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Real Estate – Foreclosure – Refi Rate – Fees

A woman who alleges “predatory lending practices” because her second refinancing with defendant led to higher interest rates and “exorbitant” fees can sue under the Virginia Mortgage Lender Act and for breach of contract and misrepresentations that allegedly violated the Virginia Consumer Protection Act, but a Charlottesville U.S. District Court dismisses her claim under the Virginia Home Solicitation Sales Act.

Plaintiff sues for 1) violations of the Virginia Mortgage Lender and Broker Act, Va. Code § 6.1-408; 2) violations of the Virginia Home Solicitation Sales Act, Va. Code § 59.1-21.1; 3) breach of contract and 4) violations of the Virginia Consumer Protection Act, Va. Code § 59.1-196.

Defendant Statewide asserts it is no longer conducting business and has ceased all operations.

Plaintiff claims defendant violated the MLBA, Code § 6.1-422.1(B), by knowingly and intentionally “flipping” plaintiff’s mortgage loan within 12 months of the origination of the 2006 refinanced mortgage, even though the refinance was clearly not in plaintiff’s best interest. Plaintiff alleges Statewide satisfies the definition of a “mortgage broker” under the MLBA.

The court finds plaintiff has adequately pled her MLBA against Statewide to survive its motion to dismiss. She attached documentation to support her contentions that she was solicited by Statewide to refinance her home mortgage loan within 12 months of her prior refinancing with Statewide, and that the second refinance loan was clearly not in her best interest, in terms of fees and the interest rate.

Although plaintiff admits she received $25,000 in cash as a result of the second refinancing, other factors in the MLBA cut in favor of plaintiff, such as the fact that the borrower’s new monthly payment was not lower than the total of all monthly obligations being financed, taking into account the costs and fees.

The MLBA claim is not dismissed.

The court does, however, dismiss plaintiff’s claim under the Home Solicitation Sales Act. There is a dearth of authority applying and interpreting the VHSSA. However, in the context of the present dispute, the court is not presented with a questionable case of the applicability of the VHSSA. There was, according to plaintiff, no instance where defendant engaged plaintiff in an instance of solicitation, in which her agreement or offer to purchase or lease was there given to the seller or a person acting for him. While she states she was contacted “periodically” by Statewide, she does not allege whether it was days, weeks or over a month between defendant’s last alleged solicitation and the March 8, 2007 call during which she applied for refinancing.

A review of comparable home solicitation sales statues from other jurisdictions supports the court’s conclusion that this transaction, being the execution of the mortgage broker contract between plaintiff and defendant, and the circumstances under which this contract was signed by the parties, does not fall within the purview of the VHSSA. The claim is dismissed.

Given plaintiff’s allegations as to the terms and cost of her loan, the court finds she has adequately stated a breach of contract claim, which will not be dismissed.

Plaintiff’s VCPA claim based on defendant’s alleged failure to provide her with notice of her right to cancel under the VHSSA fails, but she can sue under the VCPA for alleged misrepresentations by Statewide about more favorable loan terms and fees.

Yarney v. Wells Fargo Bank N.A. (Moon, J.) No. 3:09cv00050, Sept. 15, 2010; USDC at Charlottesville, Va. VLW 010-3-481, 11 pp.

VLW 010-3-481

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