Parker v. Long Beach Mortg. Co.

• Decision Date: 03 January 2008
• Docket Number: Civil Action No. 06-2002.
• Citation: 534 F.Supp.2d 528
• Parties: Roger B. PARKER, et al. v. LONG BEACH MORTGAGE COMPANY, et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

534 F.Supp.2d 528

Roger B. PARKER, et al. v. LONG BEACH MORTGAGE COMPANY, et al.

Civil Action No. 06-2002.

United States District Court, E.D. Pennsylvania.

January 3, 2008.

COPYRIGHT MATERIAL OMITTED

David A. Scholl, Newtown Square, PA, for Roger B. Parker, et al.

Alison Altman Gross, Pepper Hamilton LLP, Andrew J. Soven, Elizabeth F. Abrams, Reed Smith, LLP, Stephen G. Harvey, Pepper Hamilton LLP, Frank R. Emmerich, Jr., Conrad O'Brien Gellman & Rohn, PC, Thomas J. Gregory, Murphy & O'Connor, LLP, Martin C. Bryce, Jr., Michael I. White, Ballard Spahr Andrews and Ingersoll, L.L.P., Philadelphia, PA, Joy Harmon Sperling, Day Pitney LLP, Morristown, NJ, for Long Beach Mortgage Company, et al.

MEMORANDUM AND ORDER

JUAN R. SANCHEZ, District Judge.

The dispute Roger and Sally Parker have with a broker and four lending institutions embodies many of the factors identified with predatory, subprime mortgage loans:¹ an aggressive mortgage broker, no document loans, interest climbing to double-digit rates, escalating payments, balloon payments, prepayment penalties, and negative amortization. As distasteful as the practices may be,² that odor of opportunism is not enough to save the Parkers, relatively sophisticated borrowers, from themselves.

The testimony of the Parkers was insufficient to overcome the paper trail presented by the seven Defendants in a bench trial on the Parkers' Truth — in — Lending Act, 15 U.S.C. § 1601 et seq., RESPA³, and state law claims against Long Beach Mortgage Company; Washington Mutual Home Loans; MortgageIT, Inc.; HSBC Bank, U.S.A. N.A.; Countrywide Home Loans, Inc., and the broker, Lancealott Financial Group, Inc. At the close of the Parkers' case, I found the Parkers failed to present sufficient credible testimony or evidence to support their claims and I granted Defendants's Motions pursuant to Federal Rule of Civil Procedure 52(c).

FINDINGS OF FACT⁴

The Parkers assumed four mortgage loans in October and November, 2005, two on a townhouse in West Conshohocken, Pennsylvania, and two refinancing their home in Blue Bell, Pennsylvania. The Parkers are college-educated business owners who have bought, financed, and sold two prior homes. Sally Parker had completed her studies for her Real Estate Broker's license and was ready to take the examination at the time she attended the first settlement in October, 2005. Ex. 46, unnumbered p. 11.

When they decided to buy a smaller house on Nathan's Place, West Conshohocken, the Parkers used the services of a mortgage broker, Lancealott Financial Group Inc. The Parkers asked for a no-document loan, allowing them to borrow on their stated income rather than their proved income. The. Parkers timid, not produce tax returns for the prior year because the forms had not been filed. Sally Parker testified she and her husband have credit scores in the high 600s and in the 700s respectively but were looking for a no-document loan because "we have a lot of write-offs," so their tax returns "don't look so great." Sally Parker told Jack Weinstein, the broker at Lancealott, the terms of a mortgage to buy Nathan's Place were important to them, and she hoped to spend about $1700 a Month on the new mortgage.

Almost a month before settlement, the Parkers received Early Disclosures from Long Beach Mortgage Company. Roger Parker's hand-written notes, "on Sept 18 with [sic] finally got our good faith estimate, two loans at 8.77% and 10.534%," Ex. 46, unnumbered p. 20, contradict Sally Parker's testimony she opened the package "about a week before settlement and had a fit." Sally Parker testified she did not know the mortgage for Nathan's Place would be stated as two loans, one for 80 percent of the purchase price and the other for 20 percent of the purchase price.

The package the Parkers received included seven documents from Long Beach Mortgage Company, the cover letter of which was stamped in red "EARLY DISCLOSURE." Ex. 15. The first was a preliminary Truth-in-Lending disclosure itemizing:

. an 8.7 percent annual credit rate;

. a total finance charge for the length Of the loan of $634,636.12;

. a loan amount of $334,723.50;

. total payment of $969,259.62; paid as

. 24 payments of $2,226.72 monthly beginning November 1, 2005;,

. six payments of $2,668.44 monthly beginning November 1, 2007;

. 330 payments of $2,726.69 monthly beginning May 1, 2008;

. a disclosure of the variable rates

. a disclosure which said "If you pay off your loan early, you will not have to pay a penalty." Ex. 15.

