Wolf v. Fed. Nat'l Mortg. Ass'n

• Citation: 830 F.Supp.2d 153
• Decision Date: 23 November 2011
• Docket Number: Case No. 3:11–cv–00025.
• Court: U.S. District Court — Western District of Virginia
• Parties: Elayne WOLF, Plaintiff, v. FEDERAL NATIONAL MORTGAGE ASSOCIATION, et al., Defendants.

830 F.Supp.2d 153

Elayne WOLF, Plaintiff,

v.FEDERAL NATIONAL MORTGAGE ASSOCIATION, et al., Defendants.

Case No. 3:11–cv–00025.

United States District Court, W.D. Virginia,Charlottesville Division.

Nov. 23, 2011.

Henry Woods McLaughlin, III, The Law Office of Henry McLaughlin PC, Richmond, VA, for Plaintiff.

Jacob Scott Woody, McGuire Woods LLP, Charlottesville, VA, Peter Imants Grasis, Rathbun & Goldberg, PC, Fairfax, VA, for Defendants.

MEMORANDUM OPINION

NORMAN K. MOON, District Judge.

In this action, Plaintiff Elayne Wolf (“Wolf”) seeks rescission of her home mortgage loan under the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601, et seq. On August 30, 2011, I denied Defendants' motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), finding that they were moot in light of Wolf's filing of an amended complaint on August 22, 2011. However, I gave Defendants leave to re-file their motions within fourteen days, which they in turn did. This matter is now before the Court upon consideration of Defendants' motions to dismiss Wolf's amended complaint. For the reasons that follow, I will grant Defendants' motions.

I. Background

As amended, the complaint alleges that Wolf owned a home in Charlottesville, Virginia, and that on May 14, 2007, she refinanced her home mortgage loan through MetroCities Mortgage, LLC (“MetroCities”). Her loan from MetroCities was evidenced by a note secured by a deed of trust, and was secured by a lien on the home. One purpose of the home loan was to enable Wolf to refinance debt she owed to Countrywide Home Loans (“Countrywide”). The deed of trust named Mortgage Electronic Systems, Inc. (“MERS”) as the lender's nominee, and MERS held legal title as to rights conveyed by the deed of trust and could take certain actions on behalf of the lender, including foreclosure.

Ultimately, Wolf defaulted under the terms of her mortgage loan, and, on or about March 12, 2010, she received a letter from the Law Offices of Shapiro & Burson, LLP informing her of her rights and alternatives to foreclosure. On March 30, 2010, MERS assigned the deed of trust to BAC Home Loans Servicing LP (“BAC”), a former subsidiary of Defendant Bank of America, N.A. (“Bank of America”).¹ On that same date BAC appointed Defendant Professional Foreclosure Corporation of Virginia (“PFC”) as substitute trustee in place of the original trustee under the deed of trust, Michael J. Barrett (“Barrett”). BAC instructed PFC to foreclose, and PFC advertised a foreclosure sale for May 5, 2010. On May 2, 2010, just a few days before the date of the scheduled foreclosure sale, Wolf attempted to rescind her mortgage loan pursuant to TILA by mailing a notice of rescission to BAC. As a result, BAC temporarily cancelled the foreclosure sale; however, PFC did later conduct the foreclosure sale in July 2010. Defendant Federal National Mortgage Association (“Fannie Mae”) purchased the property at the foreclosure sale, and the property was transferred by trustee's deed to Fannie Mae on or about October 7, 2010.

Thereafter, Fannie Mae instituted an unlawful detainer action against Wolf in the General District Court of Albemarle County. On March 18, 2011, the general district court entered an order awarding possession of the home to Fannie Mae. Subsequently, Wolf timely perfected an appeal to the Circuit Court of Albemarle County for a trial de novo.² Wolf filed her initial complaint in this action on February 24, 2011 in the same court. PFC removed the action to this Court on March 21, 2011.

In her amended complaint, Wolf submits that she is entitled to have the home loan on which she defaulted rescinded pursuant to TILA. First, she alleges that the original lender, MetroCities, materially under-disclosed the applicable finance charge that was assessed as part of obtaining the loan. Second, Wolf alleges that her right to rescind the loan itself was not properly disclosed. In addition, Wolf asserts that both the assignment of the note from MERS to BAC and BAC's appointment of PFC as substitute trustee were invalid. The amended complaint also arguably makes out claims for fraud (against Bank of America and PFC), defamation (against PFC), and breach of the implied covenant of good faith and fair dealing (against Bank of America).³ With respect to relief, Wolf requests the entry of a declaratory judgment that her notice of rescission is valid and an order returning the home's title to her. Additionally, Wolf seeks statutory damages under TILA, compensatory and punitive damages, and attorney's fees.

