Ginnine Fried v. JP Morgan Chase & Co
850 F.3d 590
| 3rd Cir. | 2017Background
- Ginnine Fried bought a home in 2007 for $553,330, financed with a mortgage requiring private mortgage insurance (PMI) because the loan exceeded 80% of purchase price. 78% of the original value = $431,597, which under the original amortization schedule produced a PMI termination date near March 2016.
- In 2011 Fried and Chase agreed to a HAMP mortgage modification that reduced principal to $463,736.98; under the modified amortization schedule the PMI termination would occur in 2014.
- Chase, relying on a Broker’s Price Opinion (BPO) of $420,000 obtained at modification, substituted that value for the home’s statutory “original value” and notified Fried her PMI would not terminate until November 1, 2026.
- Fried sued under the Homeowners Protection Act (12 U.S.C. § 4901 et seq.), alleging Chase violated the Act by using the BPO rather than the property’s original value to set the PMI termination date; Chase moved to dismiss, arguing the Act permits recalculation using the updated valuation and that the claim is time-barred.
- The district court denied dismissal and certified a controlling question under 28 U.S.C. § 1292(b); the Third Circuit affirmed that the Protection Act requires using the home’s original value (purchase price) to determine PMI termination after a modification and declined to dismiss on statute-of-limitations grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §4902(d) permits replacing the statutory “original value” with a valuation obtained at modification (BPO) to recalculate PMI termination | Fried: §4901(12) fixes "original value" as purchase price or appraisal at consummation; §4902(d) only recalculates termination to reflect modified loan terms (e.g., amortization), not to change original value | Chase: Substitution permissible because HAMP required an updated property valuation (BPO) and the modification conditions/terms incorporate that valuation | Held: Use of BPO to replace statutory "original value" is not permitted; §4902(d) recalculates termination only to reflect modified loan terms; original value remains the purchase price |
| Whether HAMP or investor/Fannie Mae servicing rules authorize or supersede the statute | Fried: HAMP/servicing guidelines cannot override statute; statute supersedes conflicting servicing agreements per 12 U.S.C. §4908(b) | Chase: Fannie Mae servicing guidelines and HAMP practice interpret §4902(d) to use valuation at modification; guidelines are persuasive industry practice | Held: Servicing guidelines and HAMP do not control; Fannie Mae/Freddie Mac are not agencies entitled to deference and their guidance cannot override the statute; CFPB guidance confirms statute controls |
| Whether Fannie Mae’s interpretation merits Skidmore deference | Fried: Fannie Mae is a private GSE/market participant, not an agency administering the statute; not entitled to deference | Chase: Fannie Mae’s long-standing practice warrants deference | Held: No Skidmore deference — Fannie Mae is not the administering agency and its guidance conflicts with the statute |
| Whether Fried’s claim is barred by the Act’s 2-year discovery statute of limitations (12 U.S.C. §4907(b)) | Fried: She did not discover the violation (use of BPO) until Chase expressly stated it in Oct. 2013; complaint filed within 2 years | Chase: Notice of the 2026 termination date in 2012 should have put Fried on notice and started the limitations period | Held: Whether Fried discovered the violation within the limitations period is a factual question not resolved on the pleadings; dismissal on statute of limitations was improper |
Key Cases Cited
- Spaulding v. Wells Fargo Bank, N.A., 714 F.3d 769 (4th Cir. 2013) (discussing HAMP program and servicer incentives)
- Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) (HAMP does not create a private right of action for borrowers)
- Town of Babylon v. Fed. Hous. Fin. Agency, 699 F.3d 221 (2d Cir. 2012) (describing market role of Fannie Mae and Freddie Mac)
- Gonzales v. Oregon, 546 U.S. 243 (2006) (describing Skidmore deference factors)
- Skidmore v. Swift & Co., 323 U.S. 134 (1944) (framework for respect to agency interpretive weight)
- United States v. Mead Corp., 533 U.S. 218 (2001) (limits on Chevron/agency deference; Skidmore vs. Chevron distinction)
- Schmidt v. Skolas, 770 F.3d 241 (3d Cir. 2014) (limitations defense may be resolved on Rule 12(b)(6) only if time-bar is clear on face of complaint)
- Van Buskirk v. Carey Can. Mines, Ltd., 760 F.2d 481 (3d Cir. 1985) (statute of limitations questions usually factual)