The opinion of the court was delivered by: DAVID LARIMER, Chief Judge, District
This is an appeal from an order*fn1 of the Bankruptcy Court for the
Western District of New York (Ninfo, C.J.) denying the debtor's motion
for partial summary judgment, in an adversary proceeding that was
prosecuted, in part, to rescind a mortgage to defendant IMC Mortgage
Company ("IMC Mortgage") because of the alleged failure to comply with
certain notice provisions of the Home Ownership Equity Protection Act
("HOEPA"), 15 U.S.C, § 1641(d).
There are actually two orders of Chief Judge Ninfo that are now before
this Court on appeal. The first is Chief Judge Ninfo's Decision and Order
of May 9, 2002, denying debtor's motion for summary judgment and
dismissing her claim under HOEPA. In reaction to that Decision and Order,
the debtor filed a motion for reconsideration, and Chief Judge Ninfo
issued the second of his decisions, on. July 11, 2002, denying the debtor's motion for
reconsideration. Although Chief Judge Ninfo modified one factual
finding, his second Decision and Order of July 11, 2002, reaffirmed his
earlier decision denying summary judgment, albeit with some further
elucidation of his reasons for doing so.
The parties have thoroughly briefed the relevant issues and have
appeared before this Court for oral argument. After due consideration, I
AFFIRM the orders appealed from,
Debtor, Penny R. Nunn, filed a petition seeking relief under Chapter
13. One of the debts listed was a 1998 home equity mortgage on her
residence in Hornell, New York to defendant, IMC Mortgage in the
approximate sum of $.26,000, After filing her petition, Nunn commenced an
adversary proceeding to rescind the mortgage because IMC Mortgage had
failed to comply with the disclosure requirements under the truth in
lending provisions of HOEPA. If HOEPA does apply to the transaction and
if its provisions, including a three day notice of the right to cancel
were not complied with, then the mortgage contract may be rescinded.
The broad issue before both the Bankruptcy Court and this Court is
whether HOEPA does apply to this particular transaction. The specific
issue that separates the parties is whether the triggering event set
forth at 15 U.S.C. § 1602(aa)(1)(B) applies, thereby requiring conformity
with all the applicable disclosure requirements. That section of HOEPA
provides that mortgages are covered by its provisions if "the total points and fees payable by
the consumer at or before closing will exceed . . . 8% of the total
After analyzing the transaction and the fees paid, Chief Judge Ninfo
determined that the 8% fee trigger had not been met and, therefore HOEPA
did not apply. I agree with his analysis and therefore affirm.
In this case, when Nunn applied for the mortgage, she agreed to pay the
mortgage broker, Michael Cronin, a fee of 5 3/4% for arranging the loan.
In fact, when the loan closed, this sum $1,437,50 was paid directly
to the broker at closing. The parties do not dispute that this fee 5
3/4% counts toward the 8% amount that triggers HOEPA's applicability.
In this case, there was an additional fee of 3% paid not directly by
the mortgagor, Nunn, but by the lender mortgagee, IMC Mortgage,
to the broker, Cronin. Nunn contends that this 3% fee should be counted
toward the 8% trigger. If it does count, all parties agree that the
resulting 8 3/4% fee would trigger HOEPA.
When Nunn signed the original documents with the broker engaging his
services, she executed a Mortgage Loan Origination Agreement
("Origination Agreement") in which she agreed to finance that part of the
broker's fee that was to be paid by IMC Mortgage to the broker. The
Origination Agreement advised Nunn that because of that agreement she
would be paying a slightly higher interest rate over the course of the
After reviewing the statute, the official staff commentary and
treatises, Chief Judge Ninfo ruled that the "indirect fee" paid to the
broker by the lender was not required to be included in determining the
8% fees trigger. I concur with Chief Judge Ninfo and find that the
reasons given both in the May 9 and July 11, 2002 decisions are sound, I understand
that the standard of review is de novo, and it is by that standard that
I have considered, the appeal. National Union Fire Ins. Co. v.
Bonnanzio, 91 F.3d 296, 300 (2d Cir. 1996).
I think the principal focus should be the statute itself. Section
1602(aa)(1)(B) speaks only to fees paid by the consumer at a specific
time, that is, at or before closing. By that definition, the only
broker's fees paid were the 5 3/4% fees. Chief Judge Ninfo specifically
noted this statutory language in his July 11, 2002 decision. He notes, as
do I, that if other fees are intended to be included, then the remedy for
clarification rests with Congress,
In his decision, Chief Judge Ninfo noted a complete lack of authority
to support Nunn's position that the indirect fees must be included in
determining the 8% trigger. During the pendency of this appeal, the
Bankruptcy Court in the Western District of Michigan ruled contrary to
Chief Judge Ninfo and held that the financing charge paid indirectly by
the borrowers in a situation similar to the case at hand, was deemed to
be "points and fees" payable at closing and, therefore, counted toward
the 8% threshold. In re Mourer, 287 B.R. 889 (2003), That decision,
however, was recently reversed on appeal to the district court. Mower v.
Equicredit Corp. of America, No. 1:03-CV-141 (W.D. Mich. Mar. 31, 2004
In his decision, Judge McKeague notes that the debtor's position, like
Nunn's position here, is not supported by any case law authority, and
appears contrary to the statutory language that limits the provision to
fees payable by the consumer at closing. Id., slip op. at 4, CONCLUSION
The Decisions and Orders of Bankruptcy Court, entered May 9, 2002 and
July 11, 2002, are affirmed. The appeal to this Court is dismissed and
the case is remanded to ...