Reverse Mortgage Solutions, Inc. (“RMS”), a leading servicer of home equity conversion mortgages, commonly known as reverse mortgages, recently received a complete defense verdict in the United States District Court for the Southern District of West Virginia, in a trial presided over by Judge Irene Berger. The case arose out of a reverse mortgage entered into by the borrower, Teresa Lavis, and RMS in November 2013. When the borrower was unable to pay her taxes and insurance for several years, RMS – with the approval of the U.S. Department of Housing and Urban Development – called the loan due and payable and began foreclosure proceedings. The borrower retained Gary Smith of Mountain State Justice, who prompted her to send a letter to RMS in May 2016 purporting to “rescind” her loan. In early November 2016, the borrower then filed an eight-count Complaint against RMS in the Circuit Court of Raleigh County, West Virginia. RMS removed the case to the U.S. District Court for the Southern District of West Virginia.

The Complaint asserted claims under the West Virginia Consumer Credit Protection Act, the Truth in Lending Act, and the Residential Mortgage Lender, Broker and Servicer Act (“RMLBSA”), including a class action claim alleging that RMS charged various purportedly illegal and excessive fees, charges, and costs at closing. The borrower made individual claims under the West Virginia Consumer Credit Protection Act for unconscionable inducement into the loan, unfair or unconscionable debt collection, and using fraudulent, deceptive or misleading representations to collect a debt, as well as claims for breach of contract, failure to honor payment, rescission under the Truth in Lending Act, and failure to honor rescission. The basic allegations made by the borrower were that the loan officer misrepresented to her that she would never have to make a payment under the loan, was denied meaningful counseling about the loan because RMS steered her to a loan counselor alleged to have a business relationship with RMS, and had no opportunity to read the closing documents because the closing was rushed. She also asserted that RMS improperly sought reimbursement for tax and insurance payments it advanced on her behalf, had no right to foreclose, and failed to honor her purported “rescission” of the loan.

Ruling on a motion to dismiss, Judge Berger agreed with RMS that the borrower’s putative class action claims – alleging improper and unlawful closing fees and charges - were time-barred under the two-year statute of limitations applied to claims under the RMLBSA because they accrued on the date of the closing. The case proceeded on the borrower’s individual claims. Ultimately, on summary judgment, the Court also dismissed the borrower’s claims for unconscionable inducement and unconscionable debt collection. Notably, Judge Berger found that all terms of the loan had been disclosed to the borrower up front, some months before the closing, and that she could not, therefore, base an unconscionable inducement claim on the alleged statements made by RMS’s loan officer. In addition, the Court found – on an issue of first impression in West Virginia – that closing costs and fees were not “debts” that RMS sought to collect. Instead, they were charges and fees for services rendered.

Having dropped her claims for breach of contract and failure to honor payment, the case proceeded to trial on the borrower’s claims that RMS used fraudulent, deceptive or misleading representations to collect a debt and failed to honor her purported rescission of the loan. After a three-day jury trial, during which the borrower was represented by Gary Smith and Bren Pomponio of Mountain State Justice, the jury returned a complete defense verdict for RMS on all counts, finding that RMS did not misrepresent the amount or status of the debt and did not fail to honor the borrower’s purported rescission.