Roach v. Option One Mortg. Corp., 1:08cv225.

• Decision Date: 21 January 2009
• Docket Number: No. 1:08cv225.,1:08cv225.
• Citation: 598 F.Supp.2d 741
• Court: U.S. District Court — Eastern District of Virginia
• Parties: Crystal J. ROACH, Plaintiff, v. OPTION ONE MORTGAGE CORP., et al., Defendants.

598 F.Supp.2d 741

Crystal J. ROACH, Plaintiff, v. OPTION ONE MORTGAGE CORP., et al., Defendants.

No. 1:08cv225.

United States District Court, E.D. Virginia, Alexandria Division.

January 21, 2009.

COPYRIGHT MATERIAL OMITTED

Crystal J. Roach, Bristow, VA, pro se.

Stephen Todd Fowler, Reed Smith LLP, Falls Church, VA, for Defendants.

MEMORANDUM OPINION

T.S. ELLIS, III, District Judge.

In this TILA¹ suit, plaintiff, proceeding pro se, claims that when she refinanced her home mortgage in January 2005, the lender's agent misled her with respect to the monthly payment amounts she would be required to make pursuant to the adjustable rate mortgage ("ARM") she was assuming. Specifically, plaintiff contends that the lender's agent falsely represented to her that notwithstanding the contrary statements in the loan documents, her monthly payments would never exceed certain amounts. Defendants seek dismissal on the ground that plaintiffs claim is barred by TILA's one-year statute of limitations and on the further ground that certain of the named defendants are not "creditors" subject to TILA. Plaintiff seeks to avoid the one-year limitations bar by arguing that the lender's agent's misrepresentation that her payments would never exceed certain amounts warrants equitable tolling of TILA's statute of limitations. Defendants counter that the individual plaintiff claims made such misrepresentations to her was not defendants' agent, and that even if plaintiff could prove to the contrary, TILA's one-year statute of limitations nonetheless still bars plaintiffs suit because she did not file her TILA claim within one year of discovering the alleged fraud. Plaintiff responds that she complied with TILA's statute of limitations because she raised her TILA claim at a bankruptcy proceeding she filed within one year of becoming aware that her payments were not fixed as she had believed. Finally, defendants argue in the alternative that even if plaintiff's TILA claims are not time-barred, the undisputed facts nonetheless show that defendants complied with all applicable TILA disclosure requirements.

Defendants' motion to dismiss, now appropriately treated as a motion for summary judgment,² has been fully briefed and argued, including supplemental briefing and oral argument. Accordingly, the matter is now ripe for disposition. For the reasons that follow, defendants are entitled to summary judgment.

I³

Plaintiff Crystal J. Roach, a Virginia resident, is employed as a program examiner for the Office of Management and Budget. She holds a bachelor's degree in political science and a master's degree in public policy. Defendant Option One Mortgage Corp. ("Option One") is a mortgage lender that was, prior to 2007, a California corporation that maintained an office in Herndon, Virginia. In 2007, defendant H & R Block, Option One's parent company, sold Option One to American Home Mortgage Servicing, Inc., a Texas corporation. Defendant Deutsche Bank Trust Co. ("Deutsche Bank"), serves, inter alia, as a trustee holder of secured mortgage deeds of trust for the types of mortgages provided by Option One. And 1st Principle Mortgage, LLC ("1st Principle"), a Virginia corporation not named as a defendant here,⁴ serves as a broker between lenders like Option One and homeowners who seek to refinance their mortgages.

In 2004, plaintiff owned a four-bedroom home in Prince William County, Virginia. The home served as plaintiffs principal residence, and her parents and sister lived in the home with her. At some point between July 2004 and January 2005, plaintiff decided to help finance her sister's pursuit of a master's degree in a study-abroad program. Plaintiff did so by refinancing her existing mortgage in order to take advantage of an increase in the value of her home and obtain cash proceeds. To this end, she dealt with Ryan Samuel,⁵ a mortgage broker employed by 1st Principle. Specifically, Samuel arranged a refinancing agreement between plaintiff and Option One. Pursuant to the terms of the agreement, Option One provided plaintiff with a cash payment of $79,690.81 at the January 28, 2005 closing in exchange for plaintiffs assumption of an ARM on her residence. At that time, plaintiff was presented with, and signed, each of the following documents:

• A thirty-year "Adjustable Rate Note," which provided, inter alia:

(i) an initial 24-month fixed interest rate of 6.75%;

(ii) a "Change Date" of February 1, 2007, at which point the interest rate could increase to as much as 9.75% based on an agreed-upon market index;

(iii) the possibility, after the initial Change Date, of adjustments to the interest rate of as much as a full percentage point, but only based on the agreed-upon index and only after six months at any given rate; and

(iv) a fixed range of 6.75% to 12.75%, within which the interest rate would remain regardless of the agreed-upon index.

