Vincent Howard and our Perris foreclosure defense lawyers have heard of plenty of predatory lending cases involving homeowners who took out loans that were far different from what they expected. Generally, these bubble-era cases involve people who thought they were getting a reasonably priced loan, but instead were given papers to sign for a very expensive loan, often with subprime features like a balloon payment or high adjustable interest rates. So we were interested to see a different story in McCulley v. American Land Title Co., in which Mary McCulley applied for a conventional residential loan and was given a commercial loan. McCulley was able to sell the property to a commercial buyer, but then sued the bank and the title insurance company. The trial court granted summary judgment to defendants, but the Montana Supreme Court revived the fraud allegation against the bank.
McCulley bought a condo in Bozeman in 2006 and sought a 30-year residential mortgage from Heritage Bank. Her Truth in Lending Act disclosure and good-faith estimates referenced a 30-year loan. However, the next day, the bank prepared a document noting that the condo was in a building zoned as commercial, which the bank said precluded a typical residential loan. The document proposed an 18-month "consumer bridge" loan instead. The bank says McCulley received this document as a letter; McCulley denies receiving it or agreeing to its terms. At closing, she signed documents for an 18-month loan with monthly interest-only payments and a large balloon payment due in December of 2007. McCulley made monthly payments, believing she had a 30-year residential loan, until she received a notice of the balloon payment. She negotiated several extensions of the maturity date but was unable to refinance, and ultimately sold the condo in order to pay off the loan.
McCulley sued the bank and American Land Title Company, which she alleged had changed the designated use of the property on its deed to commercial, making it impossible for her to refinance. Against both parties, she alleged negligence, fraud, breach of contract, slander of title and intentional infliction of emotional distress. On cross-motions for summary judgment, the trial court ruled for the defendants.
McCulley appealed most of her claims, and the Montana Supreme Court ultimately ruled that the fraud claim against the bank should get a hearing. On the ALTC claims, the high court said that while it's undisputed that ALTC changed the deed after McCulley signed it, the zoning of the property was the reason she couldn't refinance. Nor did McCulley show sufficient evidence that ALTC intended to misrepresent the description of the property. Because the deed was revised twice to show the correct residential use, the high court said, there could be no breach of any duty that created damages. Thus, it upheld the dismissal of all claims against ALTC. Against the bank, however, McCulley had better luck. The court agrees that there were genuine issues of material fact on fraud, in part because it found her contention that she never received any letter about the "consumer bridge" loan believable. It noted that the terms of this letter are substantially different from her initial Good Faith Estimate and Truth in Lending Statement, and that the bank allegedly didn't inform her of the zoning problem at closing. Thus, it remanded that contention for trial.
Vincent Howard and our Orange foreclosure defense attorneys agree that such a large difference between the initial GFE and TILA statements and the final loan is a problem that merits a much closer look by the trial court. In fact, we tell clients seeking a home loan to pay close attention to those documents, because if the initial ones and the final ones differ substantially and you were not informed, there's probably something wrong. These documents are designed to help ordinary people understand their home loans, and while they aren't perfect--the Consumer Financial Protection Bureau is trying to replace them with one considered easier to read--they are a good resource for borrowers worried about fraud. If you have already signed loan papers with this kind of switcheroo, don't wait to call Vincent Howard and our Rialto foreclosure defense lawyers to talk about a predatory lending case.
If you were deceived when you took out your loan or tried to modify it, you should call Howard Law, P.C., to discuss how we can help. You can reach us online or call 1-800-872-5925 today.
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