HENOK v. CHASE HOME FINANCE, LLC et al

Filing 60

MEMORANDUM OPINION AND ORDER denying the plaintiff's motion 50 for partial summary judgment and granting Chase's cross-motion 56 for partial summary judgment. Signed by Judge Richard W. Roberts on 6/17/13. (lcrwr1)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
_______________________________
)
ARAYA HENOK,
)
)
Plaintiff,
)
)
v.
)
Civil Action No. 12-292 (RWR)
)
CHASE HOME FINANCE, LLC,
)
et al.,
)
)
Defendants.
)
_______________________________)
MEMORANDUM OPINION AND ORDER
Pro se plaintiff Araya Henok brings this action against
Chase Home Finance, LLC (“Chase”) and Fannie Mae,1 challenging
the legality of the foreclosure on a property he owned on
C Street S.E. in Washington, D.C. (“the property”).

Henok moves

for partial summary judgment against Chase on his claim under the
Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601
et seq., arguing that Chase failed to respond to Henok’s requests
for the amount to cure his default.

Chase cross-moves for

summary judgment arguing that RESPA does not apply to Henok’s
loan.

Because the undisputed facts show that Chase is entitled

to judgment as a matter of law, Henok’s motion for partial
summary judgment will be denied, Chase’s cross-motion for partial
summary judgment will be granted, and judgment on the RESPA claim
will be entered for Chase.

1

Shapiro and Burson, LLP was terminated as a defendant by
order dated April 17, 2013.

-2BACKGROUND
Henok purchased the property in 2007 with financing from JP
Morgan Chase Bank.

Am. Compl. ¶ 6; Def. Chase Mem. of Law in

Opp’n to Pl.’s Third Mot. for Partial Summ. J. and in Supp. of
Cross Mot. for Summ. J. (“Chase’s Mem.”) ¶ 1.

In August 2009,

Chase returned Henok’s monthly payment and “stated that [his]
property [was] going into foreclosure.”

Am. Compl. ¶ 8.

Fannie

Mae bought the property in a foreclosure sale on November 18,
2009.

Id. ¶ 15, Exs. 5-6; Pl.’s Mot. for Partial Summ. J.

Against Chase (“Pl.’s Summ. J. Mot.”) ¶ 7; Chase’s Mem. ¶ 19.
Henok filed a complaint in February 2012 in D.C. Superior
Court challenging the foreclosure.

He alleged, in part, that

Chase violated RESPA by failing to respond to his written
requests for cure figures.

The defendants removed the case to

federal court and answered the complaint.

Henok moves for

partial summary judgment on his RESPA claim.

Chase opposes and

cross-moves for summary judgment arguing that since RESPA does
not govern loans on property used for business purposes and Henok
uses the property for rental income, RESPA does not apply to
Henok’s loan.
DISCUSSION
Summary judgment is warranted on an individual claim or part
of a claim if “there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.”

-3Fed. R. Civ. P. 56(a).

RESPA provides that if the loan servicer

receives a “qualified written request” from the borrower for
information about his loan, the servicer is required to provide
“a written response acknowledging receipt of the
correspondence[.]”

12 U.S.C. § 2605(e)(1)(A).

However, RESPA

“does not apply to credit transactions involving extensions of
credit . . . primarily for business, commercial, or agricultural
purposes[.]”

12 U.S.C. § 2606(a).

In interpreting this

provision, courts have found that RESPA does not apply to loans
for non-owner-occupied rental properties.

See, e.g., Johnson v.

Wells Fargo Home Mortg., Inc., 635 F.3d 401, 417 (9th Cir. 2011);
Henok v. Chase Home Finance, Civil Action No. 12-336 (RWR), 2013
WL 2352104, at *1 (D.D.C. May 30, 2013).2

2

Johnson reasoned that RESPA’s implementing regulation,
Regulation X, 24 C.F.R. § 3500.5, refers to Regulation Z, 12
C.F.R. 226.3(a)(1), the implementing regulation for the Truth in
Lending Act, to define business purpose loans. See 24 C.F.R.
§ 3500.5(b)(2) (“Business purpose loans. An extension of credit
primarily for a business, commercial, or agricultural purpose, as
defined by Regulation Z, 12 CFR § 226.3(a)(1). Persons may rely
on Regulation Z in determining whether the exemption applies.”).
Although Regulation Z does not explicitly define business purpose
loans, the Official Staff Commentary for that regulation provides
that:
Non-owner-occupied rental property. Credit extended to
acquire, improve, or maintain rental property
(regardless of the number of housing units) that is not
owner-occupied is deemed to be for business purposes.
12 C.F.R. Pt. 226, Supp. I, Cmt. 3(a)(4) (West 2011). Thus, a
loan to acquire, improve, or maintain non-owner-occupied rental
property is excluded under 12 U.S.C. § 2606(a) because it is a
loan for a business purpose. Johnson, 635 F.3d at 417.

