Mitchell v. Beneficial Loan & Thrift Co.

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 05-3068
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Ty S. Mitchell; Kimberly S. Mitchell, *
*
Plaintiffs-Appellants, *
*
Christopher Mauer; Mary Jo Mauer; *
James L. Engstrom; Kathleen P. *
Engstrom, *
*
Plaintiffs, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
Beneficial Loan & Thrift Company, *
* [PUBLISHED]
Defendant-Appellee, *
*
Household Industrial Finance *
Company, *
*
Defendant. *
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Submitted: May 18, 2006
Filed: September 6, 2006
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Before MURPHY, BEAM, and BENTON, Circuit Judges.
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PER CURIAM.
 The district court1 granted summary judgment to Beneficial Loan & Thrift
Company. Ty S. Mitchell and Kimberly S. Mitchell appealed the issue whether a loan
transaction is subject to the Home Ownership and Equity Protection Act (HOEPA).
This court affirmed on June 21, 2006. The Mitchells petitioned for rehearing, arguing
that some amounts financed were not disbursed, making them "points and fees" under
HOEPA. This court grants the petition for rehearing, vacates the prior opinion, and
files this opinion affirming the district court.

The Mitchells assert that Beneficial violated HOEPA. HOEPA, as relevant
here, requires creditors to make additional disclosures to borrowers if the total points
and fees payable at closing exceed 8 percent of the total loan amount, or $400,
whichever is greater. 15 U.S.C. §§ 1602(aa)(1)(B), 1639(a). The Mitchells argue that
the $455 appraisal fee, $821 title insurance fee, $67 phone bill, or $1,178
overstatement of principal should be included in the total points and fees of their loan.
If any one of these were included, the total points and fees would exceed 8 percent of
the total loan amount, making the loan subject to HOEPA.

Appraisal and title insurance fees, if bona fide and reasonable, are excluded
from HOEPA's definition of total points and fees. 15 U.S.C. § 1605(e); 12 C.F.R. §
226.4(c)(7). On appeal, the Mitchells claim that these fees are not bona fide and not
reasonable because they violate the Real Estate Settlement Procedures Act (RESPA),
12 U.S.C. § 2607(b). The district court correctly found that these fees did not violate
RESPA because they were paid to an unaffiliated third party for services actually
performed, and, in any event, Beneficial derived no benefit from the payments. See
Haug v. Bank of Am., 317 F.3d 832, 836 (8th Cir. 2003).

1
The Honorable James M. Rosenbaum, Chief United States District Judge for
the District of Minnesota.
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 As for the telephone bill and principal overstatement, the statute does not
include them in total points and fees. 15 U.S.C. § 1602(aa)(4). Points and fees do,
however, include "all items included in the finance charge, except interest or the time-
price differential." Id. § 1602(aa)(4)(A). The "finance charge" is "the sum of all
charges payable directly or indirectly, by the person to whom credit is extended, and
imposed directly or indirectly by the creditor as an incident to the extension of credit."
Id. § 1605(a). See also 12 C.F.R. § 226.4(a). Most importantly, the finance charge
does not include charges payable in a "comparable cash transaction." 15 U.S.C. §
1605(a). See also Cornist v. B.J.T. Auto Sales, Inc., 272 F.3d 322, 327 (6th Cir. 2001)
("These provisions require sellers to disclose as 'finance charges' fees payable by
credit customers, but not by cash customers, in comparable transactions"); Alston v.
Crown Auto, Inc., 224 F.3d 332, 334 (4th Cir. 2000).

In the petition for rehearing, the Mitchells argue that the phone bill should be
considered a finance charge (and thus, points and fees) because, while the $67 Verizon
bill appears in the itemized "amount financed" in the disclosure form, Beneficial never
remitted that payment. Ty Mitchell avers that he paid the $67 phone bill after the loan
closing.

The Mitchells contend that Beneficial's non-payment of that $67 constitutes a
finance charge, citing 15 U.S.C. § 1605(a), which defines "finance charge" to include
fees imposed by third-party closing agents, if the creditor either requires the charge
or retains the charge. This statute is inapplicable, because there were no third-party
closing agents in this case. Similarly, the Mitchells' reliance on cases interpreting 15
U.S.C. § 1638(a)(2)(B) is misplaced, because it addresses a different kind of credit
transaction than the one here. See 15 U.S.C. § 1638(a)(2)(B) (requiring accurate
disclosure in transactions other than under open-end credit plans). See also Gibson
v. LTD, Inc., 434 F.3d 275, 285 (4th Cir. 2006); Peters v. Jim Lupient Oldsmobile Co.,
220 F.3d 915, 916 (8th Cir. 2000); Gibson v. Bob Watson Chevrolet-Geo, Inc., 112
F.3d 283, 287 (7th Cir. 1997).

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 The phone bill here was not imposed as an incident to the extension of credit.
It is an amount financed, not a charge incident to the extension of credit. It would be
payable in a comparable cash transaction, which excludes it from the finance charge
under HOEPA. See 15 U.S.C. § 1605(a). Accordingly, the district court correctly
determined that Beneficial's non-payment of the phone bill is not part of points and
fees, and does not trigger HOEPA's additional disclosure requirements.2

The Mitchells also claim that they were overcharged for the payoff of their
(previous) first mortgage, because Beneficial overstated the payoff amount by $1,178
on the loan disclosure forms. Like the phone bill, the Mitchells argue that Beneficial's
overstatement is a finance charge, which should be included in the calculation of
points and fees under HOEPA. As the principal overstatement is imposed as an
amount financed, not as an incident to extending credit, and would be imposed in a
comparable cash transaction, this court concludes that it is not a finance charge. See
15 U.S.C. § 1605(a). Accordingly, while the Mitchells may have other claims
regarding this amount, the overstatement of the principal is not points and fees under
HOEPA.

The judgment of the district court is affirmed.
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2
While the Mitchells may have other claims regarding the phone bill, they are
not before this court. The sole issue on appeal is whether HOEPA governs the loan
transaction.
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