ROBERT L. WILKINS, District Judge.
Presently before the court is a Motion to Dismiss filed by defendants Wachovia Mortgage Corporation, Wachovia Mortgage FSB (f/k/a World Savings Bank, FSB and now known as Wells Fargo Bank, N.A.), and Wells Fargo & Company. (Doc. 22.) For the reasons explained below, the Court finds that Defendants' motion is due to be granted in part and denied in part.
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). However, in evaluating a Rule 12(b)(6) motion, the court liberally construes the complaint in favor of the non-moving party and grants all reasonable inferences to the nonmovant that can be derived from the facts alleged in the complaint. See Stokes v. Cross, 327 F.3d 1210, 1215 (D.C.Cir.2003).
As alleged in the Amended Complaint, the facts are as follows: Plaintiff Susie Poindexter is a 73 year old Washington, D.C. homeowner who claims she was fraudulently induced to refinance her mortgage with a loan she could not afford. (Doc. 19, Amend. Comp. ¶¶ 1, 11.) Plaintiff asserts that Defendant Equitable Mortgage Company contacted her via telephone and offered her a fixed-rate mortgage
Ultimately, Plaintiff obtained a "Pick-A-Payment Adjustable Rate Mortgage Loan," that she could not financially maintain: she was a retired Macy's Department Store sales clerk and the loan had the effect of increasing her loan balance. (Id. ¶¶ 4, 25, 32, 43.) According to Plaintiff, she did not become aware of the adjustable rate until she started receiving mortgage statements. (Id. ¶ 58.)
The loan closing was held at a McDonald's restaurant on or about June 25, 2007 and Plaintiff did not receive any closing documents, including Truth-in-Lending Act disclosures, until several months after she initiated the current lawsuit on July 28, 2009. (Id. ¶¶ 1-3, 35-40.) The loan documents indicate that the loan closing took place at the offices of defendant Chase Title in Maryland and the documents appear to have been notarized by a Maryland notary, who Plaintiff believes is not licensed in the District of Columbia. (Id. ¶¶ 44, 54-55.) Although she was collecting social security, the documents listed Plaintiff's monthly income as $7,000, when she actually received less than $1,200 per month in benefits. (Id. ¶¶ 52-53, 28.) Finally, Plaintiff alleges she was charged unreasonably high fees in excess of $10,00 for the loan. (Id. ¶¶ 46-50.) Wachovia Mortgage, FSB (f/k/a World Savings Bank, FSB and now known as Wells Fargo & Company) is the holder of the note. (See Doc. 23, Ans ¶ 14; Doc. 22, Defs.' Mot. to Dismiss at p. 1.)
It appears that after Plaintiff received the loan documents, Plaintiff sent a rescission letter to World Savings, Wachovia and Wells Fargo, with no success. (Id. ¶¶ 63-64.) In her amended complaint, she names the following defendants: Equitable Mortgage Group, Incorporated;
Wachovia Mortgage Corporation ("WMC") contends that Plaintiff has failed to allege any wrongdoing on it its part and, therefore, the claims asserted against it should be dismissed, with prejudice. (Doc. 26, Reply at 2.) Plaintiff agrees that her claims against WMC should be dismissed; she only listed WMC in a single paragraph
Wells Fargo & Company ("WFC") contends it should be dismissed inasmuch as Plaintiff fails to allege any viable claims against it. Moreover, as a bank holding company, WFC argues that it could not have originated or held her loan. (Doc. 22-1, Def.'s Br. at 11-12; Doc. 27, Wells Fargo & Co. Reply at 1-2.) Plaintiff responds that the corporate structure of these entities has not yet been sorted out and she points out WFC's admission that it is the parent corporation of Wachovia Mortgage FSB (successor to World Savings Bank). In its reply brief, WFC responds that it could only be held liable in this case if this Court were to pierce the corporate veil and doing so would be inappropriate because there is no allegation in the complaint that WFC abused the corporate form by "perpetrat[ing] a fraud through a corporate sham," or exert[ing] undue influence over Wachovia Mortgage FSB. (Doc. 27, WFC Reply at 2-3) (citing Estates of Amore v. Accor, 529 F.Supp.2d 85, 93 (D.D.C.2008)).
