Source: http://educationcenter2000.com/legal/pred_lend_claims_available.htm
Timestamp: 2017-06-28 10:26:05
Document Index: 513173985

Matched Legal Cases: ['§ 1601', '§ 1641', '§ 1640', '§ 1641', '§ 1602', '§ 226', '§ 226', '§ 1639', '§ 1635', '§ 1639', '§ 1639', '§ 1639', '§ 1639', '§ 1640', '§ 1641', '§ 1641', '§ 2602', '§ 3500', '§2607', '§ 3500', '§ 2602', '§ 3500', '§ 3500', '§2607', '§3500', '§ 2607', '§ 2607', '§ 2605', '§ 2605', '§ 202', '§ 202', '§ 202']

Available predatory lending remedies
Truth in Lending Act (TILA). This Act attempts to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms and avoid uninformed use of credit. It also aims to protect the consumer against inaccurate and unfair credit billing and credit card practice. Home Ownership and Equity Protection Act (HOEPA). This Act is an amendment to TILA. It is enacted to deal with substantive abuses of creditors offering alternative, typically high interest rate, home loans to residents in certain geographic areas. It purports to afford consumers most vulnerable to abuse a safety net without impeding the flow of credit altogether. Real Estate Settlement Procedures Act (RESPA). This Act aims to effect more effective disclosure to home buyers and sellers of settlement costs. It also seeks to eliminate kickbacks or referral fees and reduce the required amount to be put in escrow by homeowners to insure the payment of real estate taxes and insurance. Equal Credit Opportunity Act (ECOA). This Act is created to prohibit discriminatory treatment by lenders. Its credit notification provision protects consumers from bait-and-switch tactics. Illinois Consumer Fraud and Deceptive Business Practice Act (ICFA). This is an Illinois state law that prohibits commercial deceptive and unfair business practice. Where a conduct is within the definition of Uniform Deceptive Trade Practice Act, it is unlawful whether a person has, in fact, been misled, deceived, or damaged. Your state may have similar laws, check with your state attorney general's office. Common Law Fraud. Unlike ICFA, common law fraud requires proof of reliance. In Illinois, you must show: (1) a false statement of material fact; (2) the party making the statement knew or believed it to be true; (3) the party to whom the statement was made had a right to rely on the statement; (4) the party to whom the statement was made relied on the statement; (5) the statement was made for the purpose of inducing the other party to act; and (6) the reliance by the person to whom the statement was made led to that person's injury. In foreclosure cases, borrowers usually bring a third-party claim against the one who they deal with directly (the contractor, broker, or loan officer). Breach of Fiduciary Duty. The specific elements are: (1) a fiduciary duty was created; (2) the fiduciary duty was breached; and (3) the breach proximately caused the injury of which the plaintiff complains. Breach of Contract. The parties to a contract have a duty to honor their obligations, and they also have an implied duty of good faith and fair dealing. Illinois Interest Act (IIA). This act puts a cap on the maximum percentage a lender can charge per year. The application of this Act to loans secured by first liens was preempted by federal law but is still applicable to loans secured by junior liens. Illinois "High Risk Home Loan Act" (Senate Bill 1784, Public Act 93-0561) regulates high risk home loans which closed on or after January 1, 2004. This statute is modeled after the federal Home Ownership and Equity Protection Act (HOEPA) but uses lower triggers and includes more protections for homeowners. Loans are defined as high risk if they either: (1) carry an annual percentage rate exceeding the applicable U.S. Treasury security yield by more than 6% (for first-priority liens) or by more than 8% (for junior liens); or (2) include points and fees exceeding 5%. For covered loans, certain terms are prohibited (e.g., single premium credit insurance and call provisions), while others are limited (e.g., prepayment penalties and short-term refinancing). Lenders must give heightened pre-closing disclosures and must offer the opportunity for counseling prior to closing and prior to initiating foreclosure. A knowing violation of the Act constitutes a violation of the Consumer Fraud and Deceptive Business Practices Act, and assignees of loans are subject to liability.
Sources of law: 15 U.S.C. § 1601, et seq.
Regulation Z (12 C.F.R. 226). The Federal Reserve Board’s Official Staff Commentary on Regulation Z (12 C.F.R. 226.36, Supplement I). Ford Motor Credit v. Milhollin, 444 U.S. 555, 565 (1980) (“Unless demonstrably irrational, Federal Reserve Board staff opinions construing the Act or Regulation should be dispositive”).
