Court Opinion

ID: 9734972
Source: CourtListenerOpinion
Date Created: 2023-08-26 17:54:56.037263+00
Date Added: 2024-06-11T18:26:53.188105
License: Public Domain

JUSTICE DiVITO specially concurring in part and dissenting in part: Although I agree with the majority’s decision regarding the escrow suspension fee, I respectfully dissent from its answer to the certified question. The disclosure of the mortgage assignment recording fee, in the circumstances described in the certified question, was in compliance with RESPA. The majority states that RESPA requires advance disclosure of all settlement costs. I agree that RESPA requires the disclosure of all settlement costs on the HUD-1 form, but I disagree that RESPA requires the same detailed disclosure on the good-faith estimate form. To the contrary, the regulations authorize and encourage a disclosure such as the one that occurred in this case. The sample good-faith estimate form and HUD-1 form contained in the regulations present the strongest evidence that RESPA authorizes a lender to provide a borrower with a gross estimate of recording fees at the time of loan application. Although the HUD-1 form has spaces for a lender to identify the amounts of specific recording fees, such as fees for recording the mortgage and releases, the good-faith estimate form contains only a single space for a lender to estimate recording fees. Based on this form, which the Secretary provided to assist lenders in complying with RESPA, it is reasonable to conclude that, by placing a gross estimate for recording fees in the single space the form contains, a lender complies with RESPA. Although the sample good-faith estimate form contains spaces for "other” fees, these spaces cannot have been intended for recording fees because the word "other” indicates fees in categories other than those listed on the form, and "recording fees” is listed. Although the majority states that the purpose of RESPA is served by detailing each settlement cost a borrower will pay at closing, this is contradicted by the regulation that prohibits lenders from adding information to the good-faith estimate in order to preserve the clarity and conciseness of this form. The fact that, unlike the HUD-1 form, the good-faith estimate form contains only one space for informing borrowers of recording fees also shows that the good-faith estimate is not intended to contain detailed information. Moreover, the stated purpose of RESPA is not just to provide advance disclosure, it is to provide "effective advance disclosure.” A gross estimate of recording fees provides effective advance disclosure because it allows borrowers to compare the recording fees of one lender to those of another, while maintaining the clarity and conciseness of the good-faith estimate form. I also disagree with the majority’s assertion that the lender in this case did not act with good faith. Given the single space for recording fees on the good-faith estimate form the Secretary provided, it would not be unreasonable for a lender completing this form to conclude that it should include all recording fees in that single space. Significantly, the lender in this case did not omit the mortgage assignment fee from its estimate. The fee was included in the $80 it estimated for recording fees and, in fact, the borrower had to pay $77, which was $3 less than the amount contained in the estimate. The majority also asserts that the lender did not act in good faith because it did not provide more effective advance disclosure of the mortgage assignment recording fee to plaintiffs even though, well in advance of closing, it intended to assign plaintiffs’ mortgage to "its affiliate, created for that very purpose.” 286 Ill. App. 3d at 56. Although the record supports a conclusion that Gary-Wheaton intended, in advance of closing, to assign plaintiffs’ mortgage, there is no support for the majority’s assertion that it intended to assign the mortgage to an affiliate that was created for this purpose. Instead, the record indicates that Midwest and Gary-Wheaton did not become affiliates until after plaintiffs’ loan transaction, and Midwest’s creation was independent of its later relationship with Gary-Wheaton. Given that RESPA authorizes a gross estimate of recording fees, it constitutes a defense to liability under the Consumer Fraud Act pursuant to section 10b of that act. Analogous cases under the Federal Truth in Lending Act (15 U.S.C. §§ 1601 through 1665 (1982)) support a finding that RESPA compliance is a defense to liability under the Consumer Fraud Act. For example, in Lanier v. Associates Finance, Inc., 114 Ill. 2d 1, 499 N.E.2d 440 (1986), our supreme court held that a lender’s disclosure to a borrower did not violate the Consumer Fraud Act because it was in compliance with the Truth in Lending Act. The loan agreement provided that, in the event of prepayment, the borrower could receive a refund of any unearned finance charge, and the lender would compute the refund according to the "Rule of 78’s.” The borrower complained that the lender had an obligation to explain the Rule of 78’s at the time of the loan. Lanier, 114 Ill. 2d at 12. The supreme court concluded that the Federal Reserve Board had balanced the need to avoid confusion with the need to avoid informational overload and had concluded that reference by name to the Rule of 78’s was sufficient to inform the borrower of the method for computing the unearned finance charge. Lanier, 114 Ill. 2d at 12. The court held that, because the lender’s disclosure complied with federal regulations, it was exempt from liability under section 10b(1) of the Consumer Fraud Act. Lanier, 114 Ill. 2d at 17-18. The court explained that to hold otherwise would place a lender in the anomalous position of being guilty of common law misrepresentation by specifically complying with the Truth in Lending Act. Lanier, 114 Ill. 2d at 10-11. The Lanier court also based its holding on its perception that disclosure provisions of Illinois consumer credit statutes showed a consistent policy against extending disclosure requirements beyond those required by the Truth in Lending Act. Lanier, 114 Ill. 2d at 17. Given that a gross estimate of recording fees is authorized by RESPA, under Lanier, a lender does not violate the Consumer Fraud Act in the circumstances stated in the certified question. See also Shields v. Lefta, Inc., 888 F. Supp. 894, 898 (N.D. Ill. 1995) (creditor’s compliance with Truth in Lending Act is a defense to liability under the Consumer Fraud Act); Price v. FCC National Bank, 285 Ill. App. 3d 661 (1996) (compliance with the Truth in Lending Act is compliance with the Illinois Credit Card Issuance Act (815 ILCS 140/6 (West 1994))); Aurora Firefighter’s Credit Union v. Harvey, 163 Ill. App. 3d 915, 923, 516 N.E.2d 1028 (1987) (there