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Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 05-3068

___________

Ty S. Mitchell; Kimberly S. Mitchell, *

*

Plaintiffs-Appellants, *

*

Christopher Mauer; Mary Jo Mauer; *

James L. Engstrom; Kathleen P. *

Engstrom, *

*

Plaintiffs, *

* Appeal from the United States

v. * District Court for the 

* District of Minnesota.

Beneficial Loan & Thrift Company, *

* [PUBLISHED]

Defendant-Appellee, *

*

Household Industrial Finance *

Company, *

*

Defendant. *

___________

Submitted: May 18, 2006

Filed: September 6, 2006

___________

Before MURPHY, BEAM, and BENTON, Circuit Judges.

___________

PER CURIAM.

Appellate Case: 05-3068 Page: 1 Date Filed: 09/06/2006 Entry ID: 2086180
1

The Honorable James M. Rosenbaum, Chief United States District Judge for

the District of Minnesota. 

-2-

The district court1 granted summary judgment to Beneficial Loan & Thrift

Company. Ty S. Mitchell and Kimberly S. Mitchell appealed the issue whether a loan

transaction is subject to the Home Ownership and Equity Protection Act (HOEPA).

This court affirmed on June 21, 2006. The Mitchells petitioned for rehearing, arguing

that some amounts financed were not disbursed, making them "points and fees" under

HOEPA. This court grants the petition for rehearing, vacates the prior opinion, and

files this opinion affirming the district court. 

 

The Mitchells assert that Beneficial violated HOEPA. HOEPA, as relevant

here, requires creditors to make additional disclosures to borrowers if the total points

and fees payable at closing exceed 8 percent of the total loan amount, or $400,

whichever is greater. 15 U.S.C. §§ 1602(aa)(1)(B), 1639(a). The Mitchells argue that

the $455 appraisal fee, $821 title insurance fee, $67 phone bill, or $1,178

overstatement of principal should be included in the total points and fees of their loan.

If any one of these were included, the total points and fees would exceed 8 percent of

the total loan amount, making the loan subject to HOEPA. 

Appraisal and title insurance fees, if bona fide and reasonable, are excluded

from HOEPA's definition of total points and fees. 15 U.S.C. § 1605(e); 12 C.F.R. §

226.4(c)(7). On appeal, the Mitchells claim that these fees are not bona fide and not

reasonable because they violate the Real Estate Settlement Procedures Act (RESPA),

12 U.S.C. § 2607(b). The district court correctly found that these fees did not violate

RESPA because they were paid to an unaffiliated third party for services actually

performed, and, in any event, Beneficial derived no benefit from the payments. See

Haug v. Bank of Am., 317 F.3d 832, 836 (8th Cir. 2003). 

Appellate Case: 05-3068 Page: 2 Date Filed: 09/06/2006 Entry ID: 2086180
-3-

As for the telephone bill and principal overstatement, the statute does not

include them in total points and fees. 15 U.S.C. § 1602(aa)(4). Points and fees do,

however, include "all items included in the finance charge, except interest or the timeprice differential." Id. § 1602(aa)(4)(A). The "finance charge" is "the sum of all

charges payable directly or indirectly, by the person to whom credit is extended, and

imposed directly or indirectly by the creditor as an incident to the extension of credit."

Id. § 1605(a). See also 12 C.F.R. § 226.4(a). Most importantly, the finance charge

does not include charges payable in a "comparable cash transaction." 15 U.S.C. §

1605(a). See also Cornist v. B.J.T. Auto Sales, Inc., 272 F.3d 322, 327 (6th Cir. 2001)

("These provisions require sellers to disclose as 'finance charges' fees payable by

credit customers, but not by cash customers, in comparable transactions"); Alston v.

Crown Auto, Inc., 224 F.3d 332, 334 (4th Cir. 2000). 

In the petition for rehearing, the Mitchells argue that the phone bill should be

considered a finance charge (and thus, points and fees) because, while the $67 Verizon

bill appears in the itemized "amount financed" in the disclosure form, Beneficial never

remitted that payment. Ty Mitchell avers that he paid the $67 phone bill after the loan

closing. 

The Mitchells contend that Beneficial's non-payment of that $67 constitutes a

finance charge, citing 15 U.S.C. § 1605(a), which defines "finance charge" to include

fees imposed by third-party closing agents, if the creditor either requires the charge

or retains the charge. This statute is inapplicable, because there were no third-party

closing agents in this case. Similarly, the Mitchells' reliance on cases interpreting 15

U.S.C. § 1638(a)(2)(B) is misplaced, because it addresses a different kind of credit

transaction than the one here. See 15 U.S.C. § 1638(a)(2)(B) (requiring accurate

disclosure in transactions other than under open-end credit plans). See also Gibson

v. LTD, Inc., 434 F.3d 275, 285 (4th Cir. 2006); Peters v. Jim Lupient Oldsmobile Co.,

220 F.3d 915, 916 (8th Cir. 2000); Gibson v. Bob Watson Chevrolet-Geo, Inc., 112

F.3d 283, 287 (7th Cir. 1997).

Appellate Case: 05-3068 Page: 3 Date Filed: 09/06/2006 Entry ID: 2086180
2

While the Mitchells may have other claims regarding the phone bill, they are

not before this court. The sole issue on appeal is whether HOEPA governs the loan

transaction.

-4-

The phone bill here was not imposed as an incident to the extension of credit.

It is an amount financed, not a charge incident to the extension of credit. It would be

payable in a comparable cash transaction, which excludes it from the finance charge

under HOEPA. See 15 U.S.C. § 1605(a). Accordingly, the district court correctly

determined that Beneficial's non-payment of the phone bill is not part of points and

fees, and does not trigger HOEPA's additional disclosure requirements.2

 

The Mitchells also claim that they were overcharged for the payoff of their

(previous) first mortgage, because Beneficial overstated the payoff amount by $1,178

on the loan disclosure forms. Like the phone bill, the Mitchells argue that Beneficial's

overstatement is a finance charge, which should be included in the calculation of

points and fees under HOEPA. As the principal overstatement is imposed as an

amount financed, not as an incident to extending credit, and would be imposed in a

comparable cash transaction, this court concludes that it is not a finance charge. See

15 U.S.C. § 1605(a). Accordingly, while the Mitchells may have other claims

regarding this amount, the overstatement of the principal is not points and fees under

HOEPA.

 

The judgment of the district court is affirmed. 

______________________________

Appellate Case: 05-3068 Page: 4 Date Filed: 09/06/2006 Entry ID: 2086180