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Georgia Midouin, An Individual v. Downey Savings and Loan Association

September 28, 2011

GEORGIA MIDOUIN, AN INDIVIDUAL, PLAINTIFF,
v.
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A., U.S. BANK, JOHN & JANE DOES 1-10, DEFENDANTS.



The opinion of the court was delivered by: Matsumoto, United States District Judge:

MEMORANDUM & ORDER

Georgia Midouin ("plaintiff") commenced this action on September 25, 2009 against Downey Savings and Loan Association, F.A. ("Downey"), U.S. Bank National Association ("U.S. Bank"), and John & Jane Does 1-10 (collectively, "defendants"), asserting claims for (1) rescission pursuant to the Truth in Lending Act, 15 U.S.C. § 1601 et seq. ("TILA") (Count One); (2) damages pursuant to TILA (Count Two); (3) damages pursuant to the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605 ("RESPA") (Count Three); and (4) damages pursuant to New York General Business Law ("NYGBL") § 349 (Count Four). (See ECF No. 1, Complaint, filed 9/25/2009 ("Compl."), ¶¶ 55-98.) Presently before the court is a motion to dismiss the Complaint for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6), filed by U.S. Bank as successor in interest to the Federal Deposit Insurance Corporation ("FDIC"), which was appointed as receiver for Downey. (See ECF No. 19-2, Def. Mem. at 1.)*fn1 For the reasons discussed below, defendants' motion is granted in part and denied in part.

BACKGROUND

The facts as alleged in the Complaint, which the court accepts as true for purposes of defendants' Rule 12(b)(6) motion, are as follows. This action arises out of a closed-end credit transaction in which Downey provided plaintiff a $325,000 loan to refinance and cash out the value of her home and existing mortgage loan on her primary residence located in Cambria Heights, New York (the "property"). (ECF No. 1, Compl. ¶¶ 5, 14, 35.) In 2006, plaintiff submitted financial information to First Rate Capital Corporation ("First Rate"), to apply for a loan to refinance her mortgage. (Id. ¶¶ 14-15.) Plaintiff alleges that although First Rate did not request any income verification, First Rate assured her that she qualified for mortgage loan approval and promised her that she could obtain a loan at the best possible interest rate despite her fixed income. (Id. ¶¶ 16-17.)

On November 24, 2006, First Rate provided plaintiff with a Good Faith Estimate of Settlement Charges from Downey, which set forth estimated settlement charges totaling $5,989.88, and a Federal Truth-In-Lending Disclosure Statement. (Id. ¶¶ 18-19; see also id. at 19.)*fn2 Plaintiff subsequently accepted the proposed mortgage loan with Downey and plaintiff attended the settlement and closing (the "Closing") on December 11, 2006. (Id. ¶¶ 21-24.)

Plaintiff alleges that at the Closing, Downey provided her with a $325,000 loan and copies of the following documents:

(i) a Good Faith Estimate of Settlement Charges, dated December 11, 2006, (the "Good Faith Estimate"), (id. at 20, 21);*fn3 (ii) a Federal Truth-in-Lending Disclosure Statement, dated December 11, 2006, (the "TILA Disclosure Statement"), (id. at 22); (iii) four copies of a Notice of Right to Cancel, dated December 11, 2006, (id. at 23-26); (iv) two copies of a U.S. Department of Housing and Urban Development Settlement Statement, dated December 11, 2006, (the "HUD-1 Settlement Statement"), (id. at 27-30); (v) an unsigned Uniform Residential Loan Application, (id. at 31-34); (vi) the Lender's Instructions, Itemization of Charges, dated December 11, 2006, (id. at 35); and (vii) a Statement of Mortgage Closing, (id. at 36). (Id. ¶ 24.)

The Good Faith Estimate that plaintiff received at the Closing set forth estimated settlement charges totaling more than $17,000, including $360 in recording fees. (See id. at 20, 21.)

The TILA Disclosure Statement stated that the "annual percentage rate" was 8.005 percent, the "finance charge" was $627,119.76, and the "amount finance[d]" was $321,704.60. (Id. at 22.) Thus, the total amount owed pursuant to the loan was $948,824.36. (Id.) The TILA Disclosure Statement also set forth the loan repayment schedule and indicated that the loan contained a variable interest rate. (See id.)

The HUD-1 Settlement Statement, which plaintiff signed on December 11, 2006, itemized settlement charges that were to be paid from the proceeds of the loan but were not included in the amount disclosed on the TILA Disclosure Statement as "finance charges." (See id. at 30.) These settlement charges totaled $17,843.23, including, but not limited to: (i) $195.00 for recording the deed; (ii) $280.00 for recording the mortgage;

(iii) $80.00 for the release. (Id. at 30.) In addition, the HUD-1 Settlement Statement indicated that plaintiff received a cash payment of $45,109.99. (Id. at 29.)