• A "Settlement Statement," which provided, inter alia:

(i) payoff of plaintiffs prior mortgage in the amount of $588,088.22;

(ii) settlement charges to Option One of $16,471.17, which included a $8,653.18 "broker fee" to be paid to 1 st Principle;

(iii) a new loan amount of $684,250; and

(iv) cash payment to plaintiff of $79.690.81.

• A one-page "Truth in Lending Disclosure Statement" ("TILA Disclosure Statement"), which included, inter alia:

(i) a checked box at the top of the page marked "Final";

(ii) specific disclosures in clearly-identified boxes regarding the annual percentage rate, finance charge, amount financed, and total of payments;

(iii) a payment schedule, listed as follows:

• "24 payments of $3,848.91 monthly, beginning Mar[.] 01, 2005"

• "36 payments of $4,918.05 monthly, beginning Mar[.] 01, 2007"

• "300 payments of $5,567.52 monthly, beginning Mar[.] 01, 2010"

(iv) a checked box marked "Variable Rate," located immediately beneath the payment schedule and followed by the statement, "This transaction is subject to a Variable Rate Feature. Disclosures about Variable Rate Feature have been provided to you earlier."

• An "Adjustable Rate Mortgage Loan Program Disclosure," which included, inter alia:

(i) an explanation of how the interest rate would be calculated;

(ii) statements that the interest rate "is fixed for the first 24 months" and "can change after 24 months and every 6 months thereafter";

(iii) an example of possible monthly payment increases, based on a $ 10,000 mortgage, from a beginning payment of $39.58 per month to a payment at the end of the fourth year of $89.58 per month; and

(iv) a notation that the "periodic payment may increase or decrease substantially depending on changes in the interest rate."

• An "Addendum to [the Adjustable Rate] Note for the Interest Only Payment Period," which included an acknowledgment that the interest rate "may change on the first day of February 01, 2007, and on that day every sixth month thereafter...."

• A "Summary of the Terms of Your Loan," which provided that the ARM was subject to an adjustable interest rate.

• A "Notice of Right to Cancel," which informed plaintiff of her right, pursuant to TILA, 15 U.S.C. § 1635, to rescind the agreement within three business days.

• A "Broker Compensation (YSP) and the Fees in Your Transaction," which informed plaintiff of a $10,263.75 broker compensation fee to be paid by Option One to 1st Principle in exchange for plaintiffs agreement to pay a higher interest rate on the refinanced mortgage.

Plaintiff admits that these documents were presented to her at closing and that she signed each of them. She also does not dispute that these documents, on their face, provide the accurate disclosures required by TILA. Yet, she nonetheless contends that she was misled at closing in two respects. First, she contends that in the course of the closing, Samuel advised her that the payment schedule listed on the TILA Disclosure Statement was the final payment schedule, and that the variable interest rate, as disclosed in the other documents, had already been calculated and would not affect her payments other than to increase them only twice over thirty years, as she mistakenly thought the payment schedule provided. Second, she contends that the box on the TILA Disclosure Statement marked "Final," which was checked here, confirmed the misrepresentation by Samuel that the payment schedule was fixed.

The two years following the closing were essentially uneventful, as plaintiff made timely payments in accordance with the initial 24-month fixed payment period. On January 17, 2007, as the end of that 24-month fixed-rate period approached, Option One notified plaintiff by mail that the interest rate on her mortgage would increase to 9.75% based on the terms of the loan and the current rate of the agreed-upon index. Specifically, Option One informed plaintiff that her monthly payment would increase to $5,559.53 beginning on March 1, 2007—$641.48 more than the $4,918.05 payment listed in the payment schedule on the January 28, 2005 TILA Disclosure Statement. The letter further advised plaintiff that her "minimum contractual interest rate is 6.75[]%" and that her "maximum contractual interest rate is 12.75[]%."⁶ In response to this January 17, 2007 notice, plaintiff sent a February 26, 2007 letter to Option One to express her belief that the notice did not reflect monthly payments consistent with her understanding of the mortgage terms.⁷

Thereafter, plaintiff made at least two payments in accordance with the increased monthly payment amounts. At some point prior to July 30, 2007, plaintiff ceased making payments entirely, and Option One accordingly placed her loan in foreclosure for non-payment. Plaintiff concedes that since that time, she has lived in the home without making any payments. On August 13, 2007, Deutsche Bank, holder of the mortgage's secured deed of trust, appointed Equity Trustees, LLC ("Equity") as substitute trustee. Subsequently, by letter dated August 21, 2007,...