Henok v. Chase Home Finance, LLC

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA _______________________________ ) ARAYA HENOK, ) ) Plaintiff, ) ) v. ) Civil Action No. 12-336 (RWR) ) CHASE HOME FINANCE, LLC, ) et al., ) ) Defendants. ) _______________________________)

MEMORANDUM OPINION AND ORDER

Pro se plaintiff Araya Henok brings this action against

Chase Home Finance, LLC (“Chase”) and Fannie Mae,1 challenging

the legality of the foreclosure on a property he owned on 16th

Street N.E. in Washington, D.C. (“the property”). Henok moves

for partial summary judgment against Chase on his claim under the

Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601

et seq., arguing that Chase failed to respond to Henok’s requests

for the amount to cure his default. Chase cross-moves for

summary judgment arguing that RESPA does not apply to Henok’s

loan. Because the undisputed facts show that Chase is entitled

to judgment as a matter of law, Henok’s motion for partial

summary judgment will be denied, Chase’s cross-motion for partial

1 Marco Acevedo has also been listed as a defendant in this case, but Henok does not seek judgment against Marco Acevedo. See Am. Compl. at 19. In addition, Shapiro and Burson, LLP was terminated as a defendant by order dated April 17, 2013. -2-

summary judgment will be granted, and judgment on the RESPA claim

will be entered for Chase.

BACKGROUND

Henok purchased the property in 2006 with financing from JP

Morgan Chase Bank. Am. Compl. ¶ 6; Def. Chase Mem. of Law in

Opp’n to Pl.’s Second Mot. for Partial Summ. J. and in Supp. of

Cross Mot. for Summ. J. (“Chase’s Mem.”) ¶ 1. In August 2009,

Chase returned Henok’s monthly payment and “stated that [his]

property [was] going into foreclosure.” Am. Compl. ¶ 8. Fannie

Mae bought the property in a foreclosure sale on November 18,

2009. Id. ¶ 15, Exs. 5-6; Pl.’s Mot. for Partial Summ. J.

Against Chase (“Pl.’s Summ. J. Mot.”) ¶ 7; Chase’s Mem. ¶ 19.

Henok filed a complaint in February 2012 in D.C. Superior

Court challenging the foreclosure. He alleged, in part, that

Chase violated RESPA by failing to respond to his written

requests for cure figures. The defendants removed the case to

federal court and answered the complaint. Henok moves for

partial summary judgment on his RESPA claim. Chase opposes and

cross-moves for summary judgment arguing that since RESPA does

not govern loans on property used for business purposes and Henok

uses the property for rental income, RESPA does not apply to

Henok’s loan. -3-

DISCUSSION

Summary judgment is warranted on an individual claim or part

of a claim if “there is no genuine dispute as to any material

fact and the movant is entitled to judgment as a matter of law.”

Fed. R. Civ. P. 56(a). RESPA provides that if the loan servicer

receives a “qualified written request” from the borrower for

information about his loan, the servicer is required to provide

“a written response acknowledging receipt of the

correspondence[.]” 12 U.S.C. § 2605(e)(1)(A). However, RESPA

“does not apply to credit transactions involving extensions of

credit . . . primarily for business, commercial, or agricultural

purposes[.]” 12 U.S.C. § 2606(a). In interpreting this

provision, courts have found that RESPA does not apply to loans

for non-owner occupied rental properties. See, e.g., Johnson v.

Wells Fargo Home Mortg., Inc., 635 F.3d 401, 417 (9th Cir. 2011);

Ford v. Central Loan Admin., No. 11–0017–WS–C, 2011 WL 4702912,

at *4 & n.8 (S.D. Ala. Oct. 5, 2011).2

2 Johnson reasoned that RESPA’s implementing regulation, Regulation X, 24 C.F.R. § 3500.5, refers to Regulation Z, 12 C.F.R. 226.3(a)(1), the implementing regulation for the Truth in Lending Act, to define business purpose loans. See 24 C.F.R. § 3500.5(b)(2) (“Business purpose loans. An extension of credit primarily for a business, commercial, or agricultural purpose, as defined by Regulation Z, 12 CFR § 226.3(a)(1). Persons may rely on Regulation Z in determining whether the exemption applies.”). Although Regulation Z does not explicitly define business purpose loans, the Official Staff Commentary for that regulation provides that: Non-owner-occupied rental property. Credit extended to acquire, improve, or maintain rental property -4-

Here, Chase argues that RESPA does not apply because the

property is a non-owner occupied rental property. Chase’s Mem.

at 8-9. Henok does not dispute that the property is a non-owner

occupied rental property. Indeed, Henok’s amended complaint and

partial summary judgment motion seek damages based on rental

revenue from the property. Am. Compl. at 20; Pl.’s Summ. J. Mot.

at 5. Henok attaches a purported “rental history” of the

property to support his damages claim. Pl.’s Summ. J. Mot.,

Ex. 7.