The Uniform Residential Loan Application that plaintiff received at the Closing, which plaintiff alleges she did not sign, stated that plaintiff's total monthly income was $5,469.00. (Id. at 32.)

Plaintiff also alleges that at the Closing, she did not receive a Variable Rate Promissory Note, an Adjustable Rate Rider, an Equal Credit Opportunity Act Disclosure, a Fair Housing Act Disclosure, a Privacy Disclosure, a Patriot Act Disclosure, or a Consumer Credit Score Disclosure. (Id. ¶ 25.)

At some point after the Closing, plaintiff's monthly payments on her loan began to rise. (Id. ¶ 37.) Plaintiff asserts that after reviewing the loan documents, she noticed for the first time that her monthly income was inflated on the Uniform Residential Loan Application. (Id. ¶ 38.)*fn4 After making this discovery, plaintiff contacted First Rate and demanded that the mortgage broker correct her monthly income and adjust her monthly payment schedule accordingly. (Id. ¶ 39.) However, the mortgage broker refused to change the information or facilitate a work-out agreement with U.S. Bank, which had taken over for Downey as the lender. (Id. ¶ 40; see also ECF No. 19-2, Memorandum of Law In Support of Defendant U.S. Bank's Motion To Dismiss Plaintiff's Complaint ("Def. Mem.") at 4 n.2.) Nonetheless, plaintiff continued making monthly payments on her loan using the cash proceeds that she received at the Closing. (ECF No. 1, Compl. ¶ 41.)

On March 20, 2009, plaintiff's counsel sent Downey a letter seeking rescission of plaintiff's loan pursuant to the Truth in Lending Act, 15 U.S.C. § 1635. (Id. ¶ 43; see also id. at 59-63.) The letter alleged, inter alia, (i) inaccuracies in the HUD-1 Settlement Statement; (ii) a discrepancy between the loan amount stated on the Uniform Residential Loan Application and the amount stated in public records; and (iii) a failure to provide plaintiff with all the required documents at Closing. (See id. ¶¶ 44-46; see also id. at 60-61.) The letter asserted that upon rescission, plaintiff "will tender all sums to which [Downey] is entitled." (Id. at 62.) Finally, the letter demanded certified copies of several documents from plaintiff's loan file. (See id. at 62-63.)

On April 3, 2009, U.S. Bank responded to plaintiff's counsel, stating that the requests made in her March 20, 2009 letter were being reviewed. (Id. ¶ 47; see also id. at 64.) Plaintiff subsequently failed to make her July 1, 2009 and subsequent loan payments, thereby defaulting on her loan. (Id. ¶¶ 41-42; see also id. at 66-67.) On August 5, 2009, U.S. Bank sent plaintiff a Notice of Intent to Foreclose, which informed plaintiff that unless she made her overdue loan payments within 30 days of the notice, U.S. Bank "will have no option but to begin foreclosure proceedings without further notice." (Id. ¶ 48; see also id. at 65.)

Plaintiff filed the instant action on September 25, 2009, alleging violations of the Truth in Lending Act, the Real Estate Settlement Procedures Act, and New York General Business Law. (See generally id.)*fn5 Plaintiff seeks rescission of her loan, statutory and actual damages, and attorney's fees. (See id. at 16-17.) In addition, she seeks to enjoin defendants from "instituting, prosecuting, or maintaining a proceeding" on plaintiff's property or "from otherwise taking any steps to deprive Plaintiff's ownership" of her property. (Id. at 16.)

U.S. Bank served plaintiff with the instant motion to dismiss on December 17, 2010. (See ECF No. 19, Notice of Motion, dated 12/17/2010; ECF No. 19-2, Def. Mem.) Plaintiff opposed the motion on January 11, 2011. (See ECF No. 18, Plaintiff's Motion Opposing Defendants' Motion To Dismiss Complaint, dated 1/11/11; ECF No. 18-3, Plaintiff's Memorandum of Law Opposing Defendants' Motion To Dismiss, dated 1/11/11 ("Pl. Opp.").) U.S. Bank served its reply, and the fully briefed motion was filed, on January 18, 2011. (See ECF No. 21, Reply Memorandum of Law In Further Support of Defendant U.S. Bank's Motion To Dismiss Plaintiff's Complaint, dated 1/18/11 ("Def. Reply").)

DISCUSSION

I.Legal standard

A.Motion To Dismiss Pursuant to Rule 12(b)(6)

To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that it is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This standard is met "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. A court should not dismiss a complaint for failure to state a claim if the factual allegations sufficiently "raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. The court's function "is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980). "[T]he issue is ...


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