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Taggart v. Wells Fargo Home Mortgage

September 27, 2010

KENNETH J. TAGGART PLAINTIFF
v.
WELLS FARGO HOME MORTGAGE, INC., ET AL. DEFENDANTS



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

MEMORANDUM OPINION

Kenneth Taggart filed this complaint alleging various violations of the Real Estate Settlement & Procedures Act, the Truth in Lending Act, the Pennsylvania Unfair Trade Practices & Consumer Protection Law, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act. In addition, he alleges breach of contract and breach of fiduciary duty claims. Wells Fargo Home Mortgage Inc. filed this motion to dismiss Mr. Taggart's complaint. For the reasons set forth below, I will grant Wells Fargo's motion.

I. Background

In December, 2008, Kenneth Taggart applied to refinance his mortgage loan on property located at 709 Schwab Road, Hatfield, Pennsylvania.*fn1 Eagle Nationwide Mortgage Company acted as a broker and American Partners Bank funded the loan. Complaint at ¶¶ 8-9. The mortgage loan closed on December 16, 2008. Wells Fargo now services the loan, which is owned by a securitized trust. Complaint at ¶ 11.

At the time the mortgage loan closed, Mr. Taggart received the following documents: a U.S. Department of Housing & Urban Development settlement statement and a signed certification to addendum to HUD-1 settlement statement (acknowledging receipt of the HUD-1 settlement statement); a truth in lending disclosure statement; a good faith estimate of settlement charges; fee information from his mortgage broker; and a notice of right to cancel, which he signed. See Complaint at Exh. A1-A2, A5-A9; Memorandum of Law in Support of Motion to Dismiss Complaint at Exh. A, Taggart v. Wells Fargo Home Mortg., Inc., No. 10-843 (E.D. Pa. filed June 4, 2010).

On December 16, 2009, Mr. Taggart sent a letter to Wells Fargo alleging violations of the Truth In Lending Act and the Real Estate Settlement & Procedures Act, and seeking to rescind the loan. On December 17, 2009, Mr. Taggart sent a letter to Wells Fargo, stating it was a "qualified written request" and seeking the disclosure of various mortgage loan documents. See Complaint at Exh. A10-14.

The complaint alleges various violations of RESPA, TILA, the Pennsylvania Unfair Trade Practices & Consumer Protection Law, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act. In addition, the complaint raises breach of contract and breach of fiduciary duty claims.*fn2

II. Standard

A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure examines the legal sufficiency of the complaint. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). The factual allegations must be sufficient to make the claim for relief more than just speculative. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). In determining whether to grant a motion to dismiss, a federal court must construe the complaint liberally, accept all factual allegations in the complaint as true, and draw all reasonable inferences in favor of the plaintiff. Id.; see also D.P. Enters. v. Bucks Cnty. Cmty. Coll., 725 F.2d 943, 944 (3d Cir. 1984).

The Federal Rules of Civil Procedure do not require a plaintiff to plead in detail all of the facts upon which he bases his claim. Conley, 355 U.S. at 47. Rather, the Rules require a "short and plain statement" of the claim that will give the defendant fair notice of the plaintiff's claim and the grounds upon which it rests. Id. The "complaint must allege facts suggestive of [the proscribed] conduct." Twombly, 550 U.S. at 564. Neither "bald assertions" nor "vague and conclusory allegations" are accepted as true. See Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997); Sterling v. Se. Pa. Transp. Auth., 897 F. Supp. 893 (E.D. Pa. 1995). The claim must contain enough factual matters to suggest the required elements of the claim or to "raise a reasonable expectation that discovery will reveal evidence of" those elements. Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556).

III. Discussion

A. The Real Estate Settlement and Procedures Act (RESPA)

1. Whether the Mortgage Loan was a Business-Purpose Loan

Counts 1-9, 19, and 38 of Mr. Taggart's complaint allege violations of RESPA. RESPA "does not apply to credit transactions involving extensions of credit (1) primarily for business, commercial, or agricultural purposes...." 12 U.S.C. § 2606(a). The Code of Federal Regulations provides that "RESPA and [Part 3500] apply to all federally related mortgage loans, except for the exemptions provided in paragraph (b) of this section." Paragraph (b) provides an exemption for, among other items, "[a]n extension of credit primarily for a business, commercial, or agricultural purpose, as defined by Regulation Z, 12 CFR 226.3(a)(1). Persons may rely on Regulation Z in determining whether the exemption applies." 24 C.F.R. § 3500.5(b). Regulation Z exempts several categories of lending transactions, including "[a]n extension of credit primarily for a business, commercial or agricultural purpose." 12 C.F.R. § 226.3(a). The Truth in Lending Official Staff Commentary provides:

Credit extended to acquire, improve, or maintain rental property (regardless of the number of housing units) that is not owner-occupied is deemed to be for business purposes. This includes, for example, the acquisition of a warehouse that will be leased or a single-family house that will be rented to another person to live in.*fn3 46 Fed. Reg. 50288, 50297 (Oct. 9, 1981) (as amended 75 Fed. Reg. 7658 (Feb. 22, 2010)).

Wells Fargo argues the mortgage loan is not covered by RESPA because the Hatfield property was a rental property, not owner-occupied. In its reply, Wells Fargo attached two mortgage applications. In 2006, Mr. Taggart applied for a mortgage for property in Holland, Pennsylvania. On this application, Mr. Taggart listed his current address as the property in Holland, Pennsylvania and listed the Hatfield property as a rental property.

In 2008, when he submitted an application to refinance the Hatfield property, Mr. Taggart listed the Hatfield property as his primary residence. The application lists the Holland property as being owned by Mr. Taggart, but does not indicate it was rented. When he filed this lawsuit in 2010, he listed the Holland address as his primary address and the address to which he would like correspondence to be sent. In his response to Wells Fargo's motion to dismiss, he states he now rents the Hatfield property and lives at the Holland property.*fn4 He maintains, however, that he resided at the Hatfield property in 2008.

Because Mr. Taggart alleges the Hatfield property was his principal dwelling when he applied for the mortgage, the motion to dismiss will not be granted on this ground.

2. Statute of Limitations

In counts 1, 2, 5, 6, 7, 8, and 9, Mr. Taggart alleges violations of RESPA for failing to disclose various fees. Count 1 alleges Wells Fargo charged undisclosed fees to Mr. Taggart including a $375 broker processing fee. Count 2 alleges Wells Fargo failed to disclose all fees on the settlement sheet. Count 5 alleges Wells Fargo charged an undisclosed predatory lending fee of $4,100.40 for unearned fees. Count 6 alleges Wells Fargo charged an undisclosed $486.44 interest fee and other unearned fees. Count 8 alleges Wells Fargo charged an undisclosed $695.00 commitment fee and other unearned fees. Count 9 alleges Wells Fargo charged broker fees and yield spread premiums in excess of normal market fees and engaged in predatory lending by charging higher than current market rates for the loan.

RESPA provides: "Any action pursuant to the provisions of section 2605, 2607, or 2608 of this title may be brought in the United States district court... within 3 years in the case of a violation of section 2605 of this title and 1 year in the case of a violation of section 2607 or 2608 of this title from the date of the occurrence of the violation...." 12 U.S.C. § 2614.

Section 2607 provides a prohibition against kickbacks and unearned fees and applies to counts 1, 2, 5, 6, 8, and 9. To raise a private cause of action pursuant to 2607 challenging unearned fees, a plaintiff must file a lawsuit within one year of "the date of the occurrence of the violation." The date of the violation is the date of closing. See Morilus v. Countrywide Home Loans, Inc., 651 F. Supp. 2d 292, 306 (E.D. Pa. 2008) (statute required an action for kickbacks to be brought within one year of the date of the occurrence of the violation, which was the date of the closing).

Mr. Taggart's mortgage loan closed on December 16, 2008 and the funds were disbursed on December 22, 2008. This was more than one-year before the filing of the complaint on March 1, 2010. On December 16, 2008, Mr. Taggart signed a certification addendum to HUD-1 settlement statement, which stated:

I have carefully reviewed the HUD-1 settlement and to the best of my knowledge and belief, it is a true and accurate statement of all receipts and disbursements made on my account or by me in this transaction. I further certify that I have received a copy of the HUD-1 Settlement Statement. Memorandum of Law in Support of Motion to Dismiss Complaint at Exh. A.*fn5 Therefore, because the loan closed on December 16, 2008, the statute of limitations bars counts 1, 2, 5, 6, 8, and 9.

