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Cocroft v. HSBC Bank USA, N.A.

United States District Court, N.D. Illinois, Eastern Division

February 24, 2014



MATTHEW F. KENNELLY, District Judge.

David and Veynelcia Cocroft have sued HSBC Bank USA, N.A. (HSBC); Mortgage Electronic Registration Systems, Inc. (MERS); Countrywide Bank, FSB (Countrywide); BAC Home Loans Servicing (BACHLS), formerly known as Countrywide Home Loans Servicing, L.P.; RM Appraisal Services, Inc.; and Ray Mishal. The lawsuit concerns a loan that Countywide made to the Cocrofts, secured by a mortgage on their home. Bank of America, N.A. (BANA) is the successor in interest to Countrywide.

After the Cocrofts filed their third amended complaint, BANA, BACHLS, HSBC, and MERS moved to dismiss the claims against them. The Court granted the motion in part and denied it in part, leaving the following claims: a Truth in Lending Act (TILA) claim against BANA, BACHLS, HSBC, and MERS (Count 1); a Real Estate Settlement Procedures Act (RESPA) claim against BANA, BACHLS, HSBC, and MERS (Count 2); a claim under the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA) against BANA and HSBC (Count 5); a trespass claim against BANA, BACHLS, HSBC, and MERS (Count 8); and a quiet title claim (Count 3). Cocroft v. HSBC Bank U.S.A., N.A., No. 10 C 3408, 2012 WL 1378645 (N.D. Ill. Apr. 20, 2012).

The Cocrofts never served RM Appraisal or Mishal with summons and did not seek an extension of time for service. The Court dismisses the Cocrofts' claims against those defendants (Count 4 of the third amended complaint) for want of prosecution.

BANA, BACHLS, HSBC, and MERS have now moved for summary judgment on the remaining claims against them. The Court grants the motion for the reasons stated below.


On April 17, 2007, the Cocrofts obtained a loan from Countrywide Bank, FSB in the amount of $386, 750. The loan refinanced a mortgage on a home in Illinois that the Cocrofts had purchased in 2006. The mortgage instrument identified MERS as the mortgagee, "acting solely as a nominee for [Countrywide] and [its] successors and assigns." Defs.' Ex. 35 at 2. The Cocrofts allege that their note was assigned to Countrywide Home Loans, Inc., which then indorsed it in blank. 3rd Am. Compl., p. 8.

The note and mortgage were later pooled into a trust, pursuant to a Pooling and Servicing Agreement (PSA) that established HSBC as trustee. The PSA established May 1, 2007 as the cut-off date for accepting mortgage loans into the trust and May 31, 2007 as the closing date.

The Cocrofts allege that in or about June 2009, a little over two years after they obtained the loan, they learned that Countrywide had made misrepresentations in connection with the loan. As a result, they tried to rescind the loan pursuant to TILA, mailing a rescission demand to BANA (which by then had taken over for Countrywide) and to BACHLS, which was apparently servicing the loan. Neither of those entities took action based on the rescission demand. On September 29, 2009, HSBC's lawyers informed the Cocrofts that HSBC would be foreclosing on the home. The Cocrofts sent HSBC's lawyers cease and desist letters stating that the couple had rescinded the loan. Nevertheless, on January 19, 2010, HSBC brought a foreclosure action against the Cocrofts in Illinois state court. The Cocrofts filed this suit on June 3, 2010.


As stated earlier, BANA, BACHLS, HSBC, and MERS have moved for summary judgment on all of the remaining claims against them. Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "Summary judgment is the put up or shut up moment in a lawsuit, when a party must show what evidence it has that would convince a trier of fact to accept its version of the events." Diadenko v. Folino, ___ F.3d ___, No. 12-3091, 2013 WL 6680930, at *6 (7th Cir. Dec. 19, 2013). "We must assume the truth of the non-moving party's evidence on summary judgment, but that duty does not extend to drawing inferences that are supported by only speculation or conjecture.'" Swetlik v. Crawford, 738 F.3d 818, 829 (7th Cir. 2013) (internal quotation marks omitted).

1. Admissibility of Jenkins affidavit

The Court first addresses the Cocrofts' request to strike the affidavit of BANA representative Lanisa Jenkins on the ground that at least some of her statements are not based on her personal knowledge and contradict testimony that she provided during an earlier deposition. But Jenkins testified under oath that her statements are based on her knowledge as a BANA employee as well as the BANA business records attached to her affidavit, which she says she was responsible for maintaining. As for the claim of contradictory testimony, the Cocrofts have not identified specific inconsistencies in their summary judgment briefs. The Court acknowledges that the party that Jenkins identifies in her affidavit as the holder of the Cocrofts' loan is not the same party that she named during her deposition. None of the Court's rulings, however, involve this particular inconsistency. Because the Cocrofts have not pointed to any other inconsistencies, the Court overrules their objection to the Jenkins affidavit.

2. TILA claim

TILA imposes disclosure requirements in connection with consumer credit transactions. "Congress passed [TILA] to improve information in credit transactions and thus enhance the efficiency of credit markets, relying on meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to achieve this goal." Hamm v. Ameriquest Mortg. Corp., 506 F.3d 525, 528 (7th Cir. 2007). The statute requires specified items of information to be disclosed in specified ways. "If a lender does not disclose one such piece of information in the specified way, leaving the borrower to make assumptions, then TILA has been violated." Id. at 529. TILA provides for actual or statutory damages in the event of a disclosure violation. See 15 U.S.C. § 1640(a)(1) & (2). It also provides debtors with a right of rescission in certain credit transactions, "a process in which the creditor terminates its security interest and returns any payments made by the debtor in exchange for the debtor's return of all funds or property received from the creditors (usually, the loan proceeds)." Andrews v. Chevy Chase Bank, 545 F.3d 570, 574 (7th Cir. 2008).

The Cocrofts allege that TILA was violated in three ways in connection with the making of the loan. They contend that the finance charges were understated, the identity of the actual lender was withheld, and they were provided with only one copy each of a Notice of the Right to Cancel (NORTC), a notice describing their rescission rights, rather than the required two copies. The Cocrofts do not appear to seek damages for these alleged violations. Rather, they rely on the disclosure violations for their impact on the right of rescission. Under TILA, a borrower who obtains a loan secured by a mortgage on his principal dwelling can rescind the loan for three days after closing or the delivery of the TILA disclosures, whichever is later. 15 U.S.C. § 1635(a); Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998). Thus in the event of an improper disclosure or failure to provide rescission forms, the period to rescind is effectively extended. Even in this situation, however, the right of rescission expires three years after the date of consummation of the transaction. 15 U.S.C. § 1635(f).

The Cocrofts attempted to exercise their right to rescind in or about July 2009, after they claim to have discovered the alleged TILA violations. They allege that the defendants did not take the necessary steps to rescind the transaction, thus rendering them liable for damages under TILA for failure to honor the right to rescind. ...

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