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Kratz v. Countrywide Bank

September 21, 2009

DAVID A. KRATZ, AN INDIVIDUAL; MICHELLE D. KRATZ, AN INDIVIDUAL; PLAINTIFFS,
v.
COUNTRYWIDE BANK, A DIVISION OF TREASURY BANK, N.A.; ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hon. Dale S. Fischer United States District Judge

FINDINGS OF FACT AND CONCLUSIONS OF LAW

After consideration of the parties' Trial Briefs and the oral arguments of counsel, the Court makes the following findings of facts and conclusions of law.

FINDINGS OF FACT

1. Plaintiffs David and Michelle Kratz have two remaining claims against defendant Countrywide Bank, FSB both of which are brought pursuant to the Truth in Lending Act, 15 U.S.C. Sections 1601, et seq. ("TILA"). Plaintiffs' first claim is for rescission based on Countrywide's alleged failure to provide the required number of completed copies of the notice of Plaintiffs' right to rescind their February 2005 loan transaction. Plaintiffs' second claim is for damages based on Countrywide's alleged failure to accept their February 2008 rescission demand. (Second Amended Complaint; April 29, 2009 Order GRANTING Motion of Defendant Countrywide Bank, FSB, for Partial Summary Judgment ("April 29 Order") at 4-7.)

2. Plaintiffs purchased their home in Corona, California, for $489,000 in December 2001, and refinanced their mortgage four times: in July 2002, in January 2003, in December 2003, and again in February 2005, when they obtained the refinance loan that is the subject of this dispute from Countrywide. (Plaintiffs' Supplemental Separate Statement of Genuine Issues of Material Fact in Opposition to Countrywide Bank's Motion for Partial Summary Judgment ("Plaintiffs' Separate Statement"), Undisputed Fact Nos. 1-2, 5-10.)

3. Each time Plaintiffs refinanced, they obtained cash to pay for upgrades and improvements to their home. (Id., Undisputed Fact Nos. 5-12, 96-99.)

4. Plaintiffs testified that they signed their Countrywide loan documents on February 25, 2005. (Id., Undisputed Fact No. 74.)

5. Included in the closing documents that Plaintiffs received was at least one copy of a notice of Plaintiffs' right to rescind the loan transaction within three days ("Notice of Right to Cancel"). (Second Amended Complaint, Ex. B.)

6. The Notice of Right to Cancel that Plaintiffs received disclosed the acquisition of a security interest in their property; Plaintiffs' right to rescind the transaction within three days; how to exercise that right, including a form for that purpose and the lender's address; and the effects of rescission. (Second Amended Complaint, Ex. B.)

7. Mr. Kratz understood when he signed the loan documents that he had a right to rescind the loan within three days. (Plaintiffs' Separate Statement, Undisputed Fact No. 92.)

8. Plaintiffs' Countrywide loan funded on or about March 3, 2005. The total amount of the loan was $910,000. Plaintiffs used the proceeds to pay off roughly $780,000 in existing mortgage loans, and spent the remaining $120,000 on home improvements. (Id., Undisputed Fact Nos. 96-99; see also Deposition of David Kratz at 123:14-124:23, 127:13-129:5.)

9. In or around 2007, Plaintiffs' used car dealership went out of business as a result of a dispute between Plaintiffs and their lenders, and Plaintiffs filed for bankruptcy. (Plaintiffs' Separate Statement, Undisputed Fact No. 106; Deposition of Michelle Kratz ("M. Kratz Depo.") at 23:18-24:13, 166:15-167:10.)

10. Plaintiffs received a discharge in bankruptcy in January 2008. (M. Kratz Depo. at 23:18-24:13.)

11. In February 2008 Plaintiffs sought to refinance their loan with Countrywide. They were told that, due to the down-turn in the market, they owed more on their loan than the home was worth. In order to refinance, Plaintiffs would have to come up with the difference (roughly $300,000) between the amount of a new loan and the amount they owed on their existing loan. This Plaintiffs could not do. (Plaintiffs' Separate Statement, Undisputed Fact Nos. 109-111.)

12. Plaintiffs stopped making their mortgage payments and hired a lawyer. Plaintiffs continue to live in their home, but they have not made a mortgage payment since January 2008. (Id., Undisputed Fact Nos. 114-118.)

13. On February 20, 2008 (two years and 360 days after Plaintiffs claim they signed their loan documents), Plaintiffs' counsel wrote to Countrywide and demanded rescission of Plaintiffs' loan on the ground that the Notice of Right to Cancel that Plaintiffs received did not contain the date of the transaction and the date when the three-day rescission period expired. (Id., Undisputed Fact No. 118.)

14. Within 20 days, Countrywide declined the demand because its file contains a completed Notice of Right to Cancel bearing both Plaintiffs' signatures, indicating that each Plaintiff received two completed copies. (Id., Undisputed Fact No. 119.)

15. Mrs. Kratz testified that, because Plaintiffs are "upside down" on their mortgage, she does not believe she should have to honor her contractual obligation to repay ...


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