Mr. Taggart asserts the statute of limitations should be equitably tolled. Equitable tolling may apply: "(1) where the defendant has actively misled the plaintiff respecting the plaintiff's cause of action; (2) where the plaintiff in some extraordinary way has been prevented from asserting his or her rights; or (3) where the plaintiff has timely asserted his or her rights mistakenly in the wrong forum." Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1387 (3d Cir. 1994) (citing Sch. Dist. of City of Allentown v. Marshall, 657 F.2d 16, 19-20 (3d Cir. 1981)). "[T]o warrant equitable tolling, 'mere silence or nondisclosure is not enough to trigger estoppel[;] the adversary must commit some affirmative independent act of concealment upon which the plaintiffs justifiably rely in order to toll the statute." Garczynski v. Countrywide Home Loans, Inc., 656 F. Supp. 2d 505, 516 (E.D. Pa. 2009) (citing Marple v. Countrywide Fin. Corp., No. 07-4402, 2008 U.S. Dist. LEXIS 37705, at *8 (D.N.J. May 7, 2008)).

Mr. Taggart maintains Wells Fargo failed to disclose rates and forms. However, the Department of Housing and Urban Development Settlement Statement, attached to Mr. Taggart's complaint, lists a $695.00 commitment fee paid to American Partners Bank, a $375.00 processing fee paid to Eagle Nationwide Mortgage, and a $4,100.40 yield spread premium, which was paid outside of closing. Complaint at Exh. A8-A9. Mr. Taggart signed the certification addendum to HUD-1 settlement statement, acknowledging he received the HUD-1 settlement statement. Mr. Taggart fails to allege an affirmative act of concealment on the part of Wells Fargo which would justify tolling the statute of limitations.

I will grant Wells Fargo's motion to dismiss counts 1, 5, 6, 7, 8, and 9 because the claims are barred by the statute of limitations.

3. No Private Right of Action

Counts 3, 4, and 7 raise claims pursuant to 28 U.S.C. § 2603(b).*fn6 Count 3 alleges Wells Fargo failed to provide a good faith estimate prior to closing; count 4 alleges Wells Fargo failed to provide the mortgage documents and HUD-1 statement at least 24 hours prior to settlement; and count 7 alleges Wells Fargo failed to provide all RESPA disclosures three days after his application.

12 U.S.C. § 2614 provides "[a]ny action pursuant to the provisions of section 2605, 2607, or 2608 of this title may be brought in the United States district court or in any other court of competent jurisdiction...." The text of RESPA, therefore, does not provide a private right of action for claims under § 2603. In addition, courts have found no private right of action should be implied. See Taggart v. Norwest Mortgage, Inc., 2010 WL 114946, at *2 (E.D. Pa. Jan. 11, 2010) (finding a private right of action should not be implied for §§ 2603-2604); Loften v. Diolosa, No. 05-1193, 2008 WL 2994823, at *9 n.10 (M.D. Pa. July 31, 2008) (stating "§ 2603 does not explicitly provide for a private cause of action and courts have determined that no implicit cause of action exists under § 2603"); see also Brophy v. Chase Manhattan Mortg. Co., 947 F. Supp. 879, 882 (E.D. Pa. 1996) (finding RESPA did not provide a private right of action for § 2604).

Accordingly, I will grant Wells Fargo's motion to dismiss counts 3, 4, and 7.*fn7

4. RESPA Claims Regarding Qualified Written Requests

Claim 19 alleges Wells Fargo failed to respond to a qualified written request dated December 17, 2009. Claim 38 alleged Wells Fargo failed to respond when Mr. Taggart disputed the payment history, payments credited, and payment amounts. Claim 38 references Mr. Taggart's letters of December 16, 2009 and December 17, 2009.

12 U.S.C. § 2605(e) provides:

If any servicer of a federally related mortgage loan receives a qualified written request from the borrower (or an agent of the borrower) for information relating to the servicing of such loan, the servicer shall provide a written response acknowledging receipt of the correspondence within 20 days (excluding legal public holidays, Saturdays, and Sundays) unless the action requested is taken within such period.

A qualified written request is defined as: [A] qualified written request shall be a written correspondence, other than notice on a payment coupon or other ...


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