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Third Circuit Rules Jury Instructions Were Improper on TILA Notice - Cappuccio v. Prime Capital Funding LLC

August 17, 2011

Our Chino foreclosure defense attorneys have seen a rise in federal predatory lending lawsuits since the foreclosure crisis began, thanks in part to sloppy or outright illegal lending practices during the bubble. So we were interested to see a Third U.S. Circuit Court of Appeals ruling on the Truth in Lending Act, the federal law that protects borrowers from some fraudulent practices and gives them a short window of time in which to cancel a loan. In Cappuccio v. Prime Capital Funding et al., borrower Karen Cappuccio sued under TILA, arguing that lenders First Magnus Financial and Countrywide Financial (now owned by Bank of America) and broker Prime Capital Funding deceived her about the type of loan she was taking out and did not provide adequate notice of her TILA right to rescind the loan. The Third Circuit found that Cappuccio's signature on a TILA form was not enough to prove she received notice, and vacated and remanded the case.

Cappuccio sought to refinance her two mortgages in 2006, hoping to reduce them to one fixed-interest mortgage with a lower interest rate. She filled out an online form with Prime Capital and connected with a Prime Capital loan agent who submitted applications on her behalf for three fixed-interest loans to two lenders, even though Cappuccio specifically sought one loan. Countrywide and First Magnus offered her loans with high interest rates, one of which had negative amortizing and the other of which had a balloon payment. Neither lender explained to Cappuccio that it was offering her a different and more expensive loan than she had applied for. Cappuccio went to the home of a local notary hired by title company MAK Abstract to close the loan, a process she said felt rushed. Cappuccio admits that she signed a Notice of Right to Cancel under TILA. However, she testified that she left without any documents.

Cappuccio testified that she received documents from Countrywide six days later, which tipped her off that the loans were not what she expected. A TILA notice was included, with a bolded date in the past that Cappuccio incorrectly thought was the last date to cancel the loan. A similar package from First Magnus came five days later, she said. MAK Abstract disputes that loan documents came in these packages. Cappuccio retained an attorney and sought to rescind the loans after the rescission period had passed, but the lenders refused, so she filed suit, alleging TILA violations, fraud and other causes. She won as to her fraud claims against the lenders, but on the TILA claims, the judge instructed the jury that Cappuccio's signature on the TILA notice created a rebuttable presumption that she had received the notice. To overcome this, the judge said the jury needed to support Cappuccio's claims with something other than her testimony. The jury found for the lenders on the TILA claim, and the claims against Countrywide were later settled. Cappuccio appealed.

The Third Circuit found that the trial judge's instructions were in error. Under long-standing federal interpretation of TILA, it noted, signing the TILA form does nothing more than create a rebuttable presumption that the notices were actually given. In this case, Cappuccio alleged that they were not given to her at the time, and their later delivery was both late, because the forms came after loan funds were disbursed, and confusing. The evidence required to rebut the presumption that she had received them is minimal, the Third noted, and can even be self-serving testimony. Thus, the court said, her testimony should have been enough to rebut it, and the jury would be left to determine whether she or ETrade was more credible. ETrade could have argued that Congress created a stronger rule for TILA, the court noted, but made no such argument; nor could the court find any evidence of a stronger rule. This was an error by the trial judge, and it was not harmless, the court said, because other evidence Cappuccio presented does not make it less prejudicial. Thus, it vacated the jury's decision and remanded the case to the district court.

This decision was long, but it's a worthwhile one for Santa Ana foreclosure defense lawyers, because it directly relates to the right of recovery for people alleging predatory lending. The Third Circuit did not instruct juries to take plaintiffs like Cappuccio at their word; it instructed them to weigh those words for credibility along with the word of the lenders. This is good news for borrowers because in many cases, there is no witness present at a closing who is not interested in the claim in some way; the only people present are usually borrowers or lenders. Testimony is therefore one of the major weapons at the disposal of borrowers and Lawndale foreclosure defense attorneys like us.

Howard Law PC represents people across California who are fighting foreclosure or predatory lending. To learn more about us or tell us your story, call us today at 1-800-872-5925 or send us a message online.

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