Whitley v. Taylor Bean & Whitacker Mortg. Corp.
| Decision Date | 20 April 2009 |
| Docket Number | No. 08 C 3114.,08 C 3114. |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | Ida Mae WHITLEY, Clyde Whitley and Kenna Whitley, Plaintiffs, v. TAYLOR BEAN & WHITACKER MORTGAGE CORP., Advance Lending Group, Corp., Oswald Ochoa, John Frey Ospina, Anita Logan, Favian Cardenas, Blue Horizon Real Estate Corp., and Does 1-10, Defendants. |
Al Hofeld, III, Law Offices of Al Hofeld, III, LLC, Chicago, IL, for Plaintiffs.
Thomas Justin Cunningham, Nathan W. Lamb, Simon A. Fleischmann, Locke Lord Bissell & Liddell LLP, Chicago, IL., for Taylor Bean & Whitaker Mortgage Corp.
Nancy Anne Temple, Joshua Richard Diller, Katten & Temple, LLP, Chicago, IL, for Advance Lending Group Corp, Oswaldo Ochoa, and Jhonfrey Ospina.
Sidney Abelski, Abelski & Associates, Ltd., Chicago, IL, for Favian Cardenas and Blue Horizon Real Estate Corp.
Ida Mae Whitley ("Mrs.Whitley"), Clyde Whitley ("Mr.Whitley"), and their adult daughter Kenna Whitley ("Kenna") (collectively "Plaintiffs") bring this action against Taylor, Bean & Whitacker Mortgage Corp. ("TB & W"), Advance Lending Group, Corp. ("Advance Lending"), Blue Horizon Real Estate Corp. ("Blue Horizon"), Oswald Ochoa ("Ochoa"), John Frey Ospina ("Ospina"), Anita Logan ("Logan") and Favian Cardenas ("Cardenas") (collectively "Defendants") alleging violations of the Credit Repair Organizations Act, 15 U.S.C. § 1679b ("CROA"), the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601, et seq ("RESPA"), the Fair Housing Act, 42 U.S.C. § 3605 ("FHA"), the Equal Credit Opportunity Act, 15 U.S.C. § 1691 ("ECOA"), and the Civil Rights Act, 42 U.S.C. § 1981, along with various state law violations. (R. 19, Am.Compl.) Currently before the Court are four motions to dismiss filed by Logan (R. 35), TB & W (R. 38), Advance Lending, Ochoa, and Ospina ("Advance Lending Defendants") (R. 42), and Blue Horizon and Cardenas (R. 46). For the reasons stated below, the motions to dismiss are denied in part and granted in part.
In January 2006, Plaintiffs contacted Cardenas, an Illinois licensed real estate broker, through Blue Horizon, Cardenas' brokerage firm, for assistance with purchasing their first home. (R. 19, Am. Compl. ¶¶ 9, 16.) Kenna asked Cardenas to "do for [her parents] what you would do for your own parents." (Id. ¶ 16.) Plaintiffs allege that instead Cardenas took advantage of the fact that they were unsophisticated, first-time home buyers and showed them homes that he knew they could not afford. (Id. ¶¶ 17, 18.) In April 2006, Plaintiffs decided they wanted to purchase a home that Cardenas showed them at 8519 S. Kenton in Chicago. (Id. ¶ 19.) Plaintiffs allege that Cardenas did not advise them on how to make an informed offer or how to negotiate the purchase price or other terms of the contract. (Id.) After Plaintiffs' offer of $294,000, the asking price of the house, was accepted, Cardenas arranged many aspects of the transaction including the appraisal, the closing attorney, the home owner's insurance policy and financing. (Id. ¶¶ 20, 53.)
TB & W was utilized as the lender and Advance Lending and its president, Ochoa, as the mortgage broker to finance Plaintiffs' home purchase. (Id. ¶¶ 7, 8, 20.) Ochoa worked with Ospina, an employee of LaSalle Bank, to process the loan for Plaintiffs. (Id. ¶ 10.) Daniel Sompolski ("Sompolski"), an Illinois licensed appraiser and real estate broker, conducted an appraisal of the property. (Id. ¶ 50.) In his report, Sompolski appraised the property for $295,000. (Id. ¶¶ 50, 55.) Plaintiffs allege that this value had been agreed upon in advance of the appraisal inspection and was "significantly and artificially inflated relative to comparable homes in the area." (Id. ¶¶ 53, 55.) Plaintiffs further allege that a significant amount of Sompolski's business came from Advance Lending and that he obliged their request to arrange a "fraudulently inflated appraisal of the market value of the property" in order to continue to receive business from the company. (Id. ¶¶ 52, 54.)
