Plaintiff,
v.
Defendants.
I. INTRODUCTION
Group which carried an interest rate of 14.99% and an annual percentage rate of more
than 16%. Plaintiff’s claims arise under the Truth in Lending Act and Home Ownership
II. JURISDICTION
III. PARTIES
who was formerly her foster child in a single family home she has owned for nearly 40
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years at 1184 Marshall Avenue, St. Paul, Ramsey County, Minnesota (“Ms. Coleman’s
home”). At all relevant times, Ms. Coleman’s home was her principal dwelling.
February 7, 2006. At all relevant times, it regularly extended consumer credit which was
payable by agreement in more than four installments and for which the payment of a
finance charge was required. Crossroads’ principal place of business is 300 Coon Rapids
Boulevard, Suite 100, Coon Rapids, Anoka County, Minnesota, though at the time of the
Minnesota corporation whose principal place of business is 300 Coon Rapids Boulevard,
Suite 100, Coon Rapids, Anoka County, Minnesota. Great Northern has been a licensed
bank chartered by the State of Minnesota and supervised by the Federal Reserve Board.
IV. FACTS
home mortgage to obtain funds to help a family member pay legal bills. She got the
name of a loan officer through a friend. When she contacted the loan officer, she
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provided him with information regarding her income and expenses, and she told him the
reason she was seeking to refinance. The loan officer ultimately told Ms. Coleman that
he could not assist her, but that a man named Thomas Whiteis would help her obtain a
loan to meet her needs. The loan officer told Ms. Coleman to attend a closing with Mr.
8. As instructed by the loan officer, whose name she does not recall, Ms.
Coleman attended a closing on February 1, 2006, at the offices of 1st Advantage Title
9. The February 1st closing was conducted by Mr. Whiteis; it was the first
10. Ms. Coleman did not receive any documents related to her mortgage loan
11. When Ms. Coleman saw a document that stated the amount of her monthly
payment under the loan would be more than $2,200, she told Mr. Whiteis she could not
afford the payments. Mr. Whiteis told her that she would only need to make two
payments on the loan and, that after two payments were made, he would give her a new
documents related to her finances. She believed Mr. Whiteis intended to help her, and
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13. As a result of the closing, Ms. Coleman obtained a loan in the original
principal amount of $180,000.00, which was evidenced by a Balloon Note (the “note”)
and was secured by a mortgage against Ms. Coleman’s home. The note was payable on
its face to Crossroads and the mortgage listed Crossroads as the secured lender. Copies
of the note and mortgage are incorporated herein and attached as Exhibits A and B,
respectively.
14. According to the note, the loan carried an annual interest rate of 14.99%.
Monthly payments in the amount of $2,274.56 were set to begin on March 1, 2006 and
essentially covered just the interest accruing on the loan. The loan was structured so that,
on February 1, 2011, after paying more than $134,199.04 in monthly payments over five
years, Ms. Coleman would owe a balloon payment of $179,966.94, just $34.06 less than
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16. The payment to Citi Financial satisfied Ms. Coleman’s existing mortgage,
and the payment to Patricia Hughes satisfied the outstanding legal bill for services
provided to Ms. Coleman’s family member. Other than these charges, Ms. Coleman did
17. The payment to the City of St. Paul satisfied multiple home improvement
loans that Ms. Coleman had obtained from the City in 2000 and 2002. These loans were
100% forgivable as long as Ms. Coleman remained in her home for at least ten years
following consummation. After ten years, the mortgages provided that the liens would be
18. At the time she obtained the February 1, 2006 loan, Ms. Coleman had no
intention to repay the City of St. Paul loans because she intended to stay in her home for
19. At the time Ms. Coleman obtained the February 1, 2006 loan, she did not
intend to pay the remainder of the amount owed to her bankruptcy plan in a lump sum,
and she believed she was under no obligation to do so as long as she was making her
20. Ms. Coleman is unaware of any judgment or lien owed by her to “American
ACC & AD” and, in fact, having recently emerged from a bankruptcy she believed
21. No judgment lien in favor of “American ACC & AD” was ever recorded
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22. Ms. Coleman is unsure of whether she received the entire $15,775.00
indicated as paid to her on the settlement statement, or whether she received only a
23. Of the $12,749.92 in settlement charges associated with the loan, $8,835.50
24. Upon information and belief, several of these charges constituted unearned
fees for which no or nominal services were provided, were unreasonable in relationship
25. In addition to the fees paid to (or retained by) Crossroads, $1,086.00 of the
settlement charges were paid to 1st Advantage Title Company for various purported
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26. In addition to the fees set forth above, 1st Advantage Title Company
27. According to the settlement statement, Ms. Coleman also paid 1st
Advantage Title Company approximately $759.00 to cover mortgage registration tax and
government recording fees. On information and belief, several of the recording fees were
not actually paid to public officials and/or Crossroads required the services, imposed the
28. One of the documents Ms. Coleman signed at the February 1, 2006 closing
was entitled “Notice of Right to Cancel.” It informs Ms. Coleman that she has three
business days to cancel the transaction without cost. It lists the date of the transaction as
January 31, 2006 and the deadline for her to exercise her right to rescind as February 3,
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2006, three business days later. A copy of the Notice of Right to Cancel is attached and
29. The Notice of Right to Cancel informs Ms. Coleman that in order to
exercise her right to cancel, she must send written notice to “Great Northern Mortgage
Group, Inc., 300 Coon Rapids Boulevard, Suite 100, Coon Rapids, Minnesota 55433.”
