Mortgage company asks for dismissal of Greenbrier judge's predatory lending suit

By John O'Brien | Nov 11, 2013

BECKLEY – The predatory lending lawsuit filed by Greenbrier County Circuit Court Judge Jim Rowe over his property in South Carolina should be dismissed, defendants in the case recently argued.

Rowe sued Aurora Loan Services and Nationstar Mortgage on Aug. 1 in U.S. District Court for the Southern District of West Virginia over the adjustable rate mortgage on his property in Hilton Head, S.C.

Rowe and his wife Sharon took issue with Nationstar adjusting the rate in March. The original mortgage deal was reached with TM Capital in the amount of $626,250, and it was transferred to Nationstar, which is owned by Aurora, in July 2012.

Aurora and Nationstar filed a motion to dismiss on Nov. 5.

“The ‘first’ Note provided for an interest rate floor of 2.25% while the ‘second’ Note set the interest rate floor at 6.625%,” the defendants wrote in a memorandum in support of the motion to dismiss.

“The Note terms are conspicuously disclosed on their face, and neither Plaintiffs nor their attorney-in-fact contested the terms of the executed Notes.

“Plaintiffs bring this suit eight years later alleging, for the first time, that the terms of the ‘first’ Note are the only governing terms, the ‘second’ Note should be disregarded and the security interest in the property should be cancelled.”

The Rowes claim on March 25, Nationstar sent correspondence to the Rowes’ informing them of a rate change in accordance with the terms of their adjustable rate note from 4.625 percent to 6.625 percent.

On May 15, the Rowes sent a letter to Nationstar expressing concerns regarding its calculations of interest since 2010 and requested an audit and recalculation of the correct interest rate, according to the suit.

The Rowes claim on June 17, Nationstar sent correspondence to the plaintiffs, which served as a formal notice of default.

On June 24, after sending the Rowes a formal notice of default, Nationstar sent correspondence to the Rowes explaining their methodology for calculating interest rates on the Rowes’ adjustable rate note and denying the request for audit, recalculation and/or revision of the adjustable rate note, according to the suit.

The Rowes claim the Truth in Lending Act requires lenders who regularly extend consumer credit for which a finance charge is imposed to disclose certain key loan terms.

The Rowes claim under TILA, a consumer is entitled to rescind a mortgage loan and on May 15, the Rowes directly rescinded their mortgage loan.

The defendants breached the terms of the Deed of Trust and Adjustable Rate Note by enforcing the terms that were not bargained for and/or agreed upon by the plaintiffs and which are otherwise unlawful, according to the suit.

Aurora and Nationstar make several arguments for dismissal of the Rowes’ lawsuit. They are:

-The Truth in Lending Act does not apply to loan servicers like them, as they are not “creditors” within the meaning of it;

-Claim for relief under TILA is time-barred because the statute of limitations on such claims is three years;

-The Rowes fail to allege intent or ability to tender loan proceeds, which they must do to have the loan rescinded under TILA;

-The breach of contract claim fails because South Carolina law governs their contract, not West Virginia law, and because Aurora and Nationstar were not parties to the original loan contract;

-The Rowes’ failure to read the second note does not provide a basis for a valid breach of contract claim;

-The West Virginia Consumer Credit and Protection Act does not apply to the loan contract because it is governed by South Carolina law;

-The unconscionable contract claim fails because there was no “gross inadequacy in bargaining power,” as Rowe is a judge and his wife is a member of the board of directors of several banks;

-The fraud claim is time-barred because it is subject to a two-year statute of limitations and isn’t pleaded with particularity;

-The plaintiffs can’t argue they justifiably relied on misrepresentations made when obtaining the loan because no statements were made by Aurora or Nationstar at that time;

-The usury claim fails because the second interest rate was calculated in accordance of the terms of the second note; and

-The Rowes failed to join the original lender TM Capital, which is an indispensable party to the action.

Aurora and Nationstar are represented by Jason E. Manning of Troutman Sanders in Virginia Beach, Va.

The Rowes are represented by L. Lee Javins II, Guy R. Bucci and Mark A. Barney of Bucci Bailey & Javins in Charleston.

Rowe ran for state Supreme Court in 2004 and last year. He has been a circuit judge since Gov. Gaston Caperton appointed him in 1997. He was elected to serve an unexpired term in 1998 and re-elected in 2000 and 2008. Before that, Rowe served four terms in the House of Delegates, acting as Judiciary Committee chairman and House Majority Leader.

From the West Virginia Record: Reach John O’Brien at

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