was no violation of the Consumer Fraud Act because the credit union’s disclosure complied with the Truth in Lending Act). As I have explained, I believe the lender complied with RESPA in this case. Even assuming, however, as the majority argues, that the disclosure was in violation of RESPA, there would be no violation of the Consumer Fraud Act. At least two courts have recently held that a party does not violate the Consumer Fraud Act by performing an act that is based on an erroneous interpretation of a statute. See Lee v. Nationwide Cassel, 174 Ill. 2d 540 (1996) (the defendant did not violate the Consumer Fraud Act by attempting to hold the plaintiffs primarily liable under an installment contract for a car because, although the Motor Vehicle Retail Installment Sales Act prohibited such liability, this law was uncertain, and the defendant’s actions were based on an erroneous interpretation of the law); Stern v. Norwest Mortgage, Inc., 284 Ill. App. 3d 506 (a lender did not violate the Consumer Fraud Act by charging borrowers a fee for pledging a time deposit because it did so based on an erroneous interpretation of the Mortgage Escrow Account Act). In this case, therefore, even if the lender acted on the mistaken belief that RESPA authorized the disclosure it made, there would be no Consumer Fraud Act violation. I note that the majority’s opinion is somewhat inconsistent in its application of the Stern holding. Although the majority cites Stern for the proposition that a lender does not violate the Consumer Fraud Act by acting on an erroneous interpretation of the Mortgage Escrow Account Act, it holds the lender liable under the Consumer Fraud Act for an erroneous interpretation of RESPA. RESPA compliance aside, I disagree with the other bases for the majority’s finding of a Consumer Fraud Act violation in this case. The majority argues that it is deceptive and unfair for a lender to charge a mortgage assignment recording fee under the circumstances in this case because the lender and not the borrower is responsible for paying the fee. The majority relies on Giblin’s deposition testimony that a bank that sells a mortgage to Midwest is responsible for paying the title company the mortgage assignment recording fee. According to the majority, this testimony demonstrates that it is not customary for a bank to charge a borrower a mortgage assignment recording fee and that a borrower is a "stranger” to the assignment transaction. I disagree with the majority’s reasoning on several bases. First, my reading of Giblin’s testimony causes me to conclude that, when he testified that the assigning bank bears the cost of the mortgage assignment fee, he was describing who was responsible for the fee in the relationship between Midwest and Gary-Wheaton, not in the relationship between Gary-Wheaton and a borrower. In addition, he explained that a lender could charge a borrower the mortgage assignment recording fee at closing, even if it did not assign the mortgage until after closing. His testimony, therefore, does not support a conclusion that the assigning bank always pays the mortgage assignment recording fee. Furthermore, Giblin’s testimony concerning the relationship between Midwest and Gary-Wheaton is an insufficient basis from which to conclude that it was not customary for other banks to charge borrowers a mortgage assignment recording fee. Second, a borrower is not a "stranger” to the assignment of its loan, as the facts of this case illustrate. As a direct result of the assignment of their mortgage to Midwest, plaintiffs in this case received an annual interest rate .05% lower than Gary-Wheaton could have offered them if it had not assigned their loan. In addition, at the time of their loan application, Gary-Wheaton informed plaintiffs that their loan would be sold. The mortgage assignment recording fee was, therefore, a cost of plaintiffs’ loan. There is no legal reason why a lender may not pass this cost on to the borrower in the same way that it charges borrowers other fees, such as document preparation fees, for its costs of doing business. I also disagree with the majority’s conclusion that a lender "conceals” the mortgage assignment recording fee by providing a borrower with a gross estimate of recording fees. It no more conceals this fee than it conceals other recording fees, such as the mortgage recording fee, that it more specifically discloses at closing on the HUD-1 form. As I have explained, a gross estimate that includes an amount for a mortgage assignment recording fee sufficiently informs a borrower of this fee and allows the borrower to make an effective comparison of the recording fees charged by various lenders. The precise identity of each recording fee, such as those for recording the mortgage, deed, and releases, as well as the assignment of the mortgage, would be of little additional help in comparison shopping for a loan. The court’s decision in Butitta v. First Mortgage Corp., 218 Ill. App. 3d 12, 578 N.E.2d 116 (1991), supports a conclusion that a lender may charge a mortgage assignment recording fee in the circumstances of this case. The majority distinguishes Butitta on the basis that, unlike plaintiffs in this case, the plaintiffs in that case did not allege the materiality of the mortgage assignment fee. This does not make Butitta inapplicable to the situation before us, however, because the lack of materiality was only one of the bases for the court’s finding that there was no Consumer Fraud Act violation. The court held that there was no Consumer Fraud Act violation in that case because plaintiffs had failed to show that the mortgage assignment recording fee was material or illegal. Plaintiffs in this case may have alleged materiality, but they have failed to show that the fee was illegal. As Butitta holds, it is not illegal for a lender to charge a mortgage assignment recording fee at closing. The majority argues that Butitta also differs from the situation before us because there was no unfairness in that case as there is here. I cannot accept this argument. In Butitta the sellers, who were required to pay the mortgage assignment fee, had no notice before closing that this fee would be among their costs at closing. By contrast, in this case, plaintiffs received an estimate that included this fee at the time they made their loan application. Furthermore, I do not see how it is more fair to charge a seller a recording fee for the assignment of a buyer’s mortgage than it is to charge a buyer a fee for the assignment of his own mortgage, especially when he benefits from that assignment by obtaining a lower interest rate. For the foregoing reasons, I would affirm the circuit court’s judgment dismissing plaintiffs’ escrow suspension fee claim, but answer the certified question in the negative.