Clear, conspicuous, and accurate disclosures of loan terms set forth in
12 C.F.R. 226.18 (“Content of Disclosures”). In re Ralls, 230 B.R. 508 (Bankr. E.D.Pa. 1999); In re Cook, 76 B.R. 661 (Bankr. C.D.Ill. 1987). Every loan charge must be properly disclosed as either part of the “amount financed,” which represents “the amount of credit provided to you or on your behalf,”
12 C.F.R. 226.18(b), or as part of the “finance charge,” which represents “the dollar amount the credit will cost you,”
12 C.F.R. 226.18(d). The “annual percentage rate” (APR) combines the interest rate and additional up-front (prepaid) finance charges to yield the total “cost of your credit as a yearly rate.” 12 C.F.R. 226.18(e). In re Hill, 213 B.R. 934 (Bankr. D.Md. 1997). The finance charge is computed according to the rules set forth in
12 C.F.R. 226.4 (“Finance Charge”). The finance charge includes “any charge payable directly or indirectly by the creditor as an incident to or a condition of the extension of credit,” 12 C.F.R. 226.4(a), unless a charge is specifically excluded. The most pertinent exclusions in the context of real-estate loan transactions are as follows:
Credit insurance premiums are excluded from the finance charge if they are voluntary, if this fact and other specified information is disclosed to the borrower, and if the borrower signs that, having been given these disclosures, s/he still wants the insurance. 12 C.F.R. 226.4(d). In re Duffy, 32 B.R. 497 (D.R.I. 1983). Taxes and fees “prescribed by law that are or will be paid to public officials,” such as for a release of lien. 12 C.F.R. 226.4(e).
Delivery to each borrower of two copies of a 3-day notice of right to rescind the loan transaction (non-purchase money mortgages only). The notice must meet all the requirements specified in
12 C.F.R. 226.23(b)(1), including setting forth the date the rescission period expires, how to exercise the right, how to contact the creditor, and the effects of rescission. The three-day right to rescind is absolute; unless the borrower waives the right as set forth in
12 C.F.R. 226.23(e), the creditor cannot take any action to undermine that right. 12 C.F.R. 226.23(c). Rodash v. AIB Mort. Co., 16 F.3d 1142 (11th Cir. 1994); Jenkins v. Landmark Mortgage Co., 696 F. Supp. 1089 (W.D.Va. 1988). The creditor must deliver TILA disclosures to each person whose ownership interest in a dwelling is subject to the security interest, and each such person has the right to rescind. 12 C.F.R. 226.2(a)(11),
226.15(a) and (b),
226.17(d),
226.23(a)(1). Westbank v. Maurer, 658 N.E.2d 1381 (Ill.App. 2nd Dist. 1995).
Failure to deliver a proper 3-day notice of right to rescind triggers an extended right of rescission. 12 C.F.R. 226.23(a)(3). Westbank v. Maurer, 658 N.E.2d 1381 (Ill.App. 2nd Dist. 1995). Failure to make clear, conspicuous, and accurate material disclosures also triggers an extended right of rescission. 12 C.F.R. 226.23(a)(3). Material disclosures include the: (1) annual percentage rate, (2) finance charge, (3) amount financed, (4) total payments, (5) or payment schedule. 12 C.F.R. 226.23(a)(3) n.48.
There are statutory “tolerances” for the APR and the amount financed and finance charge. Violations are deemed non-material if they fall within these tolerances. The APR tolerance is .125% for regular loans and .25% for irregular (variable-rate) loans.
