Drakopoulos v. U.S. Bank National Ass'n
465 Mass. 775
Mass.2013Background
- In 2006 Susanne and Peter Drakopoulos refinanced their Haverhill home with a stated-income loan from Aegis Lending; monthly payments (~$2,573) exceeded the plaintiffs’ total monthly income by about $600. The loan closed after the lender listed Peter’s income far above documented W-2/paystub figures.
- The loan was sold in 2007 and assigned to U.S. Bank, N.A. as trustee for a mortgage-backed trust; Select Portfolio Servicing (servicer) serviced the loan. Plaintiffs defaulted and the bank foreclosed in 2008.
- Plaintiffs sued the bank and servicer asserting violations of the Predatory Home Loan Practices Act (G. L. c. 183C), G. L. c. 93A, the Borrower’s Interest Act (G. L. c. 183, § 28C), unconscionability, and emotional distress; defendants moved for summary judgment on remaining claims.
- The trial judge granted summary judgment for both defendants; on appeal the court evaluated (1) whether the loan was a high-cost loan under c.183C, (2) assignee liability, and (3) whether triable issues remained on G. L. c. 93A, unconscionability, and § 28C claims.
- The Supreme Judicial Court held summary judgment for U.S. Bank was improper because material factual disputes remain (e.g., whether points/fees exceeded 5% threshold, whether title-exam fee was bona fide, whether lender should have recognized inability to repay), but affirmed summary judgment for the servicer (no basis shown to treat it as assignee).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether loan is a “high-cost home mortgage loan” under G. L. c.183C (points/fees test) | HUD statement shows fees >5% of loan; omitted $215 title-exam fee should be included because no title work was performed (so fee not bona fide) | High-cost worksheet shows fees <5%; title-exam fee is bona fide and thus excluded | Triable issue exists whether title-exam fee was bona fide; summary judgment improper for bank on c.183C claim |
| Whether assignee (U.S. Bank) is shielded from liability for originator’s conduct | Assignee may be liable under c.183C §15(a) and other statutes; bank had notice and may be subject to claims/defenses | Bank argued it cannot be liable as assignee because loan is not a high-cost loan | Bank not entitled to judgment as a matter of law; assignee status does not automatically shield it and may carry liability under c.183C and other claims |
| Whether lender violated G. L. c. 93A by originating an unaffordable loan | Lender should have recognized borrowers couldn’t repay (inflated income, payment shock, vulnerable borrowers) | Bank argued fixed-rate loan falls outside Fremont presumption of predatory loans | Fremont does not limit c.93A to loans with its specific features; material fact disputes require trial on c.93A claim |
| Whether loan is unconscionable / violation of Borrower’s Interest Act (G. L. c. 183, §28C) | Loan refinanced a prior loan <60 months earlier, left borrowers worse off; terms and origination conduct (inflated income, pressure, disabilities) support unconscionability and §28C violation | Defendants argued plaintiffs were sophisticated, and assignee status precludes liability | Material factual disputes on unconscionability and whether refinancing was in borrower’s interest preclude summary judgment; §28C issues likewise present triable questions |
Key Cases Cited
- Premier Capital, LLC v. KMZ, Inc., 464 Mass. 467 (2013) (standard of review for summary judgment)
- DeWolfe v. Hingham Ctr., Ltd., 464 Mass. 795 (2013) (moving party burden on summary judgment)
- SCA Servs., Inc. v. Transportation Ins. Co., 419 Mass. 528 (1995) (opponent must allege specific facts to defeat summary judgment)
- Commonwealth v. Fremont Inv. & Loan, 452 Mass. 733 (2008) (G. L. c. 93A prohibits origination of loans lender should know borrower cannot repay)
- Frappier v. Countrywide Home Loans, Inc., 645 F.3d 51 (1st Cir. 2011) (discussion of stated-income loans and c.93A analysis)
- Quincy Trust Co. v. Pembroke, 346 Mass. 730 (1964) (assignee stands in assignor’s shoes for defenses)
- Ford Motor Credit Co. v. Morgan, 404 Mass. 537 (1989) (assignee liability limited as matter of common law; defensive equitable relief possible)
- Waters v. Min Ltd., 412 Mass. 64 (1992) (factors for unconscionability: oppression, surprise, gross disparity)
- O’Connor v. Redstone, 452 Mass. 537 (2008) (trial judge may not weigh credibility or make findings on summary judgment)
- Aspinall v. Philip Morris Cos., 442 Mass. 381 (2004) (negligence can support liability under G. L. c. 93A)
- Maillet v. ATF-Davidson Co., 407 Mass. 185 (1990) (intent not required for G. L. c. 93A deceptive-acts liability)