documents list Great Northern as the “lender,” though Ms. Coleman is unaware of what,
if any, role Great Northern played in the origination of her mortgage loan.
notice entitled “Home Ownership and Equity Protection Act of 1994 Federal Truth-in-
Lending Disclosure” (hereinafter the “HOEPA notice”). A copy of this notice is attached
months; and
will be due.
33. At the bottom of the HOEPA notice, it states that the signor acknowledges
that he or she originally received a completed copy of this notice not less than three (3)
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business days prior to signing the other loan documents. Ms. Coleman’s signature on the
HOEPA notice is dated the same day as the closing, February 1, 2006. Ms. Coleman had
not received the HOEPA notice or any other loan document prior to the closing.
TILA disclosure states that the annual percentage rate on the loan is 16.413%, the amount
financed is $171,339.62, and the finance charge is $142,826.36. A copy of the TILA
35. The TILA disclosure lists Great Northern, not Crossroads, as the lender on
36. At the closing, Mr. Whiteis held himself out as the president of 1st
Advantage Title Company. He notarized Ms. Coleman’s signature on her mortgage and
on the day of closing or shortly thereafter. An assignment dated February 1, 2006 from
Crossroads to First Commercial Bank was recorded with the Ramsey County Recorder’s
Office on August 17, 2006. The assignment was signed by Thomas Whiteis as vice
February 6, 2006 and is likewise signed by Mr. Whiteis as vice president of Crossroads.
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A copy of the February 6, 2006 assignment is incorporated herein and attached as Exhibit
H.
39. Ms. Coleman never received any kind of monthly statement or invoice
telling her where to make payments on the mortgage; though Mr. Whiteis contacted Ms.
Coleman by telephone after the closing and asked her to send the payments to him,
personally.
40. Ms. Coleman never made a mortgage payment to Mr. Whiteis, though she
believes some of her closing proceeds may have been retained by him for the purpose of
41. On December 19, 2008, Ms. Coleman, through her attorney, sent notice to
Crossroads, Great Northern, and First Commercial Bank informing them of her decision
to rescind the February 1, 2006 mortgage loan transaction. A copy of the notice is
42. As of the date this lawsuit is filed, Defendants have failed to take any steps
to release the security interest or take any other measures to effectuate Ms. Coleman’s
rescission.
V. LEGAL CLAIMS
COUNT I
TRUTH-IN-LENDING ACT RESCISSION
consumer’s principal dwelling, the Truth in Lending Act, 15 U.S.C. § 1601, et seq.
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(“TILA”), requires that creditors disclose certain key loan terms to consumers. 15 U.S.C.
45. Disclosures that are deemed “material” include the disclosure of the annual
percentage rate, finance charge, amount financed, total of payments, and payment
46. When entering into a consumer credit transaction that is secured by the
consumer’s principal dwelling, TILA also provides that the consumer has the right to
rescind the transaction for three business days following consummation of the
47. A creditor must clearly and conspicuously disclose the consumer’s right to
rescind and provide the appropriate model form, or a “substantially similar notice,” for
the consumer to use in exercising this right. 15 U.S.C. § 1635(a); 12 C.F.R. § 226.23(b).
