Hi =ANALYSIS

The purpose of TILA is to “assure a meaningful disclosure of credit terms so that the
consumer will be able to compare more readily the various credit terms available to him and
avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair
credit billing and credit card practices.” See 15 U.S.C. § 1601(a); see also Carmichael v. The
Payment Ctr., Inc., 336 F.3d 636, 639 (7th Cir. 2003) (“Act’s main purpose is to allow
consumers to compare credit rates so that they may make an informed use of credit”), Under
TILA and Regulation Z, lenders are required to make disclosures to consumers regarding the
charges and fees that accompany the extension of credit. See O’Brien v. J.I. Kislak Mortgage
Corp., 934 F.Supp. 1348, 1356 (S.D. Fla. 1996). Accordingly, lenders must disclose finance
charges to ensure that the costs of securing credit are not obscured or hidden. See id, Where a
lender does not accurately disclose finance charges, a plaintiff may bring a TILA action for the
equitable remedy of rescission. See Quinn v, Ameriquest Mortgage Co., 03 C 5059, 2004 WL
316408, at *4 (N.D. Ill. Jan. 26, 2004).

Regulation Z tists charges associated with real estate transactions that are excluded from
the definition of “finance charges", including fees for title insurance, as long as these fees are
bona fide and reasonable. See 12 C.F.R. § 226.4(c)(7)(i). Here, the plaintiffs argue that the
$665.00 they paid for title insurance was not bona fide and reasonable, and therefore, should
have been listed under the finance charge section of their TILA documents. As such, they
contend that by failing to include the $665.00, New Century understated their finance charges in
violation of TILA.

To dissuade plaintiffs from attempting to rescind mortgages as a result of minor TILA


V. CONCLUSION
For the foregoing reasons, New Century’s Motion to Dismiss Counts I, I, and Il of the
Complaint [R. 8-1] is granted. The remaining defendants’ Motion to Dismiss Count I [R. 15-1)

is also granted. This Court directs the Clerk of the Court to enter Rule 58 judgment and

Blanche M. Manning

United States District Judge

terminate this case from the Court’s docket.

DATE: APR 0 2-294



Jose Tamayo, and Luis Tamayo (the “Tamayos”).

The plaintiffs allege that the finance charges disclosed in their TILA documents were
understated, thus giving them the right to rescind their mortgage from New Century. First, the
plaintiffs claim that the cost of their title insurance was not bona fide and reasonable under TILA
because Chicago Title quoted a significantly lower amount for title insurance for a refinanced
mortgage, Therefore, plaintiffs contend that the cost of their title insurance should have been
reflected under the finance charges pursuant to TILA and Regulation Z. Second, the plaintiffs
allege that they were overcharged for recording the mortgage with the Cook County Recorders
Office. Finally, plaintiffs allege that New Century erroneously charged them for recording a
release of a prior mortgage that was already recorded and paid for by a prior lender, CitiFinancial
Mortgage. However, attachments to the Complaint indicate that there were two prior mortgages
on the plaintiffs’ home at 5514 South Hamilton.'

In any event, the plaintiffs contend that the exclusion of these charges from the disclosed
finance charges resulted in their finance charges being understated in excess of the tolerance for
accuracy of one half of one percent of the loan principal under TILA. See 15 U.S.C. § 1605(6);

Regulation Z, 12 C.F.R. § 226.23(g)(1). Therefore, the plaintiffs seek to rescind their mortgage.

‘After reviewing the Complaint and attached exhibits, see Thompson v. Illinois Dept. of
Prof'l Regulation, 300 F.3d 750, 753 (7th Cir. 2002), the Court notes that there were two prior
mortgages on the plaintiffs’ home at 5514 South Hamilton Avenue. The other mortgage with
LaSalle Bank Lake View was released after the plaintiffs’ refinanced with New Century.
Accordingly, any such claim that the $26.50 was erroneously charged for recording a release
because there was only one prior mortgage must fail. See Complaint, Exs. C, H, and I. The
Court also notes that the exhibit which plaintiffs assert is CitiFinancial’s payoff letter, Exhibit I,
is actually a payoff quote given to Tamayo Financial.

3


violations, Congress amended the statute to allow for finance charges to be considered accurate if
the “amount disclosed as the finance charge does not vary from the actual finance charge by more
than an amount equal to one haif of one percent of the total amount of credit extended.” See
Walker v. Gateway Fin. Corp., 286 F.Supp.2d 965, 967 (N.D.Il. 2003) (citing 15 U.S.C.