-4Here, Chase argues that RESPA does not apply because the
property is a non-owner-occupied rental property.
at 8-9.

Chase’s Mem.

Henok does not dispute that the property is a non-owner-

occupied rental property.

Indeed, Henok’s amended complaint and

partial summary judgment motion seek damages based on rental
revenue from the property.
at 5.

Am. Compl. at 19; Pl.’s Summ. J. Mot.

Henok attaches a purported “rental history” of the

property to support his damages claim.

Pl.’s Summ. J. Mot.,

Ex. 7.3
Henok argues, though, that RESPA applies to his loan because
the deed of trust required Chase to abide by RESPA’s
requirements.

Pl.’s Summ. J. Mot. at 3.

The definition section

in the deed of trust provides that:
As used in this Security Instrument, “RESPA” refers to
all requirements and restrictions that are imposed in
regard to a “federally related mortgage loan” even if
the Loan does not qualify as a “federally related
mortgage loan” under RESPA.
Chase’s Mem., Ex. 2, Deed of Trust at 2-3.

Also, the “Funds for

Escrow Items” covenant of the deed of trust incorporates some of
RESPA’s requirements when the borrower and lender use an escrow
account.

3

Id., Ex. 2, Deed of Trust ¶ 3.

Although Henok characterizes this exhibit as a “rental
history” for the property, Pl.’s Summ. J. Mot. at 5, this exhibit
appears to be a Housing Assistance Payments Contract which
reflects the rental amount for a tenant living in the property
from 2009-2010. Id., Ex. 7. In any event, this document does
reflect that the property was used as a non-owner-occupied rental
property.

-5D.C. courts interpret deeds under the “‘objective law of
contracts.’”

Joyner v. Estate of Johnson, 36 A.3d 851, 855 (D.C.

2012) (quoting Dyer v. Bilaal, 983 A.2d 349, 354 (D.C. 2009)).
Under this principle, the written language in the agreement
governs unless the language is unclear or there is fraud, duress
or mutual mistake.

“‘If a deed is unambiguous, the court’s role

is limited to applying the meaning of the words[.]’”

Id.

(quoting Found. for the Pres. of Historic Georgetown v. Arnold,
651 A.2d 794, 796 (D.C. 1994)).
The plain language of the definition section does not
reflect that RESPA applies to Henok’s loan.

The deed’s RESPA

definition does not say that all of RESPA’s requirements and
restrictions apply even if the loan is a non-covered business
purpose loan for non-owner-occupied rental property.

Nor does

the fifteen-page deed say so in the single-spaced text of any of
its twenty-four covenants.

Other than one mention of RESPA in

covenant 20 requiring notice to the borrower of any change in
loan servicer, Chase’s Mem., Ex. 2, Deed of Trust ¶ 20, RESPA is
mentioned only in covenant 3 governing funds collected for escrow
items, id., Ex. 2, Deed of Trust ¶ 3.

Neither that covenant nor

any other provision in the deed adopts RESPA’s provisions under
12 U.S.C. § 2605(e)(1)(A) for responding to a borrower’s requests
for amounts to cure a default.

Therefore, RESPA’s requirements

were not triggered by Henok’s requests for cure figures, and

-6Chase, rather than Henok, is entitled to summary judgment on
Henok’s RESPA claim.
CONCLUSION AND ORDER
Business purpose loans are exempted from RESPA’s coverage
and loans involving non-owner-occupied rental properties are
business purpose loans under RESPA’s implementing regulations.
It is undisputed that Henok’s loan involved a non-owner-occupied
rental property.

RESPA, then, does not apply to Henok’s loan,

and the deed of trust does not otherwise incorporate RESPA’s
notification requirements.

Thus, Chase is entitled to judgment

as a matter of law on Henok’s RESPA claim.

Accordingly, it is

hereby
ORDERED that plaintiff’s motion [50] for partial summary
judgment be, and hereby is, DENIED.

It is further

ORDERED that Chase’s cross-motion [56] for partial summary
judgment be, and hereby is GRANTED.

Judgment is ENTERED for

Chase concerning the RESPA claim.
SIGNED this 17th day of June, 2013.

/s/
RICHARD W. ROBERTS
United States District Judge