2008 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 6-27-2008 

# In Re: F ield s P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 06-3942

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Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i l l a nova U nive r sity S choo l of L a

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w Di git al Reposit ory

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w . vi l l a nova . e du . Re c omme nde d C it at ion
" In Re: F ie ld s " (2008). 2008 D e cisio n s . P ape r 971. http://d i git alc ommon s .l a

w . vi l l a nova . e du/thir dc ir c uit_2008/971NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

____________ N o. 06- 3942

____________ I N R E: M A RG A RE T FI ELD S, D eb tor, M A RG A RE T FI ELD S, A p p e llan t,

v. OP T I ON ONE M OR T GAGE CO RP OR AT I ON;

DAMON CAR P I T E L L A, d/b/ a C om m on M ort gag e S ervi ces, d /b /a C o m m o n M o rt g a g e S e rv ic e s , In c ., d /b / a C o m m o n M o r t g a g e C o m p a n y, A ppel l ee.

____________ O n A p p ea l from the U n it ed S tat es D istri ct C o u rt f o r th e E a ste rn D istric t o f P e n n sy lv a n ia D . C . N o. 06- cv- 01753 D istri ct C o u rtJu d g e: H o n o rab le H arv eyB artl e, II I

____________ A r gued M ar ch 6, 2008 B e f o re : B A R R Y , J O R D A N , a n d H A R D IM A N , C i r cui tJudges .

( Fi l ed: J une 27, 2008)2

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____________ OPI NI ON O F THE COURT

____________ H A R D IM A N , C i r cui tJudge . M ar gar etFi el ds fi l ed thi s appea l fr om t he D i s t r i ctC our t ’ s or deraff i r m i ng t he Ba n k ru p t c yCo u r ti n a c a s e a r i s i n g u n d e rt h e Tru t h i n Le n d i n g Ac t( TI LA) , 1 5 U. S . C. § 1601 et s eq. , as amended byt he H om e O w ner s hi p E qui t yPr ot ect i on A ctof 1994 ( H O E PA ) . A ft eran adve r s arypr ocee di ng, t he B ankrupt cyC our thel d t hatFi el ds di d not pr ove thatherl ender , O pt i on O ne M or t gage Corpor at i on ( O pt i on O ne) , vi ol at ed TILA or H O E PA . W e have j ur i s di ct i on pur s uantt o 28 U . S. C . §§ 158( d) and 1291.T h e p a rties a g re e d b e f o re th e B a n k ru p tcy C o u rt th a t th e a m o u n t F ield s s h o u ld 1 have pa i d fort i t l e i ns ur ance s houl d be ca l cul at ed us i ng t he M anual of the Ti t l e I ns ur ance R at i ng B ur eau of

Penns y l vani a. T hus , w hethers um s ot hert han thos e s peci fi ed i n t he M anual m i ghtbe dee m ed ‘ r eas onabl e’ i s notbefor e us . A s of J anuary2002, t he M anual s peci fi ed thatt he “ba s i c” t i t l e i ns ur ance r at e fora l oan of $83, 000 w as $756. 75. U nder s ect i on 5. 3 of the M anual , a “r ei s s ue” r at e of ni netyper centof the bas i c r at e appl i es i f the r eal pr oper t yhad bee n “i ns ur ed 10 y ear s i m m edi at el ypr i ort o t he dat e the i ns ur ed t r ans act i on cl os es ” and i f “e vi dence of the ea r l i erpol i cyi s pr oduced notw i t hs t andi ng t he a m o u n t o f

c o v e ra g e p ro v id e d b yth e p ri o r p o lic y .” U n d e r s e c tio n 5 .6 o f th e M a n u a l, a “ re f in a n c e ” ra te o f

e ig h typ e rc e n t o f

th e re iss u e ra te ( o r $ 5 4 4 .8 6 in th is c a se ) a p p lies if three req u ir em en ts are m et: (1) “ a re fin an ce o r sub sti tuti o n loan is m ad e w ith in 3 y ea rs fr om t he dat e of c l os i ng of a pr evi ous l yi ns ur ed mort gage” ; ( 2) “the pr emi s es t o be i ns ur ed ar e i dent i cal t o orpar tof the r eal pr oper t ypr evi ous l yi ns ur ed”; and ( 3) “ther e has b e e n n o c h a n g e in th e f e e s im p le o w n e rs h ip .” U nderH O E PA , a l enderm us tm eetcert ai n di s cl os ur e r equi r ement s i f “the t ot al 2 p o in ts a n d f

