834 F. Supp. 2d 95
E.D.N.Y2011Background
- Plaintiff Georgia Midouin filed Sept. 25, 2009 suit against Downey Savings and Loan Association, F.A., U.S. Bank and unknown defendants asserting rescission under TILA (Count One) and damages under TILA (Count Two), RESPA (Count Three), and NYGBL § 349 (Count Four).
- Loan: $325,000 refinanced on plaintiff's primary residence in Cambria Heights, NY; closing Dec. 11, 2006 with Downey; First Rate provided the loan application and purportedly misrepresented income.
- Closing documents included Good Faith Estimate, TILA Disclosure Statement, HUD-1, and other disclosures; Good Faith Estimate showed $5,989.88 in settlement charges, HUD-1 listed $17,843.23 in charges, and TILA disclosed APR and finance charge with a total amount financed around $321,704.60 and total payment around $948,824.36.
- Plaintiff alleges misstatements/inaccuracies in loan documents (including inflated income on the Uniform Residential Loan Application) and failure to provide required disclosures at Closing; later discovery of inflated income occurred after loan commenced.
- March 20, 2009 rescission letter seeking rescission and production of documents; April 3, 2009 response; August 5, 2009 Notice of Intent to Foreclose; plaintiff continued payments; foreclosure timeline continued with state court action later filed in 2010.
- U.S. Bank moved to dismiss on Dec. 17, 2010; the court granted in part and denied in part, addressing TILA rescission, TILA damages, RESPA, and NYGBL claims, and dismissed certain RESPA and NYGBL grounds as preempted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether rescission under TILA is timely and viable | Plaintiff alleges understatements in finance charges and unequal disclosures entitle rescission. | Defendants argue rescision time barred given disclosures and tolerance rules; foreclosure timing affects timing. | Rescission claim denied? Actually granted denial of dismissal; court allowed rescission claim to proceed (denied motion to dismiss). |
| Whether damages under TILA for alleged nondisclosures are time-barred | Damages claims based on pre-consummation nondisclosures are timely under continuing disclosure regime. | Damages claims are time-barred under 15 U.S.C. § 1640(e) as to disclosures. | Time-barred for damages based on nondisclosures; dismissed. |
| Whether damages under TILA for failure to honor rescission notice survive | Defendants refused to honor rescission notice, causing damages under 15 U.S.C. § 1640. | Argues timing and procedural aspects limit damages; seeks dismissal as untimely. | Damages claim for failure to honor rescission survives; timely filed within one year from notice of rescission. |
| RESPA claims for reporting to consumer reporting agencies and other damages | Defendants violated RESPA by failing to correct account and by reporting overdue payments; seek damages. | Requests dismissal for lack of precise pleading of reporting timing and damages; possible amendment. | Claim under 12 U.S.C. § 2605(e)(3) pled inadequately and dismissed without prejudice; remaining actual damages under RESPA survive. |
| Whether NYGBL § 349 claims are preempted by HOLA | Plaintiff asserts deceptive practices under NYGBL § 349; seeks damages and injunction. | HOLA preempts state law claims that regulate federally regulated lending activities; NYGBL § 349 preempted. | NYGBL § 349 claims preempted by HOLA; dismissal granted. |
Key Cases Cited
- Beach v. Ocwen Fed. Bank, 523 U.S. 410 (U.S. 1998) (TILA disclosures and rescission timing framework)
- McAnaney v. Astoria Fin. Corp., 357 F.Supp.2d 578 (E.D.N.Y. 2005) (finance charge disclosures and recording fees permissibility under Regulation Z)
- Glucksman v. First Franklin Fin. Corp., 601 F.Supp.2d 511 (E.D.N.Y. 2009) (foreclosure timing and rescission process considerations in TILA cases)
- Palm er v. Wilson, 502 F.2d 860 (9th Cir. 1974) (equitable tolling and rescission considerations in older TILA framework)