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Jackson v. Accredited Home Lenders

August 21, 2009


The opinion of the court was delivered by: McLaughlin, J.


This action arises out of the refinancing of a mortgage loan brokered by Real Estate Mortgage Network, Inc. ("Mortgage Network"), and underwritten by Accredited Home Lenders, Inc. ("Accredited"). The plaintiffs allege that the defendants induced them to agree to a loan refinancing by making misrepresentations regarding the existence of a prepayment penalty and the availability of an additional refinancing within one year of the loan agreement. The defendants are Mortgage Network, Accredited, and Chase Home Finance, LLC ("Chase"), which the plaintiffs allege to be the assignee of the refinanced loan.

The plaintiffs filed their complaint on April 10, 2009, and an amended complaint on July 14, 2009. The amended complaint brings claims for violation of various federal and state statutes: (1) the Federal Truth in Lending Act ("TILA") (Count I), against Mortgage Network and Chase; (2) the Federal Credit Services Act ("CSA") (Count II), against Mortgage Network; and (3) the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL") (Count III), against all defendants.

The complaint also claims fraud and fraudulent misrepresentation (Count IV) against Mortgage Network. Chase has moved to dismiss all claims against it. The Court will grant Chase's motion. Count I against Chase is hereby dismissed; Count III against Chase is dismissed without prejudice.

I. Facts as Alleged in the Amended Complaint*fn1

In 2006, the plaintiffs approached Mortgage Network to refinance the mortgage loan on their residence located at 14 Penn Oak Lane in Oxford, Pennsylvania. The plaintiffs sought refinancing in order to lower their interest rate, pay off other debts, and obtain a mortgage that would include taxes. At Mortgage Network, the plaintiffs dealt with an employee named Brett Dexter ("Dexter"). The plaintiffs informed Dexter that they were seeking a loan that would include a tax escrow and would not have a prepayment penalty. Dexter told the plaintiffs that while they would be able to acquire a loan without a prepayment penalty, they would not be able to acquire one with a tax escrow provision in their stated payment range. Dexter told the plaintiffs that the best mortgage available to them would have an interest rate of approximately 11% and would not include taxes or a prepayment penalty. The loan also would not allow the plaintiffs to pay off their debts. The plaintiffs' monthly payments under this loan would be approximately $2,000, in addition to a monthly tax payment of approximately $1,000. Am. Compl. ¶¶ 20-28.

The plaintiffs told Dexter that they were reluctant to enter into a loan that did not achieve their initial goals of debt payment and tax escrow. Dexter told the plaintiffs that Mortgage Network would be able to refinance the mortgage under better terms within one year because the refinanced loan would not contain a prepayment penalty. The plaintiffs signed the refinanced loan agreement and other documents at the closing on July 26, 2006, after searching for and locating among the documents a document provided by Mortgage Network stating that there would not be a prepayment penalty. Id. ¶¶ 20, 29-33, 35; see also id. Ex. A.

Following one year of timely mortgage payments, the plaintiffs were contacted by an employee of Mortgage Network named Paul Walker ("Walker"), who told the plaintiffs that he had found a new refinanced loan that would pay off their existing debt, include a tax escrow, and feature a 6% fixed interest rate.

Walker later informed the plaintiffs, however, that they did not qualify for such a refinancing because their 2006 mortgage included a five-year prepayment penalty. To be eligible for the refinancing initially offered by Walker, the plaintiffs would have to incur a penalty of approximately $11,000. The plaintiffs fell behind on their taxes and were unable to pay other debts as a result of their inability to refinance. Id. ¶¶ 34-39, 51-52.

After searching their loan documents, the plaintiffs were unable to find any mention of a prepayment penalty. The plaintiffs contacted Chase, which sent the plaintiffs a copy of the documents in its possession relating to the plaintiffs' loan. Among the documents in the file sent to the plaintiffs by Chase was a Truth in Lending disclosure dated July 26, 2006, which was signed by the plaintiffs, and which stated that the terms of the plaintiffs' loan included existence of a prepayment penalty. Id. ¶¶ 40-45; see also Def.'s Mot. Ex. B.

The plaintiffs state that they believe that the loan documents were signed prior to any Truth in Lending Disclosures. They also claim that they did not see any disclosure identifying a prepayment penalty until they received the documents from Chase in August 2007. Id. ¶¶ 46-47.

II. Analysis

Chase moves to dismiss all claims against it for failure to state a claim; Chase also moves to dismiss the TILA claim against it for failure to comply with the applicable statute of limitations. The ...

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