The Truth in Lending disclosure also defines annual percentage rate, prepaid finance charges, finance charge, amount financed, total of payments, and payment schedule. The second document Long Beach supplied the Parkers was a RE SPA Servicing Disclosure which revealed Long Beach's intent to reassign the Parkers' loan and its servicing. The Parkers also received in the mailing a disclosure of a "2 year fixed/adjustable rate loan principal dwelling program disclosure." Ex. 15. The document states under a heading "HOW YOUR INTEREST RATE CAN CHANGE" that "[t]he initial rate will be fixed for the first two year period, and may adjust every six months thereafter." Ex. 15, WM-104. Long Beach Mortgage told the Parkers they could receive Long Beach's "best price" for a loan if they accepted a prepayment penalty and verified their income. The good faith document shows the purchase price as $426,952.00 and a loan amount of $341,561.00.

The Parkers also received an Early Disclosure packet for the small loan, showing a fixed rate loan of $84.110.70 at 10.534 percent payable in 360 payments of $771.55 with no prepayment penalty.

Sally Parker testified she only attended the settlement for Nathan's Place to protect her deposit on the townhouse. She stated she never intended to go through with settlement on the terms in the early disclosure packet. During settlement, a telephone call was made to Washington Mutual, seeking promises of a "better rate." The Parkers admitted the builder of Nathan's Place, from whom they were buying the house, was willing to delay settlement to allow the Parkers time to find a mortgage with better terms. Sally Parker claims she was prepared to leave settlement but stayed because Weinstein told her she had to go through with this settlement to get the better rates later. Sally Parker testified she only learned there were two loans after settlement when she went home and "went through the papers." Her testimony is contradicted by the documents the Parkers signed at settlement.

Both Parkers testified they had time and an opportunity to review all the documents they signed at settlement. On October 14, 2005, both Parkers signed and initialed each page of two loan applications with a stated monthly income of $30,000. Ex's 12 and 13. The Parkers received good faith estimates of closing costs and HUD-1 documents for both loans. Ex's 21, 22, 23, and 24.

Roger Parker signed the Truth-in-Lending statement at settlement which showed:

. an 9.279 percent annual percentage rate;

. a total finance charge for the length of the loan of $650,238.54;

. a loan amount of $325,696.74;

. total payment of $975,935.28; paid as

. 24 payments of $2,507.67 monthly beginning December 1, 2005; and,

. 336 payments of $2,725.45 monthly beginning December 1, 2007;

. a disclosure of the variable rates; and,

. a disclosure which said "If you pay off your loan early, you may have to pay a penalty."

Ex. 25. Roger Parker also signed at settlement a Truth — in — Lending Disclosure Statement for the smaller loan showing a loan amount of $82,081.10 payable at 10.494 percent in 360 monthly payments of $750.48. The statement shows no variable rate feature but it does show a prepayment penalty. Ex. 27.

Roger Parker also signed a "Notice Regarding Your Transaction" which described the loan as an 80/20 transaction with 80 percent of the purchase price as a first lien and 20 percent as a second lien. When he signed, Roger Parker confirmed he understood the transaction included "two separate sets of loan documents, including two separate loan agreements and two separate securing agreements." Ex. 28, WM-587. The notice also discloses the possibility of a prepayment penalty and directs the borrower in capital letters to "CHECK YOUR PROMISSORY NOTE BEFORE YOU SIGN TO CONFIRM WHETHER YOUR LOAN INCLUDES A PREPAYMENT FEE." Ex. 28, WM-587.

At settlement for Nathan's Place, Roger Parker also signed an Occupancy Agreement to occupy the property as his primary residence for the 12-month period immediately following the loan closing. The Agreement defines (in bold-faced capital letters) failure to occupy the property as the primary residence as a default under the Note and Security Instrument. Ex. 29. Roger Parkers also signed a RESPA Servicing Disclosure, Ex. 30; an affiliation disclosure, Ex's 31 and 33; and, a nonrefundable fee disclosure, Ex. 32;. Both Parkers signed and initialed each page of the Mortgage. Ex. 34. Roger Parker signed the Fixed/Adjustable Rate Disclosure. Only Roger Parker signed the Promissory Note which included a notice of a prepayment penalty of three percent of the total amount borrowed if made in the first year of the loan and two percent in the second year of the loan. Both Parkers signed the documents escrowing a portion of the settlement funds for the completion of the builder's punch-list. The Parkers received a check for $40,166.38, the amount by which the two loans exceeded the amount owed the builder for Nathan's Place. Ex. 23.

Six days before settlement on Nathan's Place, and around the same date Silly Parker testified she "had a fit" aver the terms of the Nathan's Place loans the Parkers completed a Universal Residential Loan Application to mortgage their Willowbend Road, Blue Bell, home for $675,000. On November 1, 2005, the Parkers completed a second Uniform. Residential Loan Application to borrow $129,000 against the Willowbend Road home. Both...