Henok argues, though, that RESPA still applies to his loan

because the deed of trust makes RESPA applicable to his loan.

Pl.’s Reply to Def.’s Opp’n to Pl.’s Mot. for Summ. J. and Pl.’s

Opp’n to Def.’s Mot. for Summ. J. at 1-2 (citing Chase’s Mem.,

Ex. 2, Deed of Trust at 2-3, 5). Henok cites the definition

section in the deed of trust which provides that:

As used in this Security Instrument, “RESPA” refers to all requirements and restrictions that are imposed in regard to a “federally related mortgage loan” even if the Loan does not qualify as a “federally related mortgage loan” under RESPA.

Chase’s Mem., Ex. 2, Deed of Trust at 2-3. He also cites the

“Funds for Escrow Items” covenant of the deed of trust which

(regardless of the number of housing units) that is not owner-occupied is deemed to be for business purposes. 12 C.F.R. Pt. 226, Supp. I, Cmt. 3(a)(4) (West 2011). Thus, “a loan to acquire, improve, or maintain non-owner occupied rental property” is excluded under 12 U.S.C. § 2606(a) because it is a loan for a business purpose. Johnson, 635 F.3d at 417. -5-

incorporates some of RESPA’s requirements when the borrower and

lender use an escrow account. Id., Ex. 2, Deed of Trust ¶ 3.

D.C. courts interpret deeds under the “‘objective law of

contracts.’” Joyner v. Estate of Johnson, 36 A.3d 851, 855 (D.C.

2012) (quoting Dyer v. Bilaal, 983 A.2d 349, 354 (D.C. 2009)).

Under this principle, the written language in the agreement

governs unless the language is unclear or there is fraud, duress

or mutual mistake. “‘If a deed is unambiguous, the court’s role

is limited to applying the meaning of the words[.]’” Id.

(quoting Found. for the Pres. of Historic Georgetown v. Arnold,

651 A.2d 794, 796 (D.C. 1994)).

The plain language of the definition section does not

reflect that RESPA applies to Henok’s loan. The deed’s RESPA

definition does not say that all of RESPA’s requirements and

restrictions apply even if the loan is a non-covered business

purpose loan for non-owner occupied rental property. Nor does

the fifteen-page deed say so in the single-spaced text of any of

its twenty-four covenants. Other than one mention of RESPA in

covenant 20 requiring notice to the borrower of any change in

loan servicer, Chase’s Mem., Ex. 2, Deed of Trust ¶ 20, RESPA is

mentioned only in covenant 3 governing funds collected for escrow

items, id., Ex. 2, Deed of Trust ¶ 3. Neither that covenant nor

any other provision in the deed adopts RESPA’s provisions under

12 U.S.C. § 2605(e)(1)(A) for responding to a borrower’s requests

for amounts to cure a default. Therefore, RESPA’s requirements -6-

were not triggered by Henok’s requests for cure figures, and

Chase, rather than Henok, is entitled to summary judgment on

Henok’s RESPA claim.

CONCLUSION AND ORDER

Business purpose loans are exempted from RESPA’s coverage

and loans involving non-owner occupied rental properties are

business purpose loans under RESPA’s implementing regulations.

It is undisputed that Henok’s loan involved a non-owner occupied

rental property. RESPA, then, does not apply to Henok’s loan,

and the deed of trust does not otherwise incorporate RESPA’s

notification requirements. Thus, Chase is entitled to judgment

as a matter of law on Henok’s RESPA claim. Accordingly, it is

hereby

ORDERED that plaintiff’s motion [35] for partial summary

judgment be, and hereby is, DENIED. It is further

ORDERED that Chase’s cross-motion [37] for partial summary

judgment be, and hereby is GRANTED. Judgment is ENTERED for

Chase concerning the RESPA claim.

SIGNED this 30th day of May, 2013.

/s/ RICHARD W. ROBERTS United States District Judge