United States District Court, E.D. Virginia, Alexandria Division
For Donna Johansen Cross, Plaintiff: Dale Wood Pittman, The Law Office of Dale W. Pittman, P.C., Petersburg, VA; Fernando Peter Silva, II, Gowen Group Law Office PLLC, Washington, DC; Thomas Dean Domonoske, Thomas D. Domonoske, Attorney at Law, Harrisonburg, VA.
For Prospect Mortgage, LLC, Defendant: Robert Dean Perrow, LEAD ATTORNEY, John Peyton McGuire Boyd, Jr., Williams Mullen (Richmond), Richmond, VA.
For American Portfolio Mortgage Corp., Defendant: James G. Smalley, LEAD ATTORNEY, Cyron & Miller LLP, Alexandria, VA; John Peyton McGuire Boyd, Jr., Williams Mullen (Richmond), Richmond, VA.
T. S. Ellis, III, United States District Judge.
This action by a borrower against a lender of a home loan arose when the borrower learned, for the first time more than two years after closing, that the loan was not, as represented by the borrower, a United States Department of Agricultural (" USDA" ) guaranteed Rural Development (" RD" ) loan. Among the various causes of action the borrower asserted in this case was a claim under the Equal Credit Opportunity Act (" ECOA" ) (15 U.S.C. § 1691) based on the lender's failure to provide the borrower with notice that the lender did not secure the requested loan guarantee, which the borrower claimed was an " adverse action" triggering the ECOA notice requirement (15 U.S.C. § 1691(d)). The lender countered, arguing that the failure to obtain the loan guarantee was not an " adverse action" under the ECOA because the borrower received the loan on the essential terms requested and because the lender was not responsible for the denial of the loan guarantee.
The parties filed cross motions for partial summary judgment on the ECOA claim. For the reasons that follow, the lender's failure to secure the federal loan guarantee was an " adverse action" that required notification under the ECOA. Accordingly, the borrower's motion for summary judgment on the ECOA claim was granted, and lender's motion for summary judgment on the claim was denied. Cross v. Prospect Mortgage, 1:12-cv-1455 (E.D. Va., Oct. 25, 2013) (Order). This memorandum opinion records the reasoning in support of the partial summary judgment ruling on the ECOA claim.
The facts essential to the resolution of the ECOA claim are not disputed. In
2009, plaintiff, Donna Johansen Cross (" Cross" ), a Virginia resident, applied for and received from defendant, Prospect Mortgage (" Prospect" ), a loan to finance her purchase of the residential property located at 7102 Kelly Road in Warrenton, Virginia. Cross and her husband continue to reside at the property. Prospect, a Delaware corporation with its principal place of business in Sherman Oaks, California, was the original lender for the property at issue, but has since sold the mortgage note, which is now owned by American Portfolio Mortgage Corporation.
The loan Cross applied for from Prospect was a USDA-RD guaranteed mortgage loan. Accordingly, Prospect sought and received from the USDA the required pre-closing conditional commitment to guarantee the loan. Specifically, on March 9, 2010, the USDA issued a Form 1980-18 Conditional Commitment for a Single Family Housing Loan Guarantee for a residential mortgage loan with a principal balance of $397,800 and a 5.0% interest rate. At the 5.0% interest rate, Cross would have been required to pay $5,000 cash at closing. Prior to closing. Cross requested a change in the loan that would finance her closing costs. In response to this request, Prospect agreed to finance 100% of Cross's closing costs provided that the mortgage interest rate was increased from 5.0% to 5.375%. Prospect also advised Cross that, in order for the loan to be USDA-RD guaranteed, this change in loan terms required USDA approval prior to closing. Cross accepted the increased interest rate in order to avoid closing costs. Shortly thereafter, Prospect informed Cross that the 5.375% loan was ready to close, and on March 30, 2010, the parties signed the loan documents. Consistent with the parties' understanding that the loan would be USDA-RD guaranteed. Cross, at closing, agreed to pay a $7,956.00 USDA loan note guarantee fee. This $7,956.00 fee was itemized on the HUD-1 form that Prospect provided to Cross at closing.
Discovery disclosed that Prospect never formally sought or received the USDA pre-closing approval of the 5.375% loan required for the guarantee. Discovery further disclosed that in April 2010, shortly after closing, Prospect knew that the USDA would not guarantee Cross's loan because Prospect failed to obtain USDA pre-closing approval of the altered 5.375% interest rate term. Despite knowing that the USDA would not issue a loan guarantee, Prospect never provided notice of this to Cross, pre- or post-closing, nor did Prospect refund the $7,956.00 USDA guarantee fee Cross paid at closing until August 8, 2011, more than a year after closing. Even then, Prospect failed to provide notice to Cross that the refund issued was for the USDA loan note ...