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Richard F. Dube v. Emigrant Mortgage Co

March 30, 2011


The opinion of the court was delivered by: Judge Sharon Johnson Coleman


Plaintiff Richard Dube brought this action to enforce the terms of a written mortgage loan agreement stating that the loan's variable interest rate period would be calculated by adding a market-calculated interest index to a "margin" explicitly stated to be "0.000%." Defendant Emigrant Mortgage Company contends that the agreement's designation of a zero margin was a clerical error. It contends that the parties intended that the variable component of the mortgage be calculated by adding a 2.75% margin to the market index. Dube, who has made his mortgage payments at the higher rate under protest, seeks a declaration that he is entitled to the lower rate, and also seeks relief under the Real Estate Settlement Procedures Act (RESPA) for Emigrant's failure to respond to his attorney's inquiries about the issue. In a counterclaim, Emigrant asks that the agreement be reformed to reflect the asserted true intent of the parties, or, in the alternative, that Dube be compelled to specifically perform an agreement to "adjust for clerical errors." Emigrant has moved for summary judgment on all claims. This court finds that one of the letters from Dube's attorney to Emigrant is not a communication requiring a response under RESPA, and Emigrant's motion for summary judgment is accordingly granted as to that element of Dube's RESPA claim. In all other respects, Emigrant's motion for summary judgment is denied.

Undisputed Facts

Richard Dube received a mortgage loan from defendant Emigrant Mortgage Company in 2000. The loan was for a 30-year term, and interest on the loan was payable at a fixed rate for the first five years of the loan and a variable rate thereafter. The variable rate was calculated by adding a "margin" of 2.75% to a market-calculated interest index. The parties amended the loan in 2001 and 2002. Each amendment lowered the loan's initial fixed interest rate, extended the fixed-rate period to a date five years from the date of the amendment, and left intact the original method of calculating the interest rate for the variable-rate portion of the loan.

In 2003, Dube sought another change to his loan terms, and Emigrant sent him a document advising that it had approved an amendment to the loan. The document provided that the loan's interest rate could change beginning on October 1, 2008, and that new interest rates would be calculated each year by "adding ________ percentage points (0.000%) (the 'Margin')" to the "Current Index," a rate based on U.S. Treasury security yields. The document was to take effect upon Dube's signature and a payment of a $1250 fee. Dube signed the amendment on November 17, 2003, and the parties do not dispute that he paid the required fee.

In December 2007, Emigrant sent Dube a letter requesting that he sign "a revised modification agreement outlining the terms of you[r] loan." The agreement was identical to the modification Dube had signed in November 2003, with one material exception: it provided that the adjustable rate would be calculated by "adding two and three quarters percentage points (2.750%) (the 'Margin')" to the Current Index. Emigrant's request asserted that "under the Errors and Omissions Agreement," Dube was "required to sign and return the corrected document in a timely manner." A copy of that agreement was included: it obliged Dube, if requested, "to fully cooperate and adjust for clerical errors" any loan closing documentation deemed necessary by Emigrant in its reasonable discretion to allow the loan to be transferred or secured.

Dube's counsel responded to Emigrant in a letter dated January 25, 2008. That letter recited the history of the Dube-Emigrant mortgage documentation and asserted that the November 2003 amendment "is in full force and effect and is not erroneous." The letter stated that Dube would not sign the requested modification and concluded that "We fully expect that the rate adjustment that becomes effective on October 1, 2008 will be in accordance with the third modification agreement dated November 17, 2003." Dube's counsel encouraged Emigrant to contact him with any questions.

In August 2008, Emigrant sent Dube a letter advising that under the terms of his mortgage, his interest rate would change effective with the payment due on November 1, 2008. The letter asserted that the new index rate applicable to Dube's loan was 2.23%, and that his overall mortgage interest rate would be calculated "by adding the margin of 2.750% to the index." In October 2008, Emigrant sent Dube a bill calculated at an interest rate that included the 2.75% margin.

On October 30, 2008, Dube's counsel sent Emigrant a letter advising that its new charges were at a rate "2.75% per annum above the rate that Emigrant is entitled to charge [Dube] under the terms of the Loan documents." The letter further advised that Dube would pay the amounts billed by Emigrant under protest, reserving his right to seek recovery of overcharges.

The Parties' Claims

This suit followed. Dube claims that Emigrant breached the November 2003 amendment by demanding mortgage interest that includes a 2.75% margin. He seeks a declaratory judgment that the adjustable interest rate for his mortgage must be calculated with a margin of zero. He also claims that his counsel's two letters to Emigrant were "qualified written requests" under the Real Estate Settlement Procedures Act, 12 U.S.C. §2605, which requires a mortgage servicer to respond within 20 days.

In its motion for summary judgment, Emigrant contends that the zero margin provision of the 2003 amendment is an error that should be corrected either by Dube's execution of a new amendment document or by this court's reformation of the contract. Emigrant also argues that the two letters from Dube's counsel are not qualified requests that required a response under RESPA.

Emigrant supports its assertions about the 2003 amendment with evidence demonstrating that it did not offer adjustable rate mortgages without charging a margin above the market index and that no other lender offered a zero margin mortgage. Emigrant further argues that no lender would have offered a zero margin rate because the margin represented its profit and because the $1250 fee paid by Dube was too small an amount to induce any lender to forgo a 2.75% annual return for 25 years of a loan of more than $1 million. None of the evidence offered by Emigrant is sufficient to support a grant of summary judgment on any of the claims seeking an adjudication of the parties' rights under the 2003 amendment.

Summary judgment is appropriate if a case presents no genuine issue as to any material fact, and a genuine issue exists where there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. AA Sales & Associates, Inc. v. Coni-Seal, Inc., 550 F.3d 605, 608-09 (7th Cir. 2008). This case presents a genuine ...

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