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Novak v. Ocwen Federal Bank FSB

January 5, 2010

DENISE A. NOVAK, PLAINTIFF,
v.
OCWEN FEDERAL BANK FSB, DEFENDANT.



The opinion of the court was delivered by: Harry D. Leinenweber, Judge United States District Court

Hon. Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

Presently before the Court is Defendant Ocwen Federal Bank FSB's Motion for Summary Judgment in Plaintiff's suit for fraud and deceptive practices. For the following reasons, Defendant's motion is granted.

I. BACKGROUND

A. Facts

Plaintiff Denise A. Novak (hereinafter, "Novak") and her husband David Novak obtained a loan for $450,000 from Fidelity Mortgage Inc. on October 8, 2002. The loan had an adjustable interest rate and was secured by a mortgage on the Novaks' property in Cook County, Illinois. Ocwen Federal Bank FSB did not originate the loan but has been servicing the loan since October 16, 2002, when the loan was sold to Delta Funding Corporation. In April 2004, the loan was sold and the mortgage assigned to Wells Fargo Bank, N.A. Ocwen Federal Bank FSB dissolved in July 2005. Ocwen Loan Servicing, LLC (hereinafter, "Ocwen")is the successor in interest to Ocwen Federal Bank FSB and is the actual defendant in this case.

The Novaks defaulted under the terms of the loan in May 2003, and Ocwen initiated foreclosure proceedings on behalf of Wells Fargo in April 2004. Ocwen and the Novaks entered into a Forbearance Agreement in November 2004, whereby the foreclosure action was placed on hold, but not dismissed. The Novaks again fell behind on their payments, and the parties signed an additional forbearance agreement dated December 2006.

In February 2007, David Novak was convicted of mail fraud, ordered to pay restitution of over $400,000, and sentenced to two years in prison. The criminal court entered a forfeiture order against the Novaks' property, but that order has since been vacated. Denise Novak is unable to afford payments on the loan on her sole income.

Denise Novak filed this suit in state court, claiming that Defendant had violated the High Risk Home Loan Act, 815 Ill. Comp. Stat. 137, and the Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. 505. Ocwen removed the case to federal court based on diversity jurisdiction.

B. Issues

Novak claims that Ocwen violated the High Risk Home Loan Act when making the loan because the Novaks' assets and earning capacity did not justify the loan. Novak also claims that Ocwen violated the Consumer Fraud and Deceptive Business Practices Act by (1) refusing proffered payments by Novak unless Novak signed forbearance agreements; (2) filing a foreclosure action despite Novak's efforts to bring the mortgage current; (3) failing for five months to properly credit a $1,000 check; (4) charging Novak for inspection fees, although no inspections were conducted; and (5) belatedly posting Novak's timely payments so that Novak was charged improper late fees.

Ocwen filed a Motion for Summary Judgment, arguing that (1) Ocwen did not originate the loan and cannot be held liable for predatory lending or fraud claims relating to its origin; (2) Novak's claims are barred by the forbearance agreements she signed, in which she released Ocwen from such claims; and (3) Ocwen did not use deceptive practices because all payments and fees were properly applied to the loan.

Novak counters that the release she signed is not valid because it was a ...


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