State Supreme Court takes up Quicken Loans case - Beckley, Bluefield & Lewisburg News, Weather, Sports

State Supreme Court takes up Quicken Loans case

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West Virginia's highest court recently found that Quicken Loans fraudulently misled a Wheeling homeowner by falsely promising she could refinance her loan and fraudulently concealing an "enormous" balloon payment.

However, justices also ruled the circuit court "lacked the necessary analysis and findings" when determining punitive damages, saying the analysis must be done upon remand.

The Michigan-based national mortgage lender appealed an Ohio County Circuit Court order, which found Quicken Loans misled homeowners into paying excessive loan fees, falsely promised to refinance loans and concealed balloon payments from its borrowers, according to the Ohio County Circuit Court order.

Lourie Brown and her daughter Monique purchased the duplex in 1988 for $35,000, but when Lourie died in 2002, Monique became "solely responsible," the state Supreme Court opinion states.

"When these financial obligations, among others, became difficult to meet, plaintiff refinanced the project," the opinion  adds.

Brown alleged the loan was higher than the price she expected on the pop-up ad she had seen earlier. Although the property was deeded to her daughter, Brown later obtained the title and continued with the loan process.

As a result, she called Quicken and said she no longer wanted to go through with the loan, but the $181,700 appraisal was approved the next day, according to the order.

After the loan was approved, Quicken informed Brown that it was ready to move forward. Yet, Brown did not respond to Quicken's phone calls regarding the consummation of the loan.

The order cited a note from Quicken which stated, "Client finally reached me, she was being swayed by a broker, and that's why she wanted to back out. Client very timid, and I just had to spend a lot of time explaining to her being taken advantage of. Adding more cash out and taking up to full 80 percent LTV (Loan to Value) and will have closure today."

Brown said she intended to purchase a new car and pay the existing debt with the loan proceeds.

Brown had the understanding that once the loan was in place, Quicken would refinance the loan in three to four months and she could get a cheaper rate.

Court documents state Quicken ultimately refused to refinance the loan but told her that if she dedicated more money toward the closing cost that the interest rate would be reduced.

Brown closed on the $144,800 loan in July 2006. According to court documents, the interest rate was not reduced even though Brown paid more money.

The court also outlined a balloon feature in the loan which "amortizes over 40 years but becomes due after 30 years leaving a large balloon payment." Brown was required to make 360 monthly payments totaling $550,084 but would still owe a $107,015 lump-sum balloon payment to repay a $144,800 loan, or nearly four times the amount financed, the order states.

Court documents state Brown did not know about this balloon feature until the loan was closed.

The court concluded that the company was unconscionable because it made a falsely promised refinancing, introduced a balloon payment feature at closing, misrepresented that the plaintiff was buying the interest rate down, negligently conducting the appraisal review and "failing to realize the highly inflated appraisal."

The circuit court found the lending practices of Quicken Loans to be unconscionable based in part upon Quicken's utilization of a highly inflated appraisal in making the loan.

Monique was awarded $596,199 for court costs and $2,168,868 in punitive damages. 

Quicken appealed the verdict Sept. 6.

The Supreme Court affirmed the order in part, reversed in part and remanded it back for further proceedings.

Justices found Quicken concealed an "enormous balloon payment" to get her to enter the loan. 

The opinion also states Brown proceeded with the loan because of the promise of refinance. The court further said Quicken misrepresented the extent to which she bought down her interest rate, saying "it charged her $2,100 for a benefit she never received." However, justices sided with Quicken in the fraud allegations regarding her buying down her interest rate.  

"Quicken's claim that it would have charged plaintiff this extra fee anyway based upon the fact that she was a high credit risk in no way legitimizes its actions, which this court finds to be distasteful and opportunistic," justices wrote. "Nevertheless, an action in fraud requires that plaintiff prove that she relied upon the misrepresented discount points when she entered into the loan. From our review of the evidence, we agree with Quicken that clear and convincing evidence in this regard was not presented."

Quicken argued the circuit court failed to offset compensatory damages against Brown's pretrial settlement with Guida and Appraisals Unlimited saying she settled with these parties for $700,000.

"It is clear that plaintiff suffered a single indivisible loss arising from the actions of Quicken and the settling co-defendants," justices wrote. "Quicken is therefore entitled to a credit for the settlement between plaintiff and the appraisal defendants."

Justices said Quicken violated provisions related to illegal fraudulent conduct but Brown's $144,800 debt can "only be canceled under state code if it is not secured by a security interest." The court notes her loan was secured by a security interest. 

In a released statement, Quicken Loans said it was happy with several parts of the opinion.

"However, we are disappointed that the court failed to address other serious errors by the trial court and has sent those issues back to that same court for further proceedings. While Quicken Loans welcomes the continued opportunity to show the circuit court, the West Virginia Supreme Court of Appeals, and, potentially even the Supreme Court of the United States the many aspects of this case that are flawed and outright wrong, these steps are burdensome and unnecessary."

Quicken also called the damages awarded "irrational."

"The simple fact is that this plaintiff was wrongfully awarded nearly $3.7 million in damages in relation to a $145,000 mortgage on a single family home. We fully expect the circuit court's continued review of the case to find that the irrational award to this plaintiff is out of line with any near reasonable review of the facts and the law surrounding this case."