12 C.F.R. 226.22(a). The finance charge tolerance for defendants in foreclosure actions is $35 (for rescission),
12 C.F.R. 226.23(h), and $100 (for monetary damages),
12 C.F.R. 226.18(d)(1).
The extended right of rescission lasts 3 years from the date of the closing of the loan. 12 C.F.R. 226.23(a)(3). Semar v. Platte Valley Fed. S&L. Assn., 791 F.2d 699 (9th Cir. 1986) The rescission remedy runs against any assignee: “Any consumer who has the right to rescind a transaction under section 1635 of this title may rescind the transaction as against any assignee of the obligation.” 15 U.S.C. § 1641(c). Mount v. LaSalle Bank Lake View, 926 F.Supp. 759 (N.D.Ill. 1996); Stone v. Mehlberg, 728 F.Supp. 1341 (W.D.Mich. 1989). Upon rescission, “the security interest giving rise to the right of rescission becomes void and the consumer shall not be liable for any amount, including any finance charge” (step one). 12 C.F.R. 226.23(d)(1). Within 20 days the creditor must take any action required to cancel the security interest and must return any money paid on the loan (step two). 12 C.F.R. 226.23(d)(2). If and when the creditor does so, the consumer must tender to the creditor the value of the money or property received (step three). 12 C.F.R. 226.23(d)(3). The tender amount is reduced by any amount paid on the loan (unless previously returned). White v. WMC Mortgage, 2001 U.S. Dist. LEXIS 15907, at * 5 (E.D. Pa. July 31, 2001); Williams v. Gelt, 237 B.R. 590, 598-99 (E.D. Pa. 1999). Courts can modify steps two and three of the above rescission process. 12 C.F.R. 226.23(d)(4).
Creditors are also liable for actual damages, statutory damages in the amount of twice the finance charge, up to $2,000, and attorney’s fees and costs. 15 U.S.C. § 1640(a). Failure to respond to the rescission notice as spelled out above results in another violation and an addition award of statutory damages. White v. WMC Mortgage, 2001 U.S. Dist. LEXIS 15907, at * 5 (E.D. Pa. July 31, 2001); Mayfield v. Vanguard Savings & Loan, 710 F. Supp. 143, 145 (E.D. Pa. 1989). Liability for TILA claims for monetary damages runs against assignees where the violation is apparent on the face of the loan documents. 15 U.S.C. § 1641(a).
15 U.S.C. §§ 1602(aa),
1639, and
1641(d)(1).
Federal Reserve Board Regulation Z (12 C.F.R. 226), particularly § 226.31 (“General Rules”) and § 226.32 (“Requirements for Certain Closed-End Home Mortgages”). The Federal Reserve Board’s Official Staff Commentary on Regulation Z. Ford Motor Credit v. Milhollin, 444 U.S. 555, 565 (1980) (“Unless demonstrably irrational, Federal Reserve Board staff opinions construing the Act or Regulation should be dispositive”).
APR more than 10% above comparable Treasury security rate (8% on first-lien loans closing on or after October 1, 2002) on the 15th day of the month before the lender received the loan application. 12 C.F.R. 226.32(a)(1)(i); 66 Fed. Reg. 65,617 (2001). “Points and fees” exceeding 8% of the “total loan amount.” 12 C.F.R. 226.32(a)(1)(ii).
All prepaid finance charges. 12 C.F.R. 226.32(b)(1)(i). All compensation paid to mortgage brokers. 12 C.F.R. 226.32(b)(1)(ii). All items paid to the lender or to a lender affiliate. 12 C.F.R. 226.32(b)(1)(iii). “Total loan amount” is defined as the amount financed (principal minus prepaid finance charges) minus any additional HOEPA fees not already included in the finance charge, e.g., a bona fide and reasonable appraisal fee paid to the lender. Official Staff Commentary
12 C.F.R. 226.32(a)(1)(ii)-1. Lopez v. Delta Funding Corp., 1998 U.S. Dist. LEXIS 23318 (E.D.N.Y. Dec. 23, 1998).
A special HOEPA disclosure notice must be delivered to the consumer at least three business days prior to the closing of the loan. 15 U.S.C. § 1639(b);
12 C.F.R. 226.31(c). A signed statement to the effect that the consumer received the HOEPA notice creates a rebuttable presumption only. 15 U.S.C. § 1635(c). Bryant v. Mortgage Capital Resource Corp., 2002 U.S. Dist. LEXIS1566, at **11-17 (N.D. Ga. Jan. 14 ,2002); Williams v. Gelt, 237 B.R. 590 (E.D. Pa. 1999), Newton v. United Companies Financial Corp., 24 F. Supp. 2d 444, 448-51 (E.D. Pa. 1998).
