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Lind v. New Hope Property

April 13, 2010

DEBORAH LIND, ET AL., PLAINTIFFS,
v.
NEW HOPE PROPERTY, LLC, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Simandle, District Judge

OPINION

Plaintiffs Deborah Lind, Patrick Lind Sr., Patrick Lind Jr., Eileen Fisher, Daniel Cullen, Tricia Curiale, Sandra Valdez, and Charles Heineman, were all "investors" in an alleged mortgage rescue scheme orchestrated by Defendants Brian Mammoccio, Donna Fisher, and their companies Defendants New Hope Property, LLC ("New Hope") and American Home Lending ("AHL") (collectively, "New Hope Defendants"). Presently before the Court are motions to dismiss submitted by five banking and lending companies, Defendants Wells Fargo Bank together with Wachovia Mortgage [Docket Item 19], GMAC Mortgage [Docket Item 22], Chase Home Finance [Docket Item 10], and CitiMortgage [Docket Item 7] (collectively, "Mortgage Company Defendants"*fn1 ), all also named as defendants in this action, but with virtually no details regarding their alleged involvement in unlawful or otherwise actionable conduct. As will be explained at length below, the Court finds that Plaintiffs have failed to state claims against the Mortgage Company Defendants for which relief may be granted.

I. FACTUAL ALLEGATIONS AND PROCEDURAL HISTORY

As alleged, Defendants Mammoccio and Fisher "solicited their family members and friend to participate in a foreclosure and/or bankruptcy rescue program through which Plaintiffs would invest with [Defendant] New Hope Property, LLC and help purchase properties from defaulting/distressed homeowners." (Compl. ¶ 1.) The New Hope Defendants "created and marketed" the scheme, whereby Plaintiffs purchased homes from distressed homeowners, with the understanding that the homeowners would remain in their homes under a lease and then repurchase the home after New Hope had resolved the homeowners' financial difficulties. (Id. ¶¶ 39-44.) AHL "handled, processed, and funded" all financial matters for this scheme "as broker, agent, lender or mortgage service provider and subsequently sold, transferred or assigned [the mortgages] to other named Defendant financial lending institutions." (Id. ¶ 2.)

Plaintiffs allege that the New Hope Defendants "targeted" Plaintiffs based on their familial and friendly relationships with Mammoccio and Fisher and that the New Hope Defendants made numerous misrepresentations in order to "lull Plaintiffs into a mistaken belief that the program was legal and their investment and credit was safe." (Id. ¶¶ 44-48, 65.) "Defendants New Hope, Mammoccio, American Home Lending and Fisher all made affirmative representations to Plaintiffs that through the program, Defendants and the distressed homeowners would come up with a sale price for the home that [would] enable Defendant New Hope to repair the distressed homeowners' bad credit by paying off the property's mortgage as well as the distressed homeowner's debts with the equity from their home." (Id. ¶ 44.) The New Hope Defendants also represented to Plaintiffs that during the first twelve months of Plaintiffs' investment, "New Hope would pay all the properties' mortgages, taxes and utilities." (Id. ¶ 45.) The New Hope Defendants assured Plaintiffs that the program would earn them a "lump sum payment of approximately $7,000 per house" and help to improve Plaintiffs' credit. (Id. ¶ 46.)

The New Hope Defendants failed to meet their promises. They did not make the mortgage and tax payments, did not repair the distressed homeowners' credit, and did not secure new financing for the homeowners so that the homeowners were unable to repurchase their homes. (Id. ¶ 58.) Instead, the New Hope Defendants submitted falsified credit and loan applications on behalf of Plaintiffs without Plaintiffs' knowledge in order to obtain artificially inflated loans. (Id. ¶¶ 6, 62-63, 68, 76.) AHL and Fisher secured and processed Plaintiffs' loans and then sold those loans on secondary markets. (Id. ¶¶ 2, 75.) The New Hope Defendants "placed Plaintiffs in unaffordable, unsupported, overvalued and unconscionable loans as a result of inflating home appraisals, misrepresenting home values, failing to disclose property condition, and misrepresenting Plaintiffs' income and asset figures to deceive primary and secondary lenders and market purchasers of loans so Defendant[s] could extract even more money for themselves." (Id. ¶ 70.) After paying off the existing mortgages, New Hope retained approximately $2,608,307 in excess funds. (Compl. ¶¶ 51, 56; Compl. Exh. A.)

At some unspecified time, the New Hope Defendants "advised Plaintiffs that the program was over and Defendants would not make any payments on the properties, would not secure any new financing, the distressed homeowners would not repurchase the homes and Plaintiffs should try to either collect money from the distressed homeowners living in the homes or sell the house." (Compl. ¶ 59.)

According to Plaintiffs' complaint, the Mortgage Company Defendants played some role in the above scheme. Yet their role appears to be limited to that of secondary lender, (id. ¶¶ 2, 75), and they too were allegedly the target of the New Hope Defendants' fraud, (id. ¶¶ 6, 62-63, 68, 70, 76). Many of the allegations in the complaint describe the conduct of "Defendants" collectively, though often it is obvious that the allegations refer only to the New Hope Defendants.*fn2 The only individualized mention of any of the Mortgage Company Defendants comes at the beginning, where they are listed as parties, with each described as "a banking and/or equal housing lender who is in the business of issuing, underwriting, lending and/or servicing residential mortgages . . ." (Id. ¶¶ 23-27.) The final paragraph of the factual recitals makes a clear collective reference to the Mortgage Company Defendants, stating, "The named Defendant lenders specialize in reviewing and processing mortgage applications and loan underwriting; they perform risk evaluation, loan to value analysis and repayment terms and conditions and they are prime and sub prime lenders engaging in legitimate and lawful loan transactions." (Id. ¶ 87.)

In their omnibus opposition to the Chase and CitiMortgage motions (Plaintiffs have not opposed the motions of GMAC or Wells Fargo and Wachovia), Plaintiffs continue to emphasize that their claims arises from "a mortgage rescue scheme that was created, operated and processed by Defendants Mammaccio, Fisher, New Hope and American Home Lending." (Pl. Opp'n at 2.) The Mortgage Company Defendants are at fault, according to Plaintiffs, because the defendants did not use "due diligence" when issuing loans to Plaintiffs and failed to provide paperwork directly to Plaintiffs (instead of the New Hope Defendants).

On July 29, 2009, based on the above allegations, Plaintiffs filed suit against the New Hope Defendants, the Mortgage Company Defendants, and other alleged players in the scheme. Against all the defendants, Plaintiffs assert the following causes of action:

* Count I: Violations of the Racketeer Influenced and Corrupt Organization Act ("RICO"), 18 U.S.C. §§ 1961-68, based on the alleged predicate act of wire fraud.

* Count II: Common law fraud

* Count III: ...


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