The opinion of the court was delivered by: Milton I. Shadur Senior United States District Judge
MEMORANDUM OPINION AND ORDER
Freedom Mortgage Team, Inc. ("Freedom") and Encore Credit Corporation ("Encore")*fn1 move jointly under Fed. R. Civ. P. ("Rule") 12(b)(6) to be dismissed from this action brought against them and Freedom employee Graco Funes ("Funes")*fn2 by Arturo Martinez ("Martinez").*fn3 To state a claim that survives Rule 12(b)(6) scrutiny, Rule 8(a) requires that the complaint (1) put defendant on "fair notice of what the...claim is and the grounds upon which it rests" and (2) plausibly suggests that plaintiff has a right to relief (EEOC v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007), quoting and citing Bell Atl. Corp. v. Twombly, __ U.S __, 127 S.Ct. 1955, 1964--65, 1973 n.14 (2007)). And where as here fraud is charged, Rule 9(b) adds the need for greater specificity: the circumstances constituting fraud must be stated with particularity.
Martinez is a Spanish-speaking Chicagoan of Hispanic origin (¶¶4--6), while Freedom is a mortgage broker and Encore is a residential mortgage lender (¶¶7, 10). Martinez' relationship with them began when his real estate agent referred him to Funes to seek financing to purchase a home (¶¶8, 12). Martinez met with Funes at Freedom's offices and eventually applied for a loan with Encore through Funes (¶12).
During the application process Martinez provided Funes with accurate information about his employment and finances, but Funes inserted false information into the loan application that portrayed Martinez more favorably (¶¶34, 43). Funes also ordered a house appraisal by William Beredimas ("Beredimas") of Precision Appraisals, an agent of Funes or Freedom or both (¶35). Funes told Beredimas of the figure he needed to support the amount of Martinez' prospective loan, and the two agreed on an inflated appraised value for the property (¶¶45--47). Funes then inserted that appraisal figure into the mortgage application (¶48).
Funes submitted the mortgage application to Encore, which approved it despite knowledge that the appraised value of the property was false (¶49). Funes told Martinez he was qualified for the loan and explained that the monthly payment would be $2,400, inclusive of amounts for escrow deposit, and that the monthly payments would later decline (¶37).
Although Martinez' dealings with Funes were conducted exclusively in Spanish (¶38), at the closing Martinez signed the mortgage documents prepared solely in the English language, with no accompanying Spanish translation or explanation (¶¶39, 41). Martinez' actual mortgage was an adjustable rate mortgage with an interest rate that can only increase (and never decrease) from the initial rate (¶40).
Encore paid Freedom a $3,390 yield spread premium ("Premium")*fn5 in conjunction with the mortgage transaction (¶15).
When a borrower agrees to pay interest rates higher than their "par" rate (the minimum interest rate at which the lender would make the loan), the lender may pay a Premium to the broker (¶16). Calculation of the Premium amount is based on how much the interest rate is above the "par" figure (formulas for determining such rates are sent by lenders to brokers on a regular basis), and a higher interest rate results in the broker receiving a larger Premium (¶¶17--18).
Freedom and Encore assert as their first ground for dismissal that all counts should be dismissed because Premiums are not illegal. But that is really a nonstarter, because some Premiums are legal and some are not--indeed, the Department of Housing and Urban Development has stated that Premiums in the mortgage industry are neither per se illegal nor legal under Real Estate Settlement Procedures Act ("RESPA") §8, 12 U.S.C. §2607 (see 66 Fed. Reg. 53052). More importantly, the legality of Premiums is irrelevant for the purposes of this lawsuit, for Martinez seeks no RESPA-based recovery.
Thus accepting the legality of the Premium paid by Encore to Freedom provides no answer to the inquiry as to whether the mortgage procedure was navigated free of discrimination or fraud.*fn6 Plenty of perfectly legal activities can be infected with tortious discrimination or fraud, and the provision of residential mortgages is no exception.
Freedom and Encore assert that Martinez' claims of discrimination in violation of the Fair Housing Act ("Housing Act," 42 U.S.C. §3605) and the Equal Credit Opportunity Act ("Credit Opportunity Act," 15 U.S.C. §1691) fail because denial of credit is a required component of a successful claim of discriminatory treatment under both of those sections. Martinez has not asserted a denial of credit, complaining instead of burdens associated with his receiving credit. But that contention by Freedom and Encore is dead wrong, because both statutes clearly do not require a denial of credit.
Under the Housing Act it is "unlawful for any person or other entity whose business includes engaging in residential real estate-related transactions*fn7 to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race..." (42 U.S.C. §3605(a)). As a matter of plain meaning, it is of course possible to engage in the setting of discriminatory "terms and conditions" in granting as well as in withholding credit.*fn8
Congress spoke even more clearly (if possible) in setting out the Credit Opportunity Act provision that a creditor*fn9 may not "discriminate against any applicant, with respect to any aspect of a credit transaction--on the basis of race" (15 U.S.C. §1691(a)(1)). If anything, "any aspect of a credit transaction" meshes even more plainly with a case involving the granting of credit than with one where credit was denied, even though most litigation under that section has arisen from the latter situation. Simply put, a race-based loan rejection is merely a sufficient (but ...