September 15
Capital Depot, LLC dba Network Funding, LLC
Post Office Box 4600,
Scottsdale, Arizona 85261
David T. Bonfiglio
Attorney at Law
4422 N. Civic Plaza, Suite 101
Scottsdale, Arizona 85251
Re: Wendy Lee Nichols
Rescission of Mortgage Loan Dated December 21
Rescission of Mortgage Loan Dated February 16
Both Loan Numbers: 361-051201
Pursuant to the Federal Truth and Lending Act
VIA FEDERAL EXPRESS
Dear Capitol Depot:
The undersigned represent Wendy Nichols in this matter as it relates to certain loans made by Capitol Depot which were secured by Ms. Nichols home. Please be informed that for the reasons set forth below, Ms. Nichols hereby rescinds the loans made by Capitol Depot pursuant to the Federal Truth in Lending Act.in addition to the claims listed below, there may be additional violations of TILA and state lending laws of which we are not yet aware.
Ms. On or about December 21, Wendy Nichols signed a promissory note secured by a deed of trust, payable to you. The stated principal amount on the promissory note was $20,000.00. The stated interest rate was variable, with a initial, non-discounted rate of 24.00%. The terms of the note required monthly payments of the unpaid finance charge for the first 60 months and repayment of the loan and finance charges over the next 180 months with 1/180th of the balance due each month. The term of the loan was for twenty years.
Page 2
Capitol Depot
October 23
On or about February 16, Wendy Nichols signed a document entitled AHome Equity Credit Line Agreement and Disclosure Statement Loan Modification Agreement@. She also signed a second promissory note secured by a deed of trust, payable to you. It appears that this second loan was to either replace or modify the first loan. The stated principal amount on the promissory note was $22,500.00. The stated interest rate was variable, with a initial, non-discounted rate of 24.00%. The terms of the note required monthly payments of the unpaid finance charge for the first 60 months and repayment of the loan and finance charges over the next 180 months with 1/180th of the balance due each month. The term of the loan was for twenty years.
These helcs were made to avoid hoepa
Each of your loans purport to be a AHome Equity Credit Line@. These type loans are defined under The Federal Truth in Lending Act (ATILA@) and are called AHELCS@.
As you are aware, Ms. Nichols wished for a small loan to repay her arrears on her first mortgage. She met with your representative and asked for a loan large enough to accomplish her goal. She did not wish for a line of credit and did not request a line of credit.in fact, she did not know that she was obtaining a line of credit until she received the loan documents that you email to her for her signature.
At the time the first loan was consummated Ms. Nichols received all of the funds available to her under the Aline of credit@. After deducting the extremely high loan fees and other loan related charges, the remaining balance went to bring her first deed of trust current and to pay other personal debt of Ms. Nichols. I have several HUD-1's which were provided to Ms. Nichols by First American Title. Each indicates a different amount of loan proceeds payable to Ms. Nichols. However, it appears that Ms. Nichols received $8,908.76 which was wired into her personal account by First American at close of escrow.
Correspondence received by Ms. Nichols from First American Title indicates that $2,500 of the loan amount was to be withheld from the loan proceeds by Capitol Depot. According to First American, all of the loan proceeds were given to Ms. Nichols upon closing.
Page 3
Capitol Depot
October 23
To resolve this Aproblem@, on or about February 17, it appears that Capitol Depot required Ms. Nichols to both modify her prior loan transaction and enter into a new loan transaction. The documents were emailed to her and she went to a local notary to sign them. She then mailed them back to Capitol Depot. This new loan transaction was similar in most material aspects as loan 1, save and accept that the loan amount was now $22,500.00 or $2,500.00 more. It does not appear that Ms. Nichols received any cash out of this particular transaction. It further does not appear from the HUD-1 that the first loan was paid off. It appears that the second loan somehow replaced the first loan and the second loan was, in effect, the same loan.
The Federal Truth In Lending Act (TILA) governs non-purchase money loans, made by a lender, for household purposes, which are secured by the borrower=s residence. Loans made with excessive interest rates or fees are governed by under TILA through Regulation Z ' 226.32 which is known as the Homeowner=s Equity Protection Act (HOEPA), or is alternatively known as ASection 32". Regulation Z ' 226.34 (b) prohibits the structuring of a loan as an open-ended loan to evade the requirements of ' 226.32. All loans in violation of Reg. Z ' 226.34 (b) are subject to the disclosure rules and rescission rights of TILA and HOEPA despite the label given to the loan transaction.
The facts of these loan transactions demonstrate that these loans were disguised as open ended loans to evade the requirements of HOEPA:
1) At the time of closing the entire amount available on the line of credit were lent to the borrower;
2) The loans, during the Adraw period@, are not amortizing, but are interest only and as such the loans are not replenishing;
3) The excessive fees and costs associated with these loans far exceed the fees and costs generally charged in open ended loans;
4) The excessive fees and costs on these loans would be prohibited or subject to strict regulation if the loan were closed ended loans;
As a result, each loan is in violation of Regulation Z, '226.34 (b) are subject to the disclosure rules and rescission rights of TILA and HOEPA, despite the label given to the loan transactions.
