Kahraman v. Countrywide Home Loans, Inc.

886 F.Supp.2d 114

Servet KAHRAMAN and Fatma Kahraman, Plaintiffs,

v.COUNTRYWIDE HOME LOANS, INC., Defendant.

No. 09–CV–2970 (RRM) (RML).

United States District Court, E.D. New York.

Aug. 8, 2012.

Stephen A. Katz, Stephen A. Katz, P.C., New York, NY, for Plaintiffs.

Brigitte Marie Nahas, Michael Erik Sims, Steven S. Rand, Zeichner Ellman & Krause LLP, New York, NY, for Defendant.

MEMORANDUM AND ORDER

ROSLYNN R. MAUSKOPF, District Judge.

Plaintiffs Servet and Fatma Kahraman have sued their mortgage lender, defendant Countrywide Home Loans, Inc. (“Countrywide”), in connection with a home mortgage refinancing. The Kahramans have asserted federal, state, and common-law claims against Countrywide for failing to make required disclosures and for misrepresenting their income during the loan application process. They seek rescission of the refinanced loan, statutory and actual damages, and fees. Currently before the Court are Countrywide's motion for Summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, and a request by the Kahramans to amend their complaint. For the reasons stated below, Countrywide's motion for summary judgment is granted as to all federal claims, which are dismissed with prejudice, the Kahramans' state and common-law claims are dismissed based on the Court's decision to decline supplemental jurisdiction, rendering moot the Kahramans' request to amend their complaint for a second time to amplify their state law claims.

BACKGROUND

I. Factual Background

In July of 2006, the Kahramans refinanced their Countrywide mortgage loan. (Pls.' 56.1 Stmt. (Doc. No. 31) at 1; Pls.' Mem. Opp. (Doc. No. 34) at 5.) While the original principal amount of their mortgage loan was $424,000, at refinancing the payoff figure was $341,682.44. (Pls.' 56.1 Stmt. at 1; Pls.' Mem. Opp. at 5.) Countrywide extended the Kahramans a new loan (the “Loan”) in the original amount of $424,000, secured by their residence. (Pls.' 56.1 Stmt. at 1–2.) The Loan was used in part to pay the balance of their previous mortgage loan. (Pls.' Mem. Opp. at 5.)

At the closing on July 15, 2006, the Kahramans signed a loan application indicating that Servet Kahraman's monthly income was $8,000. (Pls.' 56.1 Stmt. at 2.) The Kahramans allege—and Countrywide has not squarely denied—that an earlier loan application signed on July 5, 2006 did not contain the $8,000 figure, and that Countrywide added the figure without their knowledge or consent prior to closing. ( Id. at 2–3; see Def.'s Reply Mem. Law Supp. (Doc. No. 35) at 7–8.) At closing, the Kahramans each signed a “Notice of Right to Cancel” form, each acknowledging receipt of two copies of the Notice and one copy of a “Federal Truth in LendingDisclosure Statement.” (Pls.' 56.1 Stmt. at 2; Bjurstrom Dec. Ex. C (Doc 29–16) (Notice of Right to Cancel); see also Bjurstrom Dec. Ex. G (Doc No. 29–20) (Truth in Lending Disclosure Statement).) The Kahramans now allege that they only received one copy of the “Notice of Right to Cancel.” (Pls.' 56.1 Stmt. at 5.)

In 2008, Servet Kahraman's income decreased, and the Kahramans subsequently defaulted on the Loan. ( Id. at 3.) The Kahramans attempted to obtain a loan modification, but were unsuccessful. ( Id. at 4.) They then sent Countrywide a notice of rescission on or about July 8, 2009, just one week prior to the third anniversary of the closing. ( Id.)

II. Procedural Background

On July 10, 2009, the Kahramans commenced this action, seeking to rescind their mortgage loan under the federal Truth in Lending Act (“TILA”), based on Countrywide's alleged failure to provide each plaintiff with two copies of the Notice of Right to Cancel. (Compl. (Doc. No. 1).) On April 30, 2010, plaintiffs amended their complaint to include: an additional TILA rescission claim based on Countrywide's failure to use the proper form for the Notice of Right to Cancel; a claim under the Credit Repair Organizations Act (“CROA”), 15 U.S.C. §§ 1679–79j (2006); a claim under New York's Deceptive Practices Act, N.Y. Gen. Bus. Law § 349; and a claim for common law fraud. (Am. Comp. (Doc. No. 11).)

Countrywide has now moved for summary judgment on all of the Kahramans' claims. ( See Def.'s Mem. Law Suppt. (Doc. No. 30).) The Kahramans have opposed the motion, and have also asked for leave to amend their complaint for a second time. (Pls.' Mem. Opp.; Pls.' Letter of Dec. 11, 2011 (Doc. No. 28).) Countrywide has replied in support of its motion, and has opposed the Kahramans' request for leave to amend. (Def.'s Reply Mem. Law Suppt.; Def.'s Letter of Dec. 15, 2011 (Doc. No. 36).)