e e s p a y a b le b yth e c o n su m e r a t o r b e f o re c lo sin g w ill e x c e e d th e g re a ter o f (i) 8 p e rc e n t o f

th e to tal lo a n a m o u n t o r (ii) $ 4 0 0 .” 1 5 U .S .C . § 1 6 0 2 (a a )(1 )(B ). It is u n d isp u ted th a t if th e $ 2 1 1 .8 9 d if f e re n c e b e tw e e n th e b a sic ra te a n d th e re f in a n c e ra te is deemed unr eas onabl e, t he poi nt s and fe es w i l l exce ed 8% of the l oan amountand 3 I. Fi el ds bor r ow ed $83, 000 fr om O pt i on O ne t o r efi nance t w o out s t andi ng m or t gages on herPhi l adel phi a home. Soon t her eaf t er , s he def

aul t ed on the l oan, fi l ed a pe t i t i on underC hapt er13 of the B ankrupt cyC ode, and br oughtan adve r s arypr ocee di ng i n t he B ankrupt cyC our ts eeki ng t o r es ci nd t he l oan. I n s uppor tof hercl ai m , Fi el ds al l eged that t he amounts he pai d fort i t l e i ns ur ance w as unr eas onabl e bec aus e s he w as char ged the

“ b a sic ra te” o f

$ 7 5 6 .7 5 in ste a d o f

th e “ re f in a n c e ra te” o f

$ 5 4 4 .8 6 . A lth o u g h th is

1 di ffe r ence m ayappea ri ns i gni fi cant , i ti s i n fac tcr i t i cal beca us e the ac cur acyof the char ge di ct at es w hetherFi el ds ’ s l oan i s s ubj ectt o cert ai n di s cl os ur e r equi r ement s s et for t h i n H O E PA . A s O pt i on O ne conc edes t hati tdi d notm ake thes e di s cl os ur es , Fi el ds 2H O E P A ’ s d i s c l o s u r e r e q u i r e m e n t s w i l l a p p l y. 4 w i l l be ent i t l ed t o r es ci nd t he l oan underH O E PA i f s he ca n s how t hats he mett he
r equi r ement s forr efi nance r at e el i gi bi l i t ys etfor t h i n s ect i on 5. 6 of the M anual of the T i t l e I ns ur ance R at i ng B ur eau of Penns y l vani a. B eca us e of Fi el ds ’ s age a nd i nfi r m i t y , no w i t nes s es w er e ca l l ed dur i ng t he adver s arypr ocee di ng befor e the B ankrupt cyC our t . I ns t ead, t he part i es pr es ent ed a j oi nt s t i pul at i on of fa ct s w hi ch i ndi cat ed thatFi el ds had pur chas ed t i t l e i ns ur ance on bot h of herpr i orm or t gages and thats he w as char ged the bas i c r at e of $756. 75 i n t he tr ans act i on at i ssu e. H o w ev er, th e sti p u lat ion d id n o t spe cifyw h ethe r th e ins u red p rem ises w ere “i dent i cal t o orpar tof the r eal pr oper t ypr evi ous l yi ns ur ed” orw hethert her e had be en “no cha nge i n t he fe e s i m pl e ow ner s hi p” of the pr oper t y , as r equi r ed bys ect i on 5. 6 of the M anual . O n t he bas i s of the s t i pul at i on, Fi el ds cl ai m ed thats he w as ent i t l ed t o t he
r efi nance r at e and thatH O E PA ’ s di s cl os ur e r equi r ement s appl i ed t o herl oan. T he B ankrupt cyC our tr ej ect ed thi s cl ai m , fi ndi ng t hatFi el ds di d notpr ovi de
s uffi ci entevi dence t hatO pt i on O ne knew ors houl d have know n t hats he qual i fi ed fort he ref inan ce rate at t h e ti m e o f th e loa n ’s closin g . In so h o lding , the B an k rup tcyC o u rt i ndi cat ed thatFi el ds had notonl yfai l ed t o pr ovi de O pt i on O ne w i t h evi dence of herpr i or t i t l e i ns ur ance pol i ci es , buthad al s o fai l ed t o s how O pt i on O ne thats he mett he r emai ni ng re q u ir e m e n ts o f