II. Standard of Review

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of a complaint to determine whether the plaintiff has properly stated a claim; “it does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir.1992). In considering a Rule 12(b)(6) motion, a court must accept all factual allegations in the complaint as true and must draw all reasonable inferences in favor of the plaintiff. Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). Legal conclusions in the guise of factual allegations, however, are not entitled to a presumption of truth. Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950–51, 173 L.Ed.2d 868 (2009). Although a complaint “does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citations and quotations omitted). Thus, “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Id.

In sum, Rule 12(b)(6) does “not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face.” Id. at 570, 127 S.Ct. 1955. Consequently, “only a complaint that states a plausible claim for relief survives a motion to dismiss.” Iqbal, 129 S.Ct. at 1950.⁴ If, after accepting all well-pleaded allegations in the plaintiff's favor, it appears that the plaintiff cannot prove any set of facts in support of his claim entitling him to relief, a motion to dismiss under Rule 12(b)(6) should be granted. Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir.1999).

III. Discussion

A. TILA

In enacting TILA, Congress found “that economic stabilization would be enhanced ... by the informed use of credit.” 15 U.S.C. § 1601(a). Accordingly, TILA's principal goal is the “meaningful disclosure of credit terms.” Id. TILA's rescission provisions support this goal. Generally, when a borrower enters into a consumer credit transaction secured by his principal residence, TILA's “buyer's remorse” provision grants a right of rescission, which the creditor must “clearly and conspicuously disclose” to the borrower. 15 U.S.C. § 1635(a). The right of rescission may be exercised within three days of either closing, delivery of a notice of right to rescind, or delivery of all “material disclosures,” whichever occurs last. Id.; 12 C.F.R. §§ 226.23(a)(1)-(3).⁵ However, if the required notice or material disclosures are not provided, or are deficient in certain ways, the deadline for rescission is extended to three years. See 15 U.S.C. § 1635(f); 12 C.F.R. § 226.23(a)(3). The material disclosures provided to a borrower must “reflect the terms of the legal obligation between the parties.” 12 C.F.R. § 226.17(c)(1).

TILA requires that the mortgage lender disclose the applicable finance charge for a mortgage, which is defined as “the sum of all charges, payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit.” 15 U.S.C. § 1605(a). Thus, the finance charge is the cost to the borrower of obtaining the loan, and includes such payments as interest, service charges, loan fees, and mortgage-broker fees. Id.; see also Hudson v. Bank of Am., N.A., No. 3:09–cv–462, 2010 WL 2365588, at *3 (E.D.Va. June 11, 2010) (defining “finance charge” under TILA). In her amended complaint, Wolf alleges that MetroCities, the original lender, assessed three under-disclosed finance charges. First, she claims that MetroCities imposed “a bogus $10 charge which was claimed to have been included in a charge disclosed to her as for recordation costs at the clerk's office but in fact not paid to the office of the clerk.” Am. Compl. ¶ 11(A)(i). Second, Wolf states that MetroCities required a payment to Countrywide that was $1,195.44 in excess of what was owed to Countrywide. Countrywide refunded the entire sum to Wolf after two months, but did not compensate Wolf for the interest on the excess sum, which Wolf calculates as $15.00 based on the note's interest rate. Am. Compl. ¶ 11(A)(ii). And third, Wolf maintains that MetroCities imposed an “excess” charge for casualty insurance that Wolf asserts “was at least $50 more than reasonable.” Am. Compl. ¶ 11(A)(iii).

In addition to disclosure of the finance charge, TILA also mandates that the lender accurately disclose the borrower's right to rescind the loan. As previously mentioned, creditors must provide a notice that “clearly and conspicuously disclose[s]” the borrower's rescission rights. 15 U.S.C. § 1635(a); 12 C.F.R. § 226.15(a)-(b). Clear and conspicuous disclosure is not, however, synonymous with perfect disclosure. See Santos–Rodriguez v. Doral Mortg. Corp., 485 F.3d 12, 16 (1st Cir.2007); Veale v. Citibank, 85 F.3d 577, 581 (11th Cir.1996).

In this case, MetroCities required Wolf to enter into an arbitration agreement as a condition of the loan. Thereafter, Wolf was informed about her right to rescind that arbitration agreement as well as her right to rescind the loan...