The notice must inform the consumer that he need not enter into the loan, and that if he does enter the loan, he could lose his home and any money he has put in it. 15 U.S.C. § 1639(a);
12 C.F.R. 226.32(c)(1).
The notice must also include an accurate statement of APR, monthly payment and balloon payment amount, and maximum payment amount on a variable-rate loan. 15 U.S.C. § 1639(a)(2);
12 C.F.R. 226.32(c)(2)-(4); Official Staff Commentary 12 C.F.R. 226.32(c)(3)-2.
The following terms are prohibited (or limited) by the statute and Regulation Z: prepayment penalties, default interest rate, balloon payments, negative amortization, prepaid payments, improvident lending, direct payments to home improvement contractors. 15 U.S.C. § 1639(c)-(h);
12 C.F.R. 226.32(d). Lopez v. Delta Funding Corp., 1998 U.S. Dist. LEXIS 23318 (E.D.N.Y. Dec. 23, 1998) (default interest rate); Newton v. United Companies Financial Corp., 24 F. Supp. 2d 444, 451-57 (E.D. Pa. 1998) (improvident lending).
Failure to deliver the required HOEPA notice or inclusion of a prohibited term triggers an extended (three-year) right of rescission (described above). 15 U.S.C. § 1639(j);
12 C.F.R. 226.23(a)(3) n.48.;
Bryant v. Mortgage Capital Resource Corp., 2002 U.S. Dist. LEXIS1566 (N.D. Ga. Jan. 14 ,2002); In re Barber, 266 B.R. 309 (Bankr. E.D. Pa. 2001); In re Jackson, 245 B.R. 23 (Bankr. E.D. Pa. 2000); In re Murray, 239 B.R. 728, 733 (Bankr. E.D. Pa. 1999).
In addition to regular TILA monetary damage remedies (see above), HOEPA violations give rise to “enhanced” monetary damages under
15 U.S.C. § 1640(a)(4), namely, all payments made by the borrower. In re Williams, 291 B.R. 636, 663-64 (Bankr. E.D. Pa. 2003).
As with any TILA violation (see above), the rescission remedy runs against any assignee of the loan. 15 U.S.C. § 1641(c). In addition, where the loan documents demonstrate that the loan is covered by HOEPA coverage, assignees “shall be subject to all claims and defenses with respect to that mortgage that the consumer could assert against the creditor.” 15 U.S.C. § 1641(d)(1). This provision mirrors the FTC Holder Rule and creates assignee liability for all state and federal claims and defenses. For monetary damages claims under TILA, it provides an exception to general rule that violations must appear on the face of the documents. Pulphus v. Sullivan, No. 02 C 5794, 2003 U.S. Dist. LEXIS 7080, at *64 n.11 (N.D. Ill. April 25, 2003); Dash v. Firstplus Home Loan Trust 1996-2, 248 F. Supp. 2d 489 (M.D.N.C. 2003); Cooper v. First Gov't Mortgage & Investors Corp., 238 F. Supp. 2d 50 (D.D.C. 2002);
Bryant v. Mortgage Capital Resource Corp., 2002 U.S. Dist. LEXIS1566, at **17-22 (N.D. Ga. Jan. 14, 2002); Mason v. Fieldstone Mortgage Co., U.S. Dist. LEXIS 16415 (N.D. Ill. 2001); Vandenbroeck v. ContiMortgage Corp., 53 F.Supp. 965, 968 (W.D. Mich. 1999); In re Rodrigues, 278 B.R. 683 (Bankr. D.R.I. 2002); In re Jackson, 245 B.R. 23 (Bankr. E.D. Pa. 2000); In re Barber, 266 B.R. 309 (Bankr. E.D. Pa. 2001); In re Murray, 239 B.R. 728, 733 (Bankr. E.D. Pa. 1999).
RESPA covers all federally related mortgages, including loans (both purchase-money mortgages and others) secured by the family home. 12 U.S.C. § 2602(1);
24 C.F.R. § 3500.2.
12 U.S.C. §2607(a);
24 C.F.R. § 3500.14(b). RESPA prohibits the giving or receiving of any fee, kickback or other thing of value for the referral of a “settlement service” (defined at
12 U.S.C. § 2602(3) and
24 C.F.R. § 3500.2).
In order to state a claim alleging a violation of this section, one must demonstrate: 1) an agreement between the parties to refer settlement service business, 2) the transfer of a thing of value, and 3) the referral of settlement service business. Shah v.
Chicago Title and Trust Co., 102 Ill. App. 3d 787, 789; 430 N.E.2d 342, 344 (1st Dist. 1981). “An agreement or understanding for the referral of business incident to or part of a settlement service need not be written or verbalized but may be established by a practice, pattern or course of conduct.” 24 C.F.R. § 3500.14(e).