48. If the creditor fails to provide material disclosures or notify the consumer of
his or her right to rescind in conformity with TILA and it implementing regulations
(“Regulation Z”), a consumer has a continuing right to rescind the transaction for up to
three years unless the property has been earlier sold or transferred. 15 U.S.C. §§ 1635(a),
49. Upon rescission, a consumer is not liable for any finance or other charge
under the rescinded loan and any security interest given by the consumer is void. 15
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50. Within twenty days of receiving the consumer’s notice of rescission, the
creditor must return to the consumer any money that has been given to anyone in
connection with the mortgage loan and must take any action necessary or appropriate to
reflect the termination of the security interest taken in connection with the transaction.
52. TILA applies to Ms. Coleman’s mortgage loan because Crossroads and
Great Northern regularly extended consumer credit for which a finance charge was
imposed and the loan was for personal, family or household purposes.
53. Ms. Coleman had a continuing right to rescind her loan because, among
other things:
Ms. Coleman incorrectly lists the closing date as January 31, and
also incorrectly lists the deadline for Ms. Coleman to exercise her
February 4, 2006.
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54. On December 18, 2008, Ms. Coleman effectively rescinded her loan by
sending Crossroads, Great Northern, and First Commercial Bank notice of her rescission
transaction, Ms. Coleman is not liable for any finance or other charge imposed under the
loan; Defendants must return all payments made by Ms. Coleman to anyone in
connection with the transaction; and Defendants must release the security interest taken
226.23(d).
56. Defendants have failed to effectuate Ms. Coleman’s timely rescission, and
COUNT II
HOME OWNERSHIP AND EQUITY PROTECTION ACT RESCISSION
58. In 1994, Congress passed the Home Ownership and Equity Protection Act
1602(aa), 1639 and 1641(d)) and it regulates high costs home mortgage loans where
either the “annual percentage rate” exceeds the yields on comparable treasury securities
by more than 8 percentage points or where the total points and fees exceed 8 percent of
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59. Ms. Coleman’s high cost mortgage loan was covered under HOEPA
because the annual percentage rate, identified by Defendants as 16.413%, exceeded the
rate on comparable treasury yields - about 4.4 % at the time of consummation - by more
60. In addition to the disclosures required by TILA for all consumer credit
additional disclosures to protect consumers from the consequences of high cost home
mortgage loans. Among them, lenders must provide a special disclosure at least three (3)
business days prior to consummation of a HOEPA loan warning the consumer of the
consequences of the mortgage and identifying “the annual percentage rate” and “the
226.32(c).
61. Failure to abide by the special disclosure requirements for loans covered by
HOEPA is considered a failure to provide material disclosures under TILA, and gives rise
226.23(a)(3) n48.
62. Ms. Coleman had a continuing right to rescind her loan under TILA and
HOEPA because Defendants failed to provide her with the special, early warning
disclosure required by HOEPA at least three business days before the closing.
63. While TILA provides that a consumer’s rescission is effective against any
assignee of the mortgage loan, in the case of a mortgage covered under HOEPA an
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assignee is liable for all the claims and defenses that the borrower could assert against the
64. First Commercial, as assignee of the high cost mortgage loan, is liable to
Ms. Coleman as provided under TILA and HOEPA. 15 U.S.C. §§ 1640(a), 1641(a), (c)
and (d).
65. On December 18, 2008, Ms. Coleman effectively rescinded her loan by
sending Crossroads, Great Northern, and First Commercial Bank notice of her rescission
66. Defendants have failed to effectuate Ms. Coleman’s timely rescission, and
1. Declare that Plaintiff is not liable for any finance or other charges in
anyone, including Defendants, in connection with the February 1, 2006 loan. 15 U.S.C. §
1635(b).
3. Declare that the security interest in Ms. Coleman’s home created under the
transaction is void, and Order that Defendants take all actions necessary to terminate the
security interest in Plaintiff’s property created by the February 1, 2006 loan. 15 U.S.C. §
1635(b).
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U.S.C. § 1640(a)(1).
U.S.C. § 1640(a)(3).
8. Award such other and further relief as the Court deems just and proper.
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