at or before closing will ...


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