HUD (the agency charged with interpretative, investigative and enforcement powers under RESPA) recommends a two-step inquiry to determine whether a yield spread premium is illegal. First, one determines whether the payment of the yield spread premium was for services actually performed; if it is not, then the payment is an illegal kickback. If the payment was for services actually performed, then one looks at whether the total compensation paid to the broker reasonably related to the value of the services; if the compensation does not reasonably relate to the value of the services, the payment is a violation of this section. 64 Fed. Reg. 10080 (1999). Prohibition against unearned fees and fee splitting:
12 U.S.C. §2607(b);
24 C.F.R. §3500.14(c). RESPA prohibits the giving or receiving of “any portion, split or percentage of any charge made or received for the rendering of a settlement services in connection with a transaction involving a federally related mortgage loan other than for services performed.” The regulations further state that, “A charge by a person for which no or nominal services are performed or for which duplicative fees are charged is an unearned fee and violates this section.”
Private right of action for violation of § 2607 (Illegal referral fee or kickback and fee splitting). Statutory damages: person charged for the settlement service can recover an amount equal to “three times the amount of any charge paid for such settlement service,” plus attorney’s fees and costs. 12 U.S.C. § 2607(d). Private right of action for violation of § 2605 (Servicing requirements and administration of escrow accounts). Actual damages for each failure to comply, additional damages for a pattern and practice of noncompliance, plus attorney’s fees and costs. 12 U.S.C. § 2605(f).
Specifically, the ECOA regulations provide that “[a] creditor shall notify an applicant of action taken within 30 days after receiving a completed application concerning the creditor’s approval of, counteroffer to, or adverse action on the application.” Reg. B,
12 C.F.R. § 202.9(a)(1)(i).
An application for credit is considered “complete” when the creditor receives, through its exercise of due diligence, the last piece of information regularly obtained in the loan application process.” Dufay v. Bank of Am. N.T. & S.A., 94 F.3d 561, 564 (9th Cir. 1996) (citing12 C.F.R. § 202.2(f).) In other words, an application is complete when a creditor has enough information to determine whether or not the consumer qualifies for a loan. Newton v. United Cos. Fin. Corp., 24 F. Supp. 2d 444, 461 (E.D. Pa. 1998). If the action taken by the creditor is an “adverse action,” then the notification must be in writing. 12 C.F.R. § 202.9(a)(2). If the creditor rejects the application and such rejection is coupled with a counteroffer accepted by the consumer, then there has been no “adverse action,” and the creditor can give oral (versus written) notification. Dorsey v. Citizens & Southern Financial Corp., 678 F.2d 137 (11th Cir. 1982); Diaz v. Virginia Hous. Dev. Auth., 117 F. Supp. 2d 500 (E.D. Va. 2000); Newton v. United Cos. Fin. Corp., 24 F. Supp. 2d 444 (E.D. Pa. 1998).
“Unfair methods of competition and unfair or deceptive acts or practices, including but not limited to the use or employment of any deception fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact, or the use or employment of any practice described in Section 2 of the ‘Uniform Deceptive Trade Practices Act’, approved August 5, 1965, in the conduct of any trade or commerce are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby.” 815 ILCS 505/1. Sources of law:
Unlike ICFA, common law fraud requires proof of reliance. Specifically, to prove common law fraud, you must show: (1) a false statement of material fact; (2) the party making the statement knew or believed it to be untrue; (3) the party to whom the statement was made had a right to rely on the statement; (4) the party to whom the statement was made did rely on the statement; (5) the statement was made for the purpose of inducing the other party to act; and (6) the reliance by the person to whom the statement was made led to that person's injury. Siegel v. Levy Organization Development Co., 153 Ill. 2d 534, 542 43, 180 Ill. Dec. 300, 607 N.E.2d 194 (1992). in many predatory lending cases, borrowers can allege common law fraud against the party with whom they dealt directly (the contractor, broker, or loan officer). In the foreclosure context, this is usually done via a third-party claim.
Statute of limitations 5 years for affirmative claims. 735 ILCS 5/13-205.
Unlimited as a defense to foreclosure in the nature of a recoupment or setoff. 735 ILCS 5/13-207. Bank of New York v. Heath, 2001 WL 1771825, at *1 (Ill. Cir. Oct. 26, 2001). Breach of Fiduciary Duty