Page 4
Capitol Depot
October 23
These loans are section 32 or hoepa loans
HOEPA applies to any TILA loan for which the annual percentage rate (APR) is exceeded by ten percentage points the yield on treasury securities having a comparable maturity at the time the loan was made. Under TILA the true APR is calculated by determining the amount of Afinance charge@, which includes the base interest and all other fees which are defined as Afinance charges@ under the code. The amount of the finance charge and its relationship to the loan amount and term of the loan are then calculated to arrive at the true APR of the loan.
Using the above calculations, it appears that the true APR for the loan is in excess of 40% interest and far exceeds the ten percentage points added to the yield on treasury securities having a comparable maturity at the time the loan was made. As such this loan is considered a Acovered loan@ and is governed by HOEPA and TILA.
All lenders making a HOEPA loan must supply the borrower with a HOEPA or Section 32 disclosure within three days prior to the signing of the loan documents. No such disclosure was given to Ms. Nicholas. Failure to provide the proper disclosure at the proper time subjects this loan to rescission by the borrower.
Wendy Lee Nichols hereby informs you that she is rescinding her loan due to the failure of Capital Depot to provide her the Section 32 disclosure as required under 15 U.S.C., '1635,1639, and Reg. Z.
The Federal Truth in Lending Disclosure is required to be provided to the borrower with all material information correctly disclosed (15 U.S.C., '1635, Reg. Z '226.23 (a); Official Staff Commentary '226.15 (b)-1,226.23 (b)-1). If these material disclosures are not properly supplied, the consumer has an extended right to rescind (15 U.S.C., '1635 (f); Reg. Z '226.15 (a) (3), 226.23 (a) (3). Capital Depot was required under TILA to provide a TILA disclosure. Ms. Nichols was not given any copy of the required disclosure.
Wendy Lee Nichols hereby informs you that she is rescinding her loan due to the failure of Capital Depot to provide her the material disclosures on the Federal Truth in Lending Disclosure form as required under 15 U.S.C., '1635 and Reg. Z.
Page 5
Capitol Depot
October 23
Right to cancels
TILA at 15 U.S.C., '1635, as implemented under Regulation Z, requires that each borrower receive two copies of a properly filled out Notice of Right to Cancel. The borrower must be given their two copies of the properly filled out Right to Cancel during the period of time for which the cancellation right exists. When Capital Depot provided Ms Nichols with her loan documents electronically she was provided with one copy of a Notice of Right to Cancel. The Notice of Rights to Cancel each has preprinted the date on which the Right to Cancel was to begin. The first loan=s Right to Cancel has preprinted the starting date as A12/21/05". The second loan=s Right to Cancel has preprinted
the starting date as A02/17". Neither Right to Cancel has the ending date preprinted or handwritten on the form.
Wendy Lee Nichols hereby informs you that she is rescinding her loan due to the failure of Capital Depot to provide her with two copies, properly filled out, of the Notice of Right to Cancel, as required under 15 U.S.C., '1635, and Reg. Z.
Defective tila apr disclosures
The Federal Truth In Lending Disclosure is required to be provided to the borrower with all material information correctly disclosed, ('226.23 (a); Official Staff Commentary ' 226.15 (b)-1,226.23 (b)-1). If these material disclosures are not properly supplied, the consumer has an extended right to rescind (15 U.S.C.'1635 (f); Reg. Z ' 226.15 (a) (3), 226.23 (a) (3). TILA sets forth certain tolerances for improper disclosures and the tolerance on irregular loans is 1/4 of 1 percent (. 25%). The TILA disclosure dated December 21, which provided to Ms. Nichols on the first loan, disclosed the APR as 30.698%. The true APR on this loan is higher than the allowable tolerance on irregular loans and, as such, the information disclosed is materially erroneous. Ms. Nichols hereby informs you that she is rescinding her loan with Capital Depot due to its failure to disclose the true APR on this loan transaction.
Page 6
Capitol Depot
October 23
Please be advised, by this correspondence that Ms. Nichols hereby rescinds this loan pursuant to 15 U.S.C. 1635,15 U.S.C. 1639 for all of the reasons stated above. As a result of this rescission notice your security interest is void (Regulation Z, '226.23 (d) (1) and you are bound to immediately terminate such security interest. Regulation Z, '226.23 (d) (2).in addition, you have twenty days from your receipt of this notice to return to my client all monies paid in connection with the terms of the mortgage loan which is the subject of this letter. My client hereby requests an itemization of such monies. We further make a claim for civil penalties to the extent allowed by law. Upon your discharge of your statutory duties, my client will perform all necessary actions required by 15 U.S.C. Sec. 1635 (b); Reg. Z, Sec. 226.15 (d) (3), 226.23 (d) (3).
Failure to cancel the security interest and return to my client all monies due may further subject you to additional actual and statutory damages.
Sincerely,
Pamela D. Simmons Attorney at Law
cc: client
Now David Bonfiglio agreed to rescind the loan for 8,000, so after telling the judge in Bankrupcty court he would, 5 days later he auctioned my house off for 30,000. He even kept the 22,000 over the amount of which he told the judge i owed. How he got away with it, i dont know, but we have to complain to the attorney general to get help. So please complian.
Wendy
Lake Havasu City, Arizona
U.S.A.
0 comments