DISCUSSION

I. Summary Judgment Standard of Review

Summary judgment is appropriate when the pleadings, depositions, interrogatories, admissions, and affidavits demonstrate that there are no genuine issues of material fact in dispute and that one party is entitled to judgment as a matter of law. SeeFed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A genuine issue of material fact exists “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

In deciding a summary judgment motion, a district court must draw all reasonable inferences in favor of the nonmoving party. See id. at 249, 106 S.Ct. 2505 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158–59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970)); Castle Rock Entm't, Inc. v. Carol Publ'g Grp., Inc., 150 F.3d 132, 137 (2d Cir.1998). The court must not “weigh the evidence but is instead required to view the evidence in the light most favorable to the party opposing summary judgment, to draw all reasonable inferences in favor of that party, and to eschew credibility assessments.” Amnesty Am. v. Town of W. Hartford, 361 F.3d 113, 122 (2d Cir.2004) (quoting Weyant v. Okst, 101 F.3d 845, 854 (2d Cir.1996)).

Once a movant has demonstrated that no genuine issue of material fact exists, then “the nonmoving party must come forward with ‘specific facts showing that there is a genuine issue for trial.’ ” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting Fed.R.Civ.P. 56(e)) (emphasis in original). There must exist more than mere “metaphysical doubt as to the material facts” to defeat a summary judgment motion. Id. at 586, 106 S.Ct. 1348. The non-moving party must present “concrete evidence from which a reasonable juror could return a verdict in his favor.” Anderson, 477 U.S. at 256, 106 S.Ct. 2505. Only disputes over material facts “that might affect the outcome of the suit under the governing law” will properly preclude the entry of summary judgment. Id. at 248, 106 S.Ct. 2505;see also Matsushita, 475 U.S. at 586, 106 S.Ct. 1348.

II. Plaintiffs' TILA Claim1. TILA Framework

TILA was enacted by Congress “to assure a meaningful disclosure of credit terms” to consumers. Barberan v. Nationpoint, 706 F.Supp.2d 408, 421 (S.D.N.Y.2010) (citing 15 U.S.C. § 1601; Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998); Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 559, 100 S.Ct. 790, 63 L.Ed.2d 22 (1980)). Congress has specifically designated the Federal Reserve Board as the primary source for interpretation and application of TILA. Id. (citing Milhollin, 444 U.S. at 566, 100 S.Ct. 790).

Under TILA, as interpreted by the Board, consumers entering certain credit transactions involving security interests in their principal dwelling have a right to rescind the transaction until midnight on the third business day after the credit transaction, delivery of the rescission notice, or delivery of all material disclosures, whichever is latest. Id. (citing 15 U.S.C. § 1635(a)). If a borrower does not receive certain disclosures, the right to rescind the transaction extends for three years. Id. at 421–22; 15 U.S.C. § 1635(f); 12 C.F.R. § 226.23(a)(3). The three year extension is triggered if a creditor does not “clearly and conspicuously disclose” the security interest in the principal dwelling, the right to rescind, how to exercise rescission (with a form to exercise rescission designating the creditor's address), the effects of rescission, and the expiration date of rescission. Barberan, 706 F.Supp.2d at 421 (citing 15 U.S.C. § 1635(a); 12 C.F.R. § 226.23(b)(1)). The creditor must also make all “material disclosures,” which include “the required disclosures of the annual percentage rate, the finance charge, the amount financed, the total of payments, [and] the payment schedule ....” 12 C.F.R. § 226.23(a)(3) & n. 48.

2. Analysis

i. Rescission amount limit

As an initial matter, the Kahramans' complaint seeks more rescission rights than TILA would entitle them to. The Kahramans' amended complaint asks this Court to “rescind under TILA the $424, 000 mortgage and loan that the Kahramans received from Countrywide Home Loans, Inc., and terminate any security interest that Countrywide has in the Kahramans' Wantagh, New York home.” (Am. Comp. (emphasis added).) But all of plaintiffs' allegations concern their July 15, 2006 refinancing transaction, and not their original home loan, which was made years earlier, by an entity eventually owned by Countrywide at the time of refinancing ( See id. at 2.) On the day that the Kahramans refinanced their mortgage, they owed Countrywide $341,682.44 on that original loan. ( Id.; Pls.' Mem. Opp. at 5.)

Under the Federal Reserve Board's implementation of TILA,

[t]he right to rescind does not apply to ... a refinancing or consolidation by the same creditor of an extension of credit already secured by the consumer's principaldwelling [except] to the extent the new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the costs of the refinancing or consolidation.”

12 C.F.R. §...