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Braccia v. Arlington Capital Mortgage Corp.

November 9, 2009


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


This is a tort action brought by Nicholas J. Braccia and Karen C. Braccia (hereinafter referred to collectively as "the Braccias") against Arlington Capital Mortgage Corporation (hereinafter "Arlington") and its employee, Mark Pontz (hereinafter "Mr. Pontz") seeking damages for allegedly negligent misrepresentations made by Pontz during the Braccias' application for a mortgage loan from Arlington.

A bench trial was held on October 20, 2009. After considering the testimony of the witnesses, the exhibits received in evidence, and the arguments of counsel, the Court makes the following Findings of Fact and Conclusions of Law pursuant to Federal Rule of Civil Procedure 52(a):


1. On February 17, 2007, Ms. Braccia (nee Reiss) entered into an Agreement of Sale to sell her real property located at 344 Sherry Lane, Coatsville, PA (the "Old House"). (Stipulation of Uncontested Facts (hereinafter "St.") ¶ 1); (Trial Ex. D-13).

2. Settlement on the Old House was scheduled for April 3, 2007. (St. ¶2); (Trial Ex. D-13).

3. On February 18, 2007, the Braccias entered into an Agreement of Sale to purchase the real property located at 3 Kristen Drive, Coatsville, Chester County, PA (the "New House"). (St. ¶ 3); (Trial Ex. D-14).

4. The Agreement of Sale contained a mortgage contingency clause allowing the Braccias to cancel their purchase of the New House if they could not secure a commitment for a thirty-year conventional mortgage in the amount of $314,000 with an interest rate of between 6% and 7%. If the seller did not receive a copy of the Braccia's mortgage commitment by March 15, 2007, it was agreed that the mortgage commitment date would be extended unless the seller terminated the Agreement of Sale by written notice. (St. ¶ 4); (Trial Ex. D-13).

5. The closing on the New House was scheduled for March 23, 2007. (St. ¶ 5); (Trial Ex. D-14).

6. Ms. Braccia called Arlington in mid-February 2007 seeking a mortgage to finance the purchase of the New House. (Transcript of Non-Jury Trial Before the Honorable Jan E. DuBois, 39 (Oct. 20, 2009) (hereinafter "Tr.")); (Trial Exs. P-2(a), P-2(b)).

7. The Court finds that at all times material to this action, Arlington was a mortgage broker and mortgage banker engaged in the business of underwriting, marketing and selling mortgages to clients seeking to finance the purchase of homes.

8. Ms. Braccia spoke with Mr. Pontz, a branch manager and employee of Arlington. The two discussed the Braccias' financing needs and options. (St. ¶ 7); (Tr. 38).

9. Ms. Braccia told Mr. Pontz in their initial telephone conversation that the Braccias could only afford monthly payments in the range of $2,500 to $2,600. (Tr. 39). Mr. Pontz responded that "he was sure [the Braccias] could get into the range with what [the Braccias] wanted." (Tr. 39).

10. Mr. Pontz was informed at that time that the closing on the New House was scheduled for March 22, 2007. (St. ¶ 8).

11. During this initial discussion, the Braccias and Mr. Pontz discussed a loan product known as the "Smart Loan." (St. ¶ 9).

12. A Smart Loan is a loan that allows its recipient to make interest-only payments for a set number of years. At the end of the interest-only period, the remaining amount due on the loan is amortized. If a Smart Loan recipient voluntarily agrees to make higher payments during the interest-only period, the recipient's payments after the interest-only period are lower than they would have been should the recipient have paid only the interest. (Tr. 42, 124).

13. Mr. Pontz said he believed that the Braccias would qualify for a conventional mortgage and sent letters to the Braccias' broker, Chris Beebe, on February 13 and February 19,2007, stating that the Braccias "have excellent credit and are well-qualified to purchase a home priced as we discussed." (Trial Exs. P-2(a), P-2(b)).

14. The Braccias applied for the Smart Loan on February 22, 2007, submitting all of the documents Arlington required as part of its mortgage loan application. (St. ¶ 10); (Trial Ex. D-16); (Tr. 121).

15. The application signed by the Braccias contained a statement explaining that "[t]he lender cannot guarantee acceptance of a borrower's application into a particular loan program. The Lender will keep the borrower informed of the progress of the processing of the loan application in the event that problems arise in the processing or underwriting of the loan which may delay closing." (Trial Ex. D-16).

16. On February 22, 2007, Mr. Pontz provided the Braccias with a Real Estate Settlement Procedures Act (hereinafeter "RESPA", 12 U.S.C. § 2601 et seq.) Good Faith Estimate of the proposed Smart Loan with a monthly payment of $2,563.32 (hereinafter the "First Estimate").*fn1 (St. ¶ 11); (Trial Ex. P-1).

17. The First Estimate stated that the information it contained "reflect[s] estimates of the charges you are likely to incur at the settlement of your loan. The Fees listed are estimates -- the actual charges may be more or less." (Tr. Ex. P-1).

18. Ms. Braccia testified that she was aware that the numbers provided in the First Estimate were subject to change. (Tr. 83). She further testified that she knew that the First Estimate was not a loan commitment. (Tr. 84). She also knew that she would not know her actual monthly payments until all of the information related to the New House was verified. (Tr. 83).

19. The First Estimate reflected the terms of the Smart Loan. Each monthly payment in that estimate consisted of interest only, with no payment of principal, until the interest-only period of the loan ended. (Trial Ex. P-1); (Tr. 125).

20. The Court finds that neither Arlington nor Mr. Pontz represented that the Braccias would receive the Smart Loan reflected in the First Estimate. At all times, the Braccias knew that their application for a Smart Loan could be denied and that their monthly payments might be higher or lower than the one shown in the First Estimate.

21. To process the Braccias' application for the Smart Loan, Mr. Pontz collected the needed underwriting information from the Braccias and ordered an appraisal of the New House. (St. ¶ 12); (Tr. 123).

22. The appraisal of the New House was completed on or about March 12, 2007. (St. ¶ 13).

23. Arlington's underwriters reviewed the Braccias' application for a Smart Loan and placed it in suspense. (Tr. 125).

24. Mr. Pontz testified that once he was informed of the suspension, he reviewed the conditions of the suspense, determined they could not be overturned, and asked the underwriters to find the best alternative to the Smart Loan. (Tr. 126).

25. On March 22, 2007, approximately three hours before the scheduled closing on the Braccias' New House, Mr. Pontz informed the Braccias that underwriters at Arlington had denied their application for a Smart Loan but had approved them for a conventional loan. (St. ¶ 15).

26. At that time, Mr. Pontz provided the Braccias with a revised Good Faith Estimate (hereinafter the "Second Estimate") reflecting a $314,000 conventional loan at an interest rate of 6.75% and monthly payments of $2,865.60.*fn2 (Trial Ex. P-3).

27. Mr. Pontz told the Braccias that the increase in the estimated monthly payments was due to the fact that they had not qualified for the Smart Loan. (St. ¶ 17).

28. The terms of the conventional loan satisfied the mortgage contingency clause in the Agreement of Sale for the New House. (St. ¶ 4); (Trial Exs. P-3, D-13).

29. Hoping to maintain cordial relations with his clients, Mr. Pontz offered to reduce his broker fee from 1.5% to 0.5% because of the increase in the amount of the monthly payments. At closing on March 22, 2007, the Braccias ...

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