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West Virginia High Court Affirms Predatory Lending Verdict Against Mortgage Lender - Quicken Loans v. Brown

November 23, 2012

Vincent Howard and our team of Redlands predatory lending attorneys were interested to see a ruling with mixed results for the victims of an "unconscionable" subprime mortgage loan. In Quicken Loans v. Brown, the West Virginia Supreme Court upheld a trial court's finding that Lourie and Monique Brown had proven their fraud allegations against Quicken Loans and that the loan was unconscionable--a finding that typically means the contract is null and void. However, the high court also ruled that the Browns' obligation to pay back the principal of the loan was incorrectly canceled. The decision, joined by multiple "friends of the court" interested in predatory subprime lending in West Virginia, also sent back the case for re-analysis of the punitive damages awarded.

Lourie Brown bought a duplex in 1988; Monique Brown, her daughter, is a named owner because she lives on the property and helped pay off the loan. Lourie Brown refinanced the property three times from 2003 to 2005 in order to pay for taxes, insurance, utilities and maintenance, and also took out four separate loans. Interest rates on these ranged from 25% to 31%. In 2006, she took out a debt consolidation loan with Quicken. Quicken used a sister company to provide an appraisal the trial court called grossly inflated, resulting in monthly payments higher than Brown expected. Brown attempted to back out of the loan, but the loan officer pursued her and eventually convinced her that a refinance within a few months would solve that problem. Brown received a good-faith estimate that bore little resemblance to the loan she ultimately was offered; major changes included the loan amount, a balloon payment due at the end of the loan and 1.5 more points than Brown expected or qualified for (resulting in a payment that did not benefit Brown).

Two months after the loan closed, Brown began contacting Quicken about refinancing as promised. Quicken denied the refinance. Two months after that, Brown needed emergency surgery that put her out of work; she made repeated requests to work out a payment plan, but these were refused. Six months later, as foreclosure began, Brown filed suit. The Circuit court ultimately found consumer fraud and violations of West Virginia consumer protection laws on balloon payments, appraisals and unconscionable contracts. The court canceled the loan, enjoined further collection attempts and awarded Brown repayment of the money she had paid Quicken, as well as attorney fees and more than $2 million in punitive damages. Quicken appealed.

The West Virginia Supreme Court upheld most of the fraud findings, but while it agreed that the overcharge for points was "distasteful and opportunistic," it found that Brown didn't prove she relied on that misrepresentation when she entered the loan. Because of the fraud findings, it also upheld the finding that the mortgage contract was unconscionable. However, it reversed the circuit court's decision to cancel the loan principal, finding that West Virginia law allows cancellation of unconscionable loans only when they are unsecured. The appeals court also remanded the punitive damages award for a thorough analysis, finding that the lack of an analysis denied it a chance to do meaningful review. Finally, it agreed that Quicken was entitled to offset the compensatory part of its judgment by the amount of the damages paid by other defendants to Brown.

Vincent Howard and our Riverside predatory lending lawyers are pleased to see this judgment for the plaintiff. Though not everything went her way, most of the rulings that did not are based on findings of law, not findings of fact--meaning that the West Virginia legislature would have to make changes to the law to permit things like cancellation of the loan. Interestingly, loans may be canceled under the federal Truth in Lending Act, as well as under certain state laws. This is an important safeguard for people who were victims of high-pressure bait-and-switch tactics like Brown, but unfortunately, it's not available for every case. At Howard Law, P.C., our Tustin predatory lending attorneys review all of our clients' loans for signs of fraud or other unfair dealings that may form the basis of a lawsuit.

If you believe you were deceived or misled when you took out a home loan, call Vincent Howard and the team at Howard Law, P.C., to discuss your rights and your legal options. You can reach us through our website or call 1-800-872-5925.

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