§ 1605(f)); see also 12 C.F.R. § 226.23(g) (tolerances of accuracy regulation). Therefore, this
Court turns to whether the disclosed finance charges in the plaintiffs’ TILA documents fell
within the permissible range of tolerance, that is one half of one percent.

The plaintiffs’ mortgage note indicates that they borrowed $68,000. Thus, one half of
one percent of the total amount of credit extended equals $340.00. Simply put, the plaintiffs
have the right to rescind their mortgage if the disclosed finance charge was understated by more
than $340.00. As mentioned, the plaintiffs contend that their title insurance fees should have
been included in the finance charge and thus, the finance charges indicated in their TILA
documents were understated by $665.00.

The plaintiffs’ calculation, however, fails to take into account that the $665.00 they were
charged for title fees must be subtracted by what the plaintiffs claim to be a bona fide and
reasonable amount, or $349.95, which is Chicago Title’s rate for a refinanced mortgage. See
Walker, 286 F.Supp.2d at 968; see also Quinn, 2004 WL 316408, at *3-4. In other words,
subtracting $349.95 from what the plaintiffs actually paid takes into account the amount of title
fees that the plaintiffs contend are bona fide and reasonable — fees that are properly excluded
from the finance charges pursuant to 12 C.F.R. § 226.4(c)(7)(i). See Scott v. Indymac Bank, 03 C
6489, 2004 WL 422654, at *2 (N.D. Ill. Feb. 3, 2004) (“inclusion of the actual amount would

render the tolerance meaningless”). Thus, the Court subtracts $349.95 from $665.00, which


Minute Order Form (06/97)

ng

United States District Court, Northern District of Illinois

Blanche M. Manning

Sitting Judge If Other

or Magistrate Judge than Assigned Judge
03 C 7136 DATE April 2, 2004
CASE Marquez v. New Century Mortgage Corporation, et al.
TITLE
[in the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.)
DOCKET ENTRY:
q) o Filed motion of [ use listing in “Motion” box above.]
(2) o Brief in support of motion due.
(3) o Answer brief to motion due___. Reply to answer briefdue__.
(4) Q Ruling/Hearing on setfor____at
(5) a Status hearing(held/continued to} [set for/re-set for]on___—sset for__— at
(6) Q Pretrial conference(held/continued to] [set for/re-set for]on__—setfor__—s—sat_—
(7) Qo Trial[set for/re-set for]on___at
(8) o [Bench/Jury trial] [Hearing] held/continued to_ at
(9) Q This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
COFRCP4(m) (General Rule2i C)FRCP41(a)(1) OFRCP41(a)(2).
(10) (Other docket entry]. New Century’s Motion to Dismiss Counts I, I, and III of the Complaint

[R. 8-1] is granted. The remaining defendants’ Motion to Dismiss Count Ill [R. 15-1] is also granted. This
Court directs the Clerk of the Court to enter Rule 58 judgment and terminate this case from the Court’s
docket. Enter Memorandum and Order. Status hearing stricken.

ql) o

[For further detail see attached Memorandum and Order.]

ov | Notices mailed by judge's staff.

No notices required, advised in open count.

No notices required.

Notified counsel by telephone.
Docketing to mail notices.

oY | Mail AO 450 form.

Copy to judge/magistrate judge.

LYnd3 19
Wy

RTS/s

courtroom
deputy’s
initials

(o:h Wd Se cus he

Date/time received in
central Clesk’s Office |

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equals $315.05, an amount that is less than the $340.00 required to rescind the mortgage under
TILA. Even if this Court were to include the $6.00 representing the extra money paid for
recording the mortgage, the alleged understatement is still in the permissible range of the
tolerance for accuracy. See 12 C.F.R. § 226.23(g)(1).

Finally, any finance charges disclosed to the plaintiffs must be reduced by the charges
that should not have been included in their TILA documents, see 12 C.F.R. 226.4(c)(7)(ii), which
includes a “settlement fee” in the amount of $285.00 that was paid to Brokers Title Insurance
Company. See Scott, 2004 WL 422654, at *3. Reducing the finance charge by this additional
amount makes New Century’s alleged understatement of the finance charges simply de minimis.