At this early stage of the litigation and prior to completion of discovery, the Court is not willing to dismiss WFC given its admitted relationship with Wachovia FSB.
Wachovia Mortgage FSB ("Wachovia FSB")
HOLA is "a product of the Great Depression of the 1930's." Fidelity Federal Sav. and Loan Ass'n v. de la Cuesta, 458 U.S. 141, 159, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982) (citation to legislative history omitted). The statute "was intended to provide emergency relief with respect to home mortgage indebtedness at a time when as many as half of all home loans in the country were in default." Id. (citations and internal quotation marks omitted). To that end, the statute specifically allows federal savings institutions to make mortgage or residential loans. 12 U.S.C. § 1464(c)(1)(b).
Pursuant to HOLA, until recently the Treasury Department's Office of Thrift Supervision (OTS) had "plenary authority to issue regulations governing" savings institutions.
Consistent with this broad mandate, the OTS has promulgated the following regulation:
12 C.F.R. § 560.2(a) (emphasis added).
Subsection b of the regulation goes on to explain that state laws "purporting to regulate or otherwise affect the[ ] credit activities" of federal savings associations are preempted. 12 C.F.R. § 560.2(b). Specifically, the types of state laws preempted are laws "purporting to impose requirements regarding"
12 C.F.R. § 560.2(b).
In contrast, subsection c specifies that the following types of state laws are not preempted "to the extent that they only incidentally affect the lending operations of Federal savings associations or are otherwise consistent with the purposes of paragraph (a) of this section [quoted above]":
12 C.F.R. § 560.2(c).
At the time this regulation was enacted, the OTS explained:
61 FR 50951-01, 50966-67, 1996 WL 548771 (F.R.).
In an Opinion Letter issued approximately three months after the preemption regulation was promulgated, the OTS further elaborated on the preemption analysis when asked about the viability of two Indiana laws applicable to credit card transactions. OTS Opinion Letter P-96-14, 1996 WL 767462 (Dec. 24, 1996.) First, with respect to a commercial law that required lenders to make certain disclosures similar to those found in TILA, the OTS found that the law was preempted consistent with paragraph (b)(9) of the regulation which specifically identifies laws relating to disclosures as preempted. 12 C.F.R. § 560.2(b)(9); 1996 WL 767462 at §§ I, I(B).
In contrast, the OTS determined that Indiana's deceptive acts and practices (DAP) statute was not preempted. 1996 WL 767462 at § II(C). The DAP law was a statute of general applicability "that prohibit[ed] specified acts and representations in all consumer transactions without regard to whether the transaction involve[d] an extension of credit." Id. (emphasis added). For example, the OTS noted in the introduction section of the letter,
1996 WL 767462 at n. 5.
The OTS went on to explain that because "[s]tate laws prohibiting deceptive acts and practices in the course of commerce are not included in the illustrative list of preempted laws," such statutes are not subject to a preemption challenges on their face. See 1996 WL 767462 at § I(C). Rather, "a more extensive preemption analysis of Indiana's DAP statute [wa]s required" and the OTS examined the law's affect on "lending" Id. Because the statute "affecte[d] lending to the extent that it prohibit[ed] misleading statements and practices in loan transactions," a presumption arose that the statute was preempted. Id. However, the OTS did not intend "to preempt state laws that establish the basic norms that undergird commercial transactions." Id. As such, the OTS reasoned:
1996 WL 767462 at § II(C).
Because the CPPA is not directed at savings institutions and is similar to the Indiana DAP statute, the instant court will utilize this same "as applied" analysis to examine whether Plaintiff's claims have more than an "incidental affect on the lending operations of" Wachovia FSB. See 12 C.F.R. § 560.2(c); see Jones v. Home Loan Investment, F.S.B., 718 F.Supp.2d 728, 734-35 (S.D.W.Va.2010); cf., In re Ocwen Loan Servicing, LLC Mortg. Servicing Litigation, 491 F.3d 638 (7th Cir. 2007) (Posner, J) (employing an "as applied" analysis to evaluate each of Plaintiff's claims, although not explicitly stating so); Casey v. F.D.I.C., 583 F.3d 586, 593-95 (8th Cir.2009).