To process their loan application, Mr. and Mrs. Whitley provided Defendants with three years of their personal tax returns, Mrs. Whitley's paycheck stubs for six months, and bank statements and rent receipts for twelve months. (Id. ¶¶ 37, 38.) Instead of using the information provided, however, Plaintiffs allege that Defendants "fabricated an entire socio-economic profile" of Mrs. Whitley and utilized this "made-up financial and other information" in the application for financing. (Id. ¶ 39.) Specifically, the loan application completed by Logan, an employee of TB & W, stated that Mrs. Whitley is a white female with a college degree, employed by the City of Chicago as a mechanic making $6,800 per month in gross income or $81,600 annually. (Id. ¶ 40.) In reality, Mrs. Whitley is African-American and has a seventh grade education. (Id. ¶¶ 5, 42.) Although she is employed by the City of Chicago, she works as a garage assistant responsible for checking the fluid levels on trucks, not a mechanic, and makes $16.50 per hour which translates to $2,840 in gross income per month and $34,000 annually. (Id. ¶¶ 43, 44.) In addition, Plaintiffs were paying $925 per month in rent, not $1,100 as stated in the loan application. (Id. ¶ 45.) Although Mr. Whitley receives Social Security benefits as income, Defendants decided not to use Mr. Whitley as a co-borrower; Mrs. Whitley was listed as the sole borrower on the loan. (Id. ¶¶ 46, 47.)
On or about May 30, 2006, Plaintiffs closed on the house. (Id. ¶ 28.) Cardenas was not present, and Plaintiffs allege that the "signing was rushed." (Id. ¶¶ 28, 29.) Plaintiffs claim that they did not receive any explanation about the contents of the documents they signed or the terms of their financing and were not given copies of all the documents to take home with them. (Id. ¶¶ 29, 31.) The property was financed for 100% of its value through an "80/20" loan financing arrangement, under which the mortgage obligation would be split into two loans. (Id. ¶ 32.) Plaintiffs, however, did not discover that they had been given two loans until two months following closing, when after making the first payment in the amount of $2,077.34 to TB & W they received a phone call from Citimorgage, Inc. ("Citi") claiming that $462.58 for their second loan was overdue. (Id.)
Plaintiffs claim that they were never properly informed that their mortgage payment would be $2,539.92 per month. (Id. ¶ 33.) Plaintiffs allege that Cardenas assured them that their payment would not be more than $1,800 including principal, interest, and escrow amounts for taxes and insurance, that after six months they could refinance with him for a lower interest rate and payment, and that they would receive a $8,000 rebate on the purchase of the home after closing. (Id. ¶ 22, 23, 24.) Plaintiffs allege that they never received any written, preliminary disclosures of loan terms such as a good faith estimate of settlement charges or a preliminary Truth-In-Lending disclosure statement from mortgage lender TB & W or broker Advance Lending. (Id. ¶¶ 6, 7, 26.) Nor did they receive any written or oral notification of change in the payment amount or loan terms that were quoted by Cardenas. (Id. ¶ 34.)
Plaintiffs further allege that Defendants "knew or should have known that [Plaintiffs] could not afford to make the payments" and "fraudulently or negligently represented to [Plaintiffs] that they could afford the home." (Id. ¶ 66.) Plaintiffs allege that Defendants used an inflated home value and false employment and educational information for Mrs. Whitley to increase their commissions and that TB & W assigned Mrs. Whitley an interest rate higher than what she qualified for. (Id. ¶¶ 66, 67.) By inducing Mrs. Whitley into the financing arrangement, Plaintiffs allege that TB & W, Logan, Advance Lending, Ospina and Cardenas, all benefitted with higher percentage-based, closing fees and commissions. (Id. ¶ 67.) Plaintiffs also allege that TB & W, who received interest-income and profits from the loans, paid "handsome yield spread premium payments" to Advance Lending in connection with the financing deal and that Cardenas received a "kickback" payment from the arrangement. (Id. ¶¶ 67, 69, 105.)
Plaintiffs could not afford the payments on the loans. (Id. ¶ 66.) In January 2008, TB & W initiated a foreclosure action against Mr. & Mrs. Whitley in the Circuit Court of Cook County. (Id. ¶ 72.) Although both Mr. Whitley and Kenna contributed to the mortgage obligation, the family has fallen behind in the payments on the larger, first-lien loan. (Id. ¶ 48, 66.) They have continued to make payments and are current on the second loan. (Id. ¶ 48.) Plaintiffs have tried three times to refinance the loans, but allege that because the mortgage indebtedness is greater than the actual value of the property and income support, their applications for refinancing have been rejected. (Id. ¶ 70.) Plaintiffs have also repeatedly requested that TB & W and Citi modify their loan arrangements, but these requests have also been denied. (Id. ¶ 71.)
On May 30, 2008, Plaintiffs filed their initial complaint which was amended on August 11, 2008. (R. 1, Compl.; R. 19, Am. Compl.) The amended complaint contains thirteen counts including violations of the CROA (Count I), RESPA (Count II) FHA (Count XII), ECOA (Count XIII) and the Civil Rights Act (Count XI). (R. 19, Am.Compl.) In addition, the amended complaint alleges a violation of the Illinois Consumer Fraud Act, 815 ILCS 505/2 ("ICFA") (Count V) as well as state law claims for fraud (Count III and IV), negligent misrepresentation (Count VI), negligence (Count VII), intentional/negligent infliction of emotional distress (Count VIII) and breach and inducement...
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