Lowenstein v. U.S. Bank, N.A. (In Re Lowenstein)
459 B.R. 227
Bankr. E.D. Pa.2011Background
- Plaintiffs Roger and Lynne Lowenstein own a single-family home in Abington, PA and refinanced on Feb 8, 2007 with Countrywide; original loan amount $262,400.
- TILA disclosure stated amount financed $260,526.84 with a total finance charge of $722,670.28 and APR 8.183%.
- Closing involved Grateful Abstract; there is a dispute whether three charges should have been included in the finance charge: a duplicative $35 closing services letter, a $25 notary fee, and a $131.50 mortgage recording fee.
- Defendant U.S. Bank holds the loan; BAC Home Loan Servicing serves as servicer; foreclosure action was filed in 2009, with rescission letter sent by Debtor in Dec 2009.
- Debtor-bankruptcy commenced in 2010; dispute centers on whether TILA disclosures permit rescission and whether the finance charge disclosure was accurate within the statutory $35 tolerance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether finance charge disclosure was understated beyond the statutory tolerance | Lowensteins: understated by $70 due to duplicative closing services letter. | Bank/BAC: only $35 understatement beyond tolerance; $35 proper under exclusion rules. | Disputed factual issue remains; liability denied without prejudice pending further evidence. |
| Whether the closing services letter is a real estate related fee excluded from the finance charge | Closing services letter should be part of the finance charge and thus not excluded. | Letter is a real estate related fee, excluded from the finance charge under Regulation Z; treated as title insurance or similar. | Close to outcome: the court treated $35 as excluded and the remaining $35 as the potential understatement relevant to tolerance. |
| Whether the $25 notary fee was properly excluded from the finance charge | Notary fee should be included in the finance charge disclosure. | Notary fee bona fide and reasonable; excluded under 12 C.F.R. § 226.4(c)(7); Regulation Z supports exclusion. | Notary fee properly excluded from the finance charge. |
| Whether the $5.00 mortgage recording service charge is properly treated as a non-finance charge | Ambiguity whether $5.00 was paid to government official or to private entity; may be finance charge. | If paid to public official, excluded; if paid to private entity, not excluded; payee identity is essential. | Disputed factual issue; unresolved as of ruling. |
Key Cases Cited
- Porter v. Port Authority, 961 F.2d 1066 (3d Cir. 1992) (TILA is a strict liability statute; damages may be awarded for noncompliance)
- Gennuso v. Commercial Bank & Trust Co., 566 F.2d 437 (3d Cir. 1977) (technical nature of disclosures not a defense; strict liability)
- Schnall v. Amboy Nat. Bank, 279 F.3d 205 (3d Cir. 2002) (private right of action and penalties to promote compliance)
- Porter v. Community Bank of Northern Virginia, 342 F.3d 260 (3d Cir. 2003) (objective standard for adequacy of disclosures)