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Eric Paterson v. Wells Fargo Bank

September 27, 2012


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


Before the Court are Defendant's Request for Judicial Notice and Motion to Dismiss. For the reasons stated herein, the motions are granted in part and denied in part.


Plaintiff Eric Paterson sues Defendant Wells Fargo Bank, N.A. over his refinanced home loans. He alleges violations of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601, et seq., the Illinois Consumer Fraud Act ("ICFA"), 815 ILL. COMP. STAT. 505/2, and the Illinois Fairness in Lending Act ("IFLA"), 815 ILL. COMP. STAT. 120/5. Plaintiff also brings common law claims of negligent misrepresentation, fraud in the inducement, and breach of fiduciary duty.

The following is a summary of the detailed allegations in the Complaint. In March 2007, Plaintiff purchased his first home in St. Charles, Illinois for $188,250. He financed the purchase through two mortgage loans from Bank of America, N.A.

The first Bank of America loan was for $150,600 and had a 30-year term and a fixed rate of interest of 6.375%. The second loan was for $28,200 for 15 years at a fixed interest rate of 8.375%. Plaintiff's combined monthly payment on these loans (including principal, interest, and escrowed tax payments) was $1,430.42. The total combined cost to Plaintiff over the life of the loans would have been $222,397.43. At the time Plaintiff refinanced, he held $11,676 in equity.

On or about January 9, 2009, Defendant's employee Jon Mize ("Mize"), "cold called" Plaintiff with an offer to refinance Plaintiff's mortgage loans and use Plaintiff's home equity to pay off his existing car loan. Mize made disparaging comments about Plaintiff's Bank of America loans and told Plaintiff that he could get better loan terms by refinancing with Wells and making one monthly mortgage payment instead of two.

Plaintiff declined Mize's initial offer to refinance. Mize continued to pursue Plaintiff, however, and eventually Plaintiff agreed to refinance, but without rolling in his car loan. Plaintiff told Mize that he was unfamiliar with lending procedures, but that he trusted Mize and that he would rely on Mize's judgment to acquire the best loan terms for Plaintiff.

Plaintiff has a high school education, and had never refinanced a mortgage before. Mize represented himself and Defendant as trustworthy and experienced, repeatedly telling Plaintiff that he would get the best loan terms available. Mize and Defendant controlled all aspects of the refinancing process, including choosing the loans for which Plaintiff applied and completing the applications.

Three to five times in the application process, Mize suggested loan terms to Plaintiff, only to tell him later that he no longer qualified for them (despite Plaintiff's actually strong credit scores). Plaintiff repeatedly asked, and was assured, that his new monthly payments would include property tax payments. Mize told Plaintiff that he would not finalize the transaction unless he made the loan "good" for Plaintiff.

On February 11, 2009, Plaintiff closed on his new loan in 20 minutes, with Mize as the closing agent and notary. At closing, Mize instructed Plaintiff to take steps to improve his credit score, telling him that he could then refinance again in six months on even better terms. The refinanced loan had a 40-year term and an adjustable rate that started at 8.5% (with a maximum rate of 14.5%). The principal amount of the loan was $186,691.69, which given the appraised value of Plaintiff's home ($187,000), left him $308.31 in equity. The total cost of the refinanced loan will be $477,426.34. The loan included a $7,180.43 "discount point" fee, and a $2,814.26 payment to Plaintiff. It also included a $473 payment to one of Plaintiff's "creditors" -- to whom Plaintiff actually owed no money. Plaintiff accepted these arrangements on Mize's advice.

Plaintiff's payments did not include the promised escrowed taxes; an escrow account was established later, further increasing the monthly payment. The loan has a three percent prepayment penalty charge for the first 34 months.

After the closing, Plaintiff took steps to further improve his credit. In May 2009, however, after discussing his loan terms with a friend, Plaintiff learned that refinancing within six months would be impossible, as the prepayment penalty, which would have been rolled into the new loan balance, would have made the new loan principal exceed the value of his home. As a result of the loan, Plaintiff's monthly payments and cost of credit have increased, and he struggles to make ends meet.


At this stage, the Court accepts as true all well-pleaded facts in the Complaint and draws all inferences in Plaintiff's favor. See Cole v. Milwaukee Area Tech. Coll. Dist., 634 F.3d 901, 903 (7th Cir. 2011). A complaint must contain a "short and plain statement of the claim" containing sufficient factual matter to allow the Court to reasonably infer that Defendant is liable for the alleged misconduct. FED. R. CIV. P. 8(a)(2); ...

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