Nationwide Advantage Mortgage Company v. MidCountry Bank
3:14-cv-01270
S.D. Ill.Dec 30, 2016Background
- NAMC and MidCountry entered a Correspondent Lender Purchase Agreement (CLPA) under which MidCountry originated mortgage loans and could sell them to NAMC; the CLPA requires compliance with Fannie Mae Investor Guidelines and contains an indemnity provision.
- MidCountry originated and sold a $346,500 mortgage to NAMC in April 2008 (the Schmitz loan); NAMC later sold the loan to Fannie Mae.
- Borrowers defaulted; during loss mitigation a short sale was approved. In November 2013 Fannie Mae demanded reimbursement from NAMC, concluding MidCountry’s appraisal violated its guidelines.
- NAMC reimbursed Fannie Mae after a final appeal was denied on March 6, 2014, and then sued MidCountry for breach of the CLPA and indemnification, seeking ~$176,912.20.
- Court considered cross-motions for summary judgment and applied Iowa law under the contract’s choice-of-law clause.
- The court granted NAMC’s summary judgment: MidCountry breached paragraph 10(h) (compliance with Fannie Mae guidelines) and paragraph 12 (indemnity); NAMC awarded $176,912.20 plus prejudgment interest and attorney fees to be determined.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of limitations | Contract exempts Section 10 claims from 3-year limitation; claim accrued when Fannie Mae’s final rejection made NAMC liable (Mar 6, 2014) | 3-year contractual limitation bars suit; claim accrued earlier (2009 short sale approval) | Exemption applies; claim did not accrue until Fannie Mae’s final denial in 2014; limitations defense fails |
| Breach of investor-guidelines (¶10(h)) | Fannie Mae’s final determination that appraisal and underwriting were deficient establishes breach as a matter of law | Subsequent appraisals and evidence show compliance; dispute of fact | Court gives preclusive effect to Fannie Mae’s contractual determination; breach established as a matter of law |
| Indemnification (¶12) | NAMC suffered loss reimbursing Fannie Mae caused by MidCountry’s action/omission; contract requires indemnity | N/A (argued remedies limited to repurchase/cure) | MidCountry breached its indemnity obligation; NAMC entitled to indemnification and damages |
| Remedy scope / "repurchase" in addendum | "Repurchase" in industry can mean reimbursement/indemnity; CLPA preserves other remedies beyond repurchase/cure | Repurchase means buy back the loan only; short sale eliminated ability to repurchase so remedy unavailable | Even if repurchase were limited, CLPA preserves other remedies; indemnity under ¶12 is available; repurchase limitation does not bar recovery |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Anderson v. Liberty Lobby, 477 U.S. 242 (nonmovant evidence credited at summary judgment)
- Kalmich v. Bruno, 553 F.2d 549 (choice-of-law in diversity cases)
- Kohler v. Leslie Hindman, Inc., 80 F.3d 1181 (enforceability of contractual choice-of-law clauses)
- Robinson v. Allied Prop. & Cas. Ins. Co., 816 N.W.2d 398 (Iowa law: parties may contractually modify statutes of limitation)
- Bob McKiness Excavating & Grading, Inc. v. Morton Bldgs., Inc., 507 N.W.2d 405 (Iowa accrual: cause of action accrues on actual loss)
- Weinhold v. Wolff, 555 N.W.2d 454 (Iowa accrual principles)
- Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222 (Iowa elements for breach of contract)