Brophy v. Chase Manhattan Mortgage Co.
1996 U.S. Dist. LEXIS 17861, 1996 WL 711020, 947 F. Supp. 879 (1996)
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Rule of Law:
Section 2604 of the Real Estate Settlement Procedures Act (RESPA) does not provide a private right of action for borrowers to sue over inaccurate good faith estimates of settlement charges. Under the Truth in Lending Act (TILA), a mere discrepancy between a good faith estimate and final settlement charges, without more evidence, is insufficient to prove the estimate was not made in good faith.
Facts:
- On June 8, 1995, Donald and Joan Brophy applied for a thirty-year fixed-rate mortgage from Chase Manhattan Mortgage Corporation to purchase a home.
- In connection with their application, Chase Manhattan provided the Brophys with a "Good Faith Estimate" document.
- This estimate listed a Loan Origination Fee of $886.38, a Loan Discount fee of $0.00, and a Mortgage Insurance Premium of $1,738.
- The Brophys signed the Good Faith Estimate on June 12, 1995, and returned it to Chase Manhattan.
- At the loan settlement on July 31, 1995, the final Settlement Statement listed a Loan Origination Fee of $1,902.02, a Loan Discount of $885.07, and a VA Funding Fee of $2,607.
- The annual percentage rate of the loan, 7.5 percent, did not change between the time of the estimate and the final settlement.
Procedural Posture:
- Donald and Joan Brophy sued Chase Manhattan Mortgage Corporation and its agent, William Bowen, in the U.S. District Court for the Eastern District of Pennsylvania.
- The Brophys' complaint alleged violations of the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), and Pennsylvania state laws.
- The defendants filed a Motion for Summary Judgment, asking the court to dismiss all claims before a trial.
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Issue:
Does a lender's failure to provide an accurate good faith estimate of settlement charges create a private right of action for a borrower under Section 2604 of RESPA, and does a discrepancy between the estimate and final charges alone suffice to show a violation of the good faith requirement under TILA?
Opinions:
Majority - Judge Anita B. Brody
No. Section 2604 of the Real Estate Settlement Procedures Act (RESPA) does not provide a private right of action for borrowers alleging inaccurate good faith estimates. Furthermore, a mere discrepancy between estimated and final loan charges is insufficient, without additional evidence, to create a genuine issue of material fact that a lender violated the Truth in Lending Act's (TILA) good faith requirement. Regarding the RESPA claim, the plain text of the statute, specifically § 2614, expressly provides for private rights of action only under sections 2607 and 2608, and conspicuously omits section 2604. The legislative history further supports this interpretation, as Congress repealed a prior version of the law (Section 6) that contained an express private right of action for inaccurate estimates and replaced it with the current § 2604, which does not. Regarding the TILA claim, the Brophys failed to produce any evidence beyond the documents themselves to show a lack of good faith. The statutory framework for residential mortgages under TILA requires 'estimates' where exact information is not yet known, which inherently presumes that final figures might vary. To allow a claim based solely on the discrepancy would be to impose strict liability, which is contrary to the statute's allowance for estimates in this context. Without additional evidence, such as depositions or affidavits suggesting the lender's estimates were not based on the best information reasonably available, a jury finding of a lack of good faith would be mere speculation.
Analysis:
This decision significantly limits the remedies available to borrowers who receive inaccurate good faith estimates for mortgage loans. By holding that RESPA § 2604 provides no private right of action, the court clarified that enforcement for such disclosure violations is left to regulatory bodies, not individual lawsuits. The ruling on the TILA claim raises the evidentiary bar for plaintiffs, establishing that the mere fact of a large discrepancy between estimated and actual costs is not enough to survive summary judgment. Plaintiffs must now provide affirmative evidence demonstrating that the lender's process for generating the estimate was flawed or not made in good faith, which can be difficult to obtain without discovery.