Accordingly, the plaintiffs’ Complaint fails to state a TILA claim against New Century
and the John Doe defendants, and thus Counts I and II are dismissed with prejudice. Because
compliance with TILA precludes liability under the Ilinois Consumer Fraud Act, the Court also
dismisses with prejudice Count III against New Century. See Jarvis v. South Oak Dodge, Inc.,
201 IiJ.2d 81, 89-90, 265 Ill.Dec. 877, 773 N.E.2d 641 (ill. 2002); Jackson v. South Holland
Dodge, Inc., 197 Til.2d 39, 46, 258 Ill.Dec. 79, 755 N.E.2d 462 (Hl. 2001).

Because the TILA claims are the only basis for the Court’s subject matter jurisdiction as
to the remaining defendants, this Court declines to exercise supplemental jurisdiction over the
remaining state law claims in Count II]. See 28 U.S.C. § 1367; Groce v. Eli Lilly & Co., 193
F.3d 496, 501 (7th Cir. 1999) (“It is the well-established law of this circuit that the usual practice
is to dismiss without prejudice state supplemental claims whenever all federal claims have been
dismissed prior to trial”). Therefore, Count III as to Tamayo Financial, Presidential, and the

Tamayos is dismissed without prejudice.


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
CANALES JOSE INES MARQUEZ and )
MARIA S, MARQUEZ, )
)
Plaintiffs, )
) Case No. 03 C 7136
v. )
) Judge Blanche M. Manning
NEW CENTURY MORTGAGE )
CORPORATION; TAMAYO )
FINANCIAL SERVICES, INC. )
PRESIDENTIAL TITLE, INC.; ) DOCKETED
JUAN TAMAYO, JR.; JOSE TAMAYO; )
LUIS TAMAYO, and DOES 1-5; ) APR 0 5 2004
)
Defendants. )
J
MEMORANDUM AND ORDER

Plaintiffs Canales Jose Ines Marquez and Maria S. Marquez bring this three-count
Complaint against a mortgage lender, a mortgage broker, and related parties. Counts I and II
allege individual and class violations of the Truth in Lending Act, 15 U.S.C. § 1601 et seq.
(“TILA”) and Regulation Z, 12 C.F.R. § 226, against New Century Mortgage Corporation (“New
Century”) and the John Doe defendants. Count Ill alleges violations of the Illinois Consumer
Fraud Act, 815 ILCS 505/2 et seq., against all of the named defendants, Before this Court is
New Century’s Motion to Dismiss the Complaint pursuant to Federal Rules of Civil Procedure
12(b)(6). Defendants, Tamayo Financial Services, Inc., Presidential Title, Inc., Juan Tamayo, Jr.,
Jose Tamayo, and Luis Tamayo, have also filed a Motion to Dismiss Count II of the Complaint.
For the following reasons, the Court grants New Century’s Motion to Dismiss Counts I, II, and

Ill, including the portions of the Complaint which purport to state a claim on behalf of a class.

ala


The Court declines to exercise supplemental jurisdiction over the remaining state law claims in

junt III, and therefore, dismisses without prejudice Count III of the Complaint against the

renidining defendants.

I.) ‘STANDARD UNDER RULE 12(b)(6)

‘|
In ruling on a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the

Court must assume the truth of the facts alleged in the pleadings, construe the allegations
liberally, and view them in the light most favorable to the plaintiff. See Flannery v. Recording

Indus. Assoc. of Am.,.354 F.3d 632, 637 (7th Cir. 2004); Hickey v. O'Bannon, 287 F.3d 656, 657-

58 (7th Cir. 2002). When considering a motion to dismiss, this Court is restricted to Teviewing

| the pleadings, which consist of the complaint, any attached exhibits, and the supporting briefs.

See 7 hompson v, Illinois Dept. of Prof’ Regulation, 300 F.3d 750, 753 (7th Cir. 2002). Under

Rul 12(b\(6), dismissal is appropriate if there is no possible interpretation of the complaint

: under which it can state a claim. See Flannery, 354 F.3d at 637.

I. BACKGROUND
i : Assuming the truth of the facts as alleged in the Complaint, on or about February 27,

2003, the plaintiffs, who are husband and wife, obtained a mortgage loan in the amount of

: $68,000 from New Century. The plaintiffs were refinancing their mortgage on their home

located at 5514 South Hamilton Avenue, Chicago, Illinois. The plaintiffs applied for their

. Mortgage loan with defendant Tamayo Financial Services (“Tamayo Financial”), a mortgage

* broker; On behalf of the plaintiffs, Tamayo Financial arranged for the mortgage from New

Century. Defendant Presidential Title (“Presidential”) provided closing services and title

insurani ¢, Both Tamayo Financial and Presidential are owned by defendants Juan Tamayo, Jr.,