THOMAS J. RIDDLE, individually and on behalf of all others similarly situated, Plaintiffs,
BANK OF AMERICA CORPORATION, et al., Defendants.
Berle M. Schiller, J.
Thomas Riddle and Marilyn Fischer, individually and on behalf of a putative class, claim that their mortgage lender, Bank of America (“BOA”), and private mortgage insurance companies were part of a scam involving kickbacks and unearned fees in violation of the Real Estate Settlement Procedures Act (“RESPA”). Defendants claim that Plaintiffs failed to bring their claims within RESPA’s statute of limitations. Plaintiffs seek to invoke the doctrine of equitable tolling to save their claims. Previously, the Court denied Defendants’ motion to dismiss and ordered the parties to conduct limited discovery on the statute of limitations and equitable tolling issues. That discovery is complete, and Defendants have moved for summary judgment. The Court grants Defendants’ motions for summary judgment.
Bank of America Corporation (“BAC”) is a large financial institution that owns BOA, which originated the home loans at issue. (Am. Compl. ¶¶ 28-29.) Bank of America Reinsurance Corporation (“BOARC”) is a captive reinsurer and a subsidiary of BAC. (Id. ¶ 30.) United Guaranty Residential Mortgage Insurance Company (“United”) and Genworth Mortgage Insurance Corporation (“Genworth”) are private mortgage insurers charged here with ceding premiums to BOARC and participating in the alleged kickback scheme. (Am. Compl. ¶¶ 31, 33.) Plaintiffs Riddle and Fischer bought their homes through mortgages with BOA and were required to purchase private mortgage insurance selected by the lender. (Id. ¶¶ 25-26.) Specifically, Riddle’s private mortgage insurer was Genworth, and Fischer’s private mortgage insurer was United. (Id.)
Home buyers who do not make a twenty percent down payment on their homes typically must buy private mortgage insurance. (Id. ¶¶ 8, 46.) This private mortgage insurance protects lenders if the borrower defaults. (Id.) The borrower typically pays for the private mortgage insurance, either through monthly premiums added to the mortgage payment or through a higher interest rate on the loan. (Id. ¶ 49.) The terms and conditions of private mortgage insurance are set by the lender and the provider of the insurance. (Id. ¶ 50.)
According to Plaintiffs, the lenders BAC and BOA, and their affiliated mortgage reinsurer, BOARC, colluded with various private mortgage insurers such as Genworth and United to evade federal laws that prohibit lenders from accepting kickbacks or referral fees from any person providing a real estate settlement service or accepting any portion of a settlement service fee, other than for services actually performed. (Id. ¶¶ 9-10.) In particular, Plaintiffs claims that BOA referred its borrowers to private mortgage insurers, such as United and Genworth, who agreed to reinsure with the lender’s captive insurer, BOARC. (Id. ¶ 75.) In return, United and Genworth ceded a percentage of the borrower’s premiums to the lender’s captive reinsurer to ensure a steady stream of business. (Id.) These contracts were structured so that the reinsurer received hundreds of millions of dollars in premiums but assumed little or no actual risk. (Id. ¶ 77.) The premiums were placed into a trust but the agreements “limit the lenders’ liability/payment responsibilities . . . through provisions that permit the captive reinsurer to effectively opt out of the contracts at will by simply failing to adequately capitalize the trust supporting the reinsurance contract.” (Id. ¶ 81.) Furthermore, once the trust was depleted, the private mortgage insurers assumed any remaining obligations and the captive reinsurer was off the hook. (See id. ¶ 124.)
According to Plaintiffs, the scheme violated RESPA, which prohibits giving or accepting “any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person” or accepting “any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.” 12 U.S.C. § 2607(a)-(b). Meanwhile, Plaintiffs contend that they and other borrowers overpaid for mortgage insurance because the price included the kickbacks to lenders. (Id. ¶¶ 111, 147 (“These arrangements tend to keep premiums for private mortgage insurance artificially inflated over time because a percentage of borrowers’ premiums are not actually being paid to cover actual risk, but are simply funding illegal kickbacks to lenders.”).) Furthermore, the scheme perpetrated by Defendants failed to constitute a real, risk-transferring reinsurance agreement between BOARC and the private mortgage insurers. (Id. ¶¶ 125, 131.)