s e c tio n 5 .6 , v iz ., t hatt he pr emi s es w er e i dent i cal t o orpar tof the pr evi ous l yi ns ur ed pr oper t y , and thatt her e had be en no cha nge i n fee s i m pl e ow ner s hi p.W e not e thatt he M anual w as r evi s ed i n 2005 t o i ncl ude s ect i on 2. 8, w hi ch s t at es 3 th a t “[ s]e c tio n s 5 .3 , 5 .4 , an d 5 .6 o f th is M a n u a l p ro v id e th a t re d u c e d ra tes a re a p p lica b le w h e n e v id e n c e o f

p re v io u s in s u ra n c e is p ro v id e d w ith in a s p e c if ie d p e ri o d o f

tim e .” 5 T h e D istri ct C o u rtaf

firm ed , h o lding that the B an k rup tcyC o u rtd id n o t cl ea rl yerr i n fi ndi ng t hatt her e w as i ns uffi ci entevi dence t hatO pt i on O ne knew ors houl d have know n t hatFi el ds qual i fi ed fort he r efi nance r at e. T he D i s t r i ctC our tr eas oned that beca us e “Fi el ds di d notpr oduce ‘ evi dence of the ea r l i erpol i cy ’ att he t i m e of the cl os i ng .

. . O pt i on O ne w as notr equi r ed t o gi ve Fi el ds t he ‘ r ei s s ue’ r at e ort he furt herr educe d ‘r e f in a n c e ’ r a te .” II. F ield s d o e s n o t ch a llen g e th e B a n k ru p tcy C o u rt’s f a c tu a l f in d in g th a t sh e f

a iled to pr ovi de O pt i on O ne w i t h evi dence of herear l i ert i t l e i ns ur ance pol i ci es att he l oan c lo sin g . R a th e r, sh e a rg u e s th a t th e B a n k ru p tcy C o u rt a n d th e D istric t C o u rt e rre d in i m pos i ng t hi s evi dent i arybur den upon herbecaus e i ti s nei t herpr es enti n s ect i on 5. 6 of t he M anual nors uppor t ed byexi s t i ng cas el aw . W e have notdeci ded thi s i s s ue i n a p re c e d e n tial o p in io n , an d w e n o te th a t R i cci ar di v. A m er i ques tMor t gage C o. , 164 Fed. A ppx. 221, 2006 W L 120234 ( 3d C i r . 2006) , ci t ed byt he B ankrupt cyC our tand D i s t r i ctC our tand r el i ed upon byO pt i on O ne, i s a not - pr ece dent i al opi ni on i n w hi ch the
s ect i on 5. 3 evi dent i aryr equi r ementw as i m pos ed t o es t abl i s h ent i t l ementt o a r efi nance r at e unders ect i on 5. 6, w hi ch i s s i l enton t hats cor e. 36

W e nee d notr eac h t he i s s ue her e. A s not ed pr evi ous l y , s ect i on 5. 6 s et s for t h t hr ee r equi r ement s forr efi nance r at e el i gi bi l i t y : ( 1) “a r efi nance ors ubs t i tut i on l oan i s m ade
w i t hi n 3 y ear s fr om t he dat e of c l os i ng of a pr evi ous l yi ns ur ed mort gage” ; ( 2) “the pr emi s es t o be i ns ur ed ar e i dent i cal t o orpar tof the r eal pr oper t ypr evi ous l yi ns ur ed”; and ( 3) “ther e has been no c hange i n t he fe e s i m pl e ow ner s hi p. ” H er e, t he part i es s t i pul at ed t hatFi el ds had pur chas ed t i t l e i ns ur ance on bot h of herpr i orm or t gages , t hus s at i s fy i ng th e f ir s t r e q u ir e m e n t. T h e s tip u la tio n is s ile n t a s to th e o th e r t w o re q u ir e m e n ts , h o w e v e r. A t oral arg u m en t, co u n sel fo r F iel d s inv it ed u s to p resu m e tha t th e ins u red p rem ises w ere “i dent i cal t o orpar tof the r eal pr oper t ypr evi ous l yi ns ur ed” a nd t hatt her e had be en “no change i n t he fe e s i m pl e ow ner s hi p” of the pr oper t y . B eca us e a pl ai nt i ff mustpr ove al l of the e lem en ts of

h er c au se o f a cti o n , w e c an n o t r ev erse the ju d g m en t of the D istri ct C o u rt bas ed on s uch pr es um pt i ons , how everr eas onabl e theym aybe. I n s um , beca us e the r ecor d r efl ect s t hatFi el ds fai l ed t o pr ove tw o of the thr ee e l e me n t s o f

h e rc a u s e o f

a c t i o n , we wi l l a f

f i r m.