In Count I, Plaintiff alleges that Wachovia FSB violated the CPPA by extending her an "unconscionable" loan without regard to her ability to pay. (Pl.'s Br. at 2.) Specifically, Plaintiff alleges that Defendant "made, funded and securitized an unconscionable loan" in violation of Section 28-3904(r)(1), which prohibits making or enforcing "unconscionable terms or provisions" of a sale or lease with knowledge "that there was no reasonable probability of payment in full of the obligation by the consumer." (Compl. ¶ 69.) This claim is preempted because determinations about whether a consumer has the ability to repay a loan depend on "loan-to-ratio" values, "terms of credit," as well as "processing," "origination," and "participation in" the defendant's loan activities. See 12 C.F.R. § 560.2(b)(3), (4), (10). More importantly, the statutory provision has more than an "incidental affect on the lending operations of" defendants. See 12 C.F.R. § 560.2(c).
Next, Plaintiff alleges defendants violated the CPPA by "promoting, underwriting and ultimately funding Plaintiff's loan." (Compl. ¶ 71.) This claim is also preempted because it has a more than incidental affect on defendant's "advertising" and "originating" of loans. See 12 C.F.R. § 560.2(b)(9)-(10).
Plaintiff's last allegation in Count I alleges Defendant paid "yield spread premiums and/or other financial incentives to Equitable to originate" a loan with unconscionable prepayment penalties, with an adjustable rate, with negative amortization and without regard to Plaintiff's ability to pay the loan. (Compl. ¶¶ 71a-71c; 72-73.)
In her complaint, Plaintiff brings Count II against Equitable, World Savings, Wachovia FSB and Wells Fargo alleging violations under various provisions of the CPPA. See D.C.Code § 28-3904. However, in her response to Defendant's Motion to Dismiss, she concedes that the following claims relate solely to Wachovia FSB:
All of these claims, which she specifically links to the loan documents, have a substantial affect on the "disclosures" Wachovia FSB is allowed to make under HOLA, as well as the "origination" of their loans, "loan-related fees," and finally the "terms of credit, amortization of loans and deferral and capitalization of interest." See 12 C.F.R. § 560.2(b)(4), (9), (10). Thus, these claims are preempted.
Finally, in Count II, Plaintiff claims Defendants failed to supply her with a
Accordingly, Plaintiff's claims in Count II will be dismissed as asserted against the Wachovia FSB.
Count III alleges a common law unconscionability claim against defendant. Specifically, Plaintiff alleges that
As discussed above, Plaintiff's challenges relating to defendant's advertisements, loan document disclosures, or terms of the loan are preempted.
For the reasons set forth above, Plaintiff's state law claims as asserted against the Wachovia FSB defendants will be dismissed with prejudice pursuant to Federal Rule 12(b)(6). Plaintiff's federal claims as related to all these defendants survive the motion to dismiss.
SO ORDERED.
Additionally, the HOLA preemption regulation has been superseded by a new regulation which eliminates the "occupy the field language" and provides that associations have the "maximum flexibility to exercise their fiduciary powers in accordance with a uniform scheme of Federal regulation." 12 C.F.R. § 150.136 (emphasis added). The new regulation also lists the types of state laws that are preempted, for example laws relating to fiduciary fees, registration, licensing, advertising and marketing. Id. To the extent the following laws only incidentally affect the fiduciary operations of savings institutions, they are not preempted: contract and commercial law, real property law, tort law; criminal law, probate law, "any other law that the OCC, upon review, finds: (i) furthers a vital state interest; and (ii) either has only an incidental effect on fiduciary operations or is not otherwise contrary to the purposes expressed in paragraph (a) of this section." 12 C.F.R. § 150.136(c).
These new statutes and regulations do not apply to the current dispute because it involves a loan finalized in June 2007, over three years prior to Dodd-Frank.
In a supplemental filing post enactment of Dodd-Frank, Plaintiff raises issues regarding application of the NBA to the present dispute. (See Doc. 25.) Inasmuch as Plaintiff has conceded to dismissal of the only bank defendant, Wachovia Mortgage Corporation, it is unclear what relevance the NBA, whether before or after Dodd-Frank, has in this case.