B. Individual Claims and Reasonable Diligence
The Court refused to dismiss Plaintiffs claims as time-barred without any discovery on the statute of limitations issue. With that tailored discovery completed, the Court will set forth the facts uncovered.
Before closing on his loan in January of 2005, Riddle could not recall discussing mortgage insurance with anyone other than his lender, BOA. (Mot. of Defs. BAC, BOA, and BOARC for Summ. J. [BOA Defs. Summ. J. Mot.] Ex. 1 [Riddle Dep.] at 74.) He believed that he reviewed all of his loan documents. (Id. at 127.) He acknowledged receiving a document that informed him that his loan required private mortgage insurance. (Id. at 127-28.) According to closing documents signed by Riddle, he understood that his loan required private mortgage insurance. (Id. at 160-61.) It was further explained that “your lender or a subsequent owner of your loan may, directly or through an affiliated company, the reinsurance company, enter into a reinsurance or other risk-sharing agreement with the insurance company that will be providing mortgage insurance covering your loan.” (Id. at 162.) Riddle was permitted to opt-out his loan from being reinsured, though he never took the required steps to do so. (Id. at 163-66.) He was also aware that BOARC might reinsure his loan and that General Electric Insurance Company was his mortgage insurer. (Riddle Dep. at 166-67.)
Riddle never tried to contact Genworth about his mortgage insurance. (Id. at 168.) When he inquired about his mortgage insurance, he contacted BOA about the matter. (Id. at 192-93.) He made these calls to BOA about his private mortgage insurance, with the first call made sometime around 2008. (Id. at 196.) He did not ask questions about mortgage reinsurance during any of these calls. (Id. at 199-200.) Around May of 2012, he called BOA in an effort to opt out of the reinsurance program because “after conferring with [his] attorneys, [Riddle] felt like [he] wanted to opt out of the reinsurance program.” (Id. at 200-02.)
Although Riddle believed that the loan documents he received contained affirmative acts of non-disclosure, Genworth did not give him the loan documents. (Id. at 278.) Indeed, he could not recall getting any documents at any point from Genworth or contacting Genworth. (Id. at 278-79; Genworth’s Mot. for Summ. J. Ex. B [Pl. Riddle’s Resps. to Genworth’s First Set of Interrogs.] at 11.) Riddle claims that he made an effort to discover his claims during a November 22, 2004 meeting with a BOA employee; on January 3, 2005, the date of his closing; late January or early February 2012; and March 28, 2012. (Pl. Riddle’s Resps. to Genworth’s First Set of Interrogs. at 6.)
According to Plaintiffs, Defendants’ misrepresentations about the legitimacy of their captive reinsurance arrangements appeared in various standardized mortgage and closing documents when Riddle received the “Affiliated Business Arrangement Disclosure Statement” and at Riddle’s closing on January 3, 2005. (Id. at 8-9.) The dates of concealment were November 22, 2004; January 3, 2005; and March 28, 2012. (Id. at 9-10.)
Fischer owns a home in Erie, Pennsylvania. (BOA Defs.’ Summ. J. Mot. Ex. 2 [Fischer Dep.] at 10.) She purchased the home and closed on the loan in April of 2005. (Id. at 43, 121.) BOA was her lender, though Fischer dealt with a representative at Select Mortgage. (Id. at 25, 47-48, 62, 69.) She ultimately received a loan from BOA in the amount of $103, 455.00 at an interest rate of 6%. (Id. at 103, 117.) She said that she had never heard of captive reinsurance prior to speaking to her attorneys in 2012. (Id. at 23-24.) At the time she discussed home financing, however, she knew that she would have to pay for mortgage insurance. (Id. at 54-55.)
Fischer attended her loan closing on April 19, 2005. (Id. at 108.) According to her loan documents, her monthly mortgage insurance payment was $67.25. (Id. at 119-20, 124-26.) One of the documents that Fischer might have reviewed during the closing was a “Federal Private Mortgage Insurance Disclosure, ” which informed Fischer that her loan required private mortgage insurance. (Id. at 130-32.) In May of 2012, she reviewed a “Risk Sharing Mortgage Insurance Disclosure” in an effort to learn who was responsible for her private mortgage insurance. (Id. at 133-34.) That document informed her that her loan required private mortgage insurance and that “[y]our lender or a subsequent owner of your loan may, directly or through an affiliated company, the reinsurance company, enter into a reinsurance or other risk sharing agreement with ...