Brannam v. Huntington Mortgage Co., 00-2225.

• Citation: 287 F.3d 601
• Decision Date: 29 April 2002
• Docket Number: No. 00-2225.,00-2225.
• Parties: Scott BRANNAM and Janet Brannam, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. HUNTINGTON MORTGAGE COMPANY, an Ohio Corporation, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

287 F.3d 601

Scott BRANNAM and Janet Brannam, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. HUNTINGTON MORTGAGE COMPANY, an Ohio Corporation, Defendant-Appellee.

No. 00-2225.

United States Court of Appeals, Sixth Circuit.

Argued March 7, 2002.

Decided and Filed April 29, 2002.

John E. Anding (argued), Christopher G. Hastings (argued and briefed), Drew, Cooper & Anding, Grand Rapids, MI, for Plaintiffs-Appellants.

George G. Kemsley (argued and briefed), Bodman, Longley & Dahling, Detroit, MI, for Defendant-Appellee.

Before KENNEDY, BOGGS, and DAUGHTREY, Circuit Judges.

OPINION

KENNEDY, Circuit Judge.

Plaintiffs Scott and Janet Brannam brought this purported class action suit against defendant Huntington Mortgage Company, challenging a document preparation fee routinely charged by Huntington, but not disclosed as part of the finance charge. Plaintiffs contend that Huntington's actions violate the Truth In Lending Act ("TILA"), as well as state law. The district court granted summary judgment in favor of Huntington, and plaintiffs now appeal. For the reasons set forth below, we affirm the judgment of the district court.

I.

This case involves the assessment of a document preparation fee in connection with mortgage loans. Huntington routinely charges a document preparation fee of $250 for mortgage loans, although in rare cases that fee may be waived or reduced. Plaintiffs allege that charging this fee without disclosing it as a finance charge violates TILA, 15 U.S.C. § 1605(e). Regulation Z, promulgated under TILA, permits lenders to exclude from finance charge disclosures any fees for the preparation of certain "loan-related documents," so long as such fees are "bona fide and reasonable in amount." 12 C.F.R. § 226.4(c)(7). Before the district court, plaintiffs raised two distinct arguments. First, they contended that the TILA exclusion should apply only to documents related to the transfer of title, not to all documents connected with a mortgage loan. This argument was based primarily upon an interpretation of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 et seq., and an accompanying regulation, 24 C.F.R. § 3500 et seq., known as Regulation X. Second, they argued that Huntington's document preparation fee was not "bona fide and reasonable" because it covers loan origination costs and because document preparation services are available on the Internet for substantially less than $250.

On March 6, 2000, the district court heard oral argument on Huntington's motion for partial summary judgment. The court issued an opinion from the bench. It rejected plaintiffs' argument based on Regulation X, finding no support for plaintiffs' attempt to read the terms of that regulation into Regulation Z or the TILA. The court found "no basis whatsoever for the plaintiffs' argument ... that because the fee in this case was charged for things other than title transferring documents, that these fees here do not fall within the exemption or exclusion for the definition of the finance charge fees under [the TILA]." The court concluded that the uniform fees charged by Huntington were bona fide, but reserved judgment on the question whether they were reasonable, observing that a factual dispute remained as to that question. The court, however, specifically rejected plaintiffs' contention that reasonableness should be determined by comparing the fee charged by Huntington to a fee for document preparation charged by a third-party service available on the Internet. The court declared that the proper measure of reasonableness requires a comparison to fees charged by other lenders in the relevant marketplace. On March 21, 2000, the court entered a written order granting in part and denying in part Huntington's motion for partial summary judgment, holding that "a uniform document services fee is bona fide and properly excludable from the computation of the finance charge in this case, provided such fee is reasonable."

Plaintiffs later moved for relief from this order, arguing that newly discovered evidence would change the court's analysis of the Regulation X issue. The defendant moved for summary judgment on the remaining issue of reasonableness. After hearing arguments the court denied plaintiffs' motion, reiterating that even if Huntington had violated Regulation X, plaintiffs would not have a private right of action thereunder. The court refused to permit plaintiffs to bootstrap the Regulation X definitions into a TILA violation. The court also granted summary judgment to defendant on the question of whether the fee charged by Huntington was reasonable, based on evidence of the market rate for document preparation fees submitted by Huntington. Having resolved all issues necessary for the disposition of the TILA claim, the court granted summary judgment in favor of defendant on that claim and declined to exercise supplemental jurisdiction over the plaintiffs' remaining state law claims. Plaintiffs appeal.

II.

We review a district court order granting summary judgment under a de novo standard of review, without deference to the decision of the lower court. Taylor v. Michigan Dept. of Corrections, 69 F.3d 76 (6th Cir.1995); Lake v. Metropolitan Life Ins. Co., 73 F.3d 1372, 1376 (6th Cir. 1995). Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. Pro. 56(c).

TILA was enacted "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...." 15 U.S.C. § 1601(a). Under TILA, a lender must disclose the "finance charge" as defined by the statute. The statute exempts from the computation of the finance charge "[f]ees for preparation of loan-related documents." 15 U.S.C. § 1605(e)(2). Regulation Z elaborates on this exemption, providing that "[f]ees for preparing loan-related documents, such as deeds, mortgages, and reconveyance or settlement documents" are excludable "if the fees are bona fide and reasonable in amount." 12 C.F.R. § 226.4(c)(7). Plaintiffs advance essentially the same arguments on appeal as they pursued before the district court, although they characterize them somewhat differently.

First, plaintiffs argue that the fee charged by Huntington is not bona fide because it is not "exactly what it purports to be." Plaintiffs go to great lengths to establish that the court must adopt this dictionary definition of "bona fide," in accordance with TILA's definition provisions. This means, they suggest, that Huntington can charge only its costs of preparing title-related documents, such as notes, mortgages, and deeds. This is so, the argument goes, because Huntington itself claimed that these were what the fee was for by entering the amount of $250 on Line 1105 of the Good Faith Estimate form required by Regulation X. As the district court noted, this is a strained effort by plaintiffs to bootstrap an arguable violation of Regulation X, for which there is no private right of action, into a TILA violation. Regulation X is simply not germane to plaintiffs' TILA claim. See Inge v. Rock Financial Corp., 281 F.3d 613, 626 & n. 4 (6th Cir. Feb.26, 2002). Moreover, the plaintiffs seemingly ignore the plain language of Regulation Z, which permits the exclusion of fees for the preparation of not only mortgages and deeds, but also "settlement documents" — a broad term that would seem to encompass any other documents necessary for the closing of a mortgage loan. The appendix to Regulation X, which provides instructions for filling out the Good Faith Estimate form, states that Line 1105 is for the entry of "charges for preparation of deeds, mortgages, notes, etc." The inclusion of the term "etc." in the Regulation X, Line 1105 definition arguably leaves room for fees for the preparation of settlement documents other than title-transferring documents. But even assuming arguendo that the Line 1105 definition is limited to only title-transferring documents, it does not establish a violation of Regulation Z, which contains a different definition. Like the district court, we reject plaintiffs' strained construction of the applicable regulations.

Next, plaintiffs argue that the document preparation fee is not bona fide because Huntington's own regional manager, John Burmeister, admitted that the fee was for loan origination costs. In considering this argument, it is crucial to separate Huntington Mortgage Company from its predecessor, First...