PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 17-1356
MATTHEW DWOSKIN; RANDI DWOSKIN; JENNIFER DECKER; TERESA
BUTLER; LINDA CAMPBELL; LINDA CUADRA; ALFRED FIGLEY;
KELLY DILLS; STEFANI DILLS; MICHAEL WALSH; JENNIFER WALSH;
PHILLIP WERTHEIMER; JOANN WOODS; SHAWN WOODS; KERRIE
ZIPPRICH,
Plaintiffs - Appellants,
SEAN DECKER,
Intervenor/Plaintiff - Appellant,
v.
BANK OF AMERICA, N.A.
Defendant - Appellee.
Appeal from the United States District Court for the District of Maryland, at Baltimore.
Catherine C. Blake, District Judge. (1:11-cv-01109-CCB)
Argued: March 21, 2018 Decided: April 19, 2018
Before WILKINSON, MOTZ, and KING, Circuit Judges.
Affirmed by published opinion. Judge Wilkinson wrote the opinion, in which Judge Motz
and Judge King joined.
ARGUED: James C. White, PARRY TYNDALL WHITE, Chapel Hill, North Carolina,
for Appellants. Bradley R. Kutrow, MCGUIREWOODS LLP, Charlotte, North Carolina,
for Appellee. ON BRIEF: Dhamian Blue, BLUE LLP, Raleigh, North Carolina; Richard
D. Heideman, Noel J. Nudelman, Tracy Reichman Kalik, HEIDEMAN NUDELMAN &
KALIK P.C., Washington, D.C.; Richard S. Wayne, STRAUSS & TROY, LPA,
Cincinnati, Ohio; Leonard B. Simon, LAW OFFICES OF LEONARD B. SIMON, P.C.,
San Diego, California, for Appellants. Brian P. Troutman, Wm. Grayson Lambert,
Charlotte, North Carolina, Brian D. Schmalzbach, MCGUIREWOODS LLP, Richmond,
Virginia, for Appellee.
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WILKINSON, Circuit Judge:
Plaintiffs brought suit against the defendant Bank of America under the
Homeowners Protection Act. They claimed that the bank failed to make certain required
disclosures in connection with their residential mortgage loans. The statute is clear,
however, that these mortgage insurance disclosures are mandated only if lender-paid
mortgage insurance is a condition of obtaining a loan. See 12 U.S.C. § 4905(c). Because
no such conditions applied to the plaintiffs’ loans, nondisclosure was not a Homeowners
Protection Act violation.
I.
Each plaintiff in this case obtained a thirty-year, fixed-rate mortgage loan between
June 2007 and December 2008 through Bank of America’s “No Fee Mortgage Plus”
program. The No Fee Mortgage Plus loans were advertised as charging no fees in
connection with closing and requiring no private mortgage insurance.
Shortly after launching this product nationwide in 2007, Bank of America began
obtaining lender-paid mortgage insurance (LPMI) on certain pools of closed and funded
No Fee Mortgage Plus loans. Bank of America explained that this decision was made to
increase liquidity during the financial crisis that began to affect the housing market that
year. That is, while Bank of America initially planned to keep the No Fee Mortgage Plus
loans on its own books, purchasing LPMI gave it the option to sell the loans on the
secondary market. LPMI was eventually purchased on a significant proportion of the No
Fee Mortgage Plus loans, including on each of the plaintiffs’ loans. For those loans which
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eventually received LPMI, the timeline for purchase of LPMI ranged from one or two
weeks after closing to several months after closing.
While looking to refinance their loan, Matthew and Randi Dwoskin learned that
Bank of America had purchased LPMI on their loan. In response, they filed a putative
class action suit in the District of Maryland, with twelve other borrowers and borrower
couples eventually joining them in a consolidated class action complaint. In addition to
various state causes of action for fraud and consumer protection violations, the complaint
alleged that Bank of America did not provide certain mortgage insurance disclosures
required by the Homeowners Protection Act and sought actual and statutory damages.
Following extensive discovery over fourteen months, including production of over
88,000 Bank of America documents and several depositions with Bank of America
designees, the district court granted summary judgment to Bank of America on the
federal claims. After obtaining a new declaration from a former Bank of America
employee, the plaintiffs moved for reconsideration in light of what it described as newly
discovered evidence. In response, the district court affirmed its initial decision on the
federal claims, granted summary judgment to Bank of America on the state claims, and
issued final judgment in favor of Bank of America. The plaintiffs appeal on the grounds
that the district court erred in its application of the Homeowners Protection Act, abused
its discretion in managing discovery, and wrongly granted summary judgment on the
state law claims.
II.
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The Homeowners Protection Act of 1998 (HPA) provides, in part, that “not later
than the date on which a loan commitment is made for [a] residential mortgage
transaction, the prospective mortgagee shall provide to the prospective mortgagor a
written notice” of certain information regarding mortgage insurance. 12 U.S.C. § 4905(c).
The required disclosures include “a generic analysis of the differing costs and benefits”
of lender paid mortgage insurance (LPMI) versus borrower paid mortgage insurance, the
fact that LPMI may be tax-deductible, and the fact that LPMI “usually results in a
residential mortgage having a higher interest rate than it would in the case of borrower
paid mortgage insurance.” Id.
These disclosures are not required with every mortgage, however. Instead, they are
mandated only “[i]n the case of lender paid mortgage insurance that is required in
connection with a residential mortgage transaction.” Id. The plaintiffs in this case argue
that this language makes the disclosures mandatory any time a bank purchases LPMI on a
loan, even if LPMI is obtained after closing and is not a condition of closing. This reads
the statute far too broadly.
In interpreting this statute, like any other, “we look first to its language, giving the
words used their ordinary meaning.” Roberts v. Sea-Land Services, Inc., 566 U.S. 93, 100
(2012) (quoting Ingalls Shipbuilding, Inc. v. Director, Office of Workers’ Compensation
Programs, 519 U.S. 248, 255 (1997)). The plain meaning of the key statutory phrase
“required in connection with a residential mortgage transaction” involves conditions at
the time a mortgage loan is closed. In addition to being the most natural reading of the
phrase, this interpretation also “give[s] each word some operative effect,” as required by
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ordinary principles of statutory interpretation. Crespo v. Holder, 631 F.3d 130, 135 (4th
Cir. 2011) (quoting Walters v. Metro. Educ. Enters., 519 U.S. 202, 209 (1997)). The
“residential mortgage transaction” is the loan’s closing, the phrase “in connection with”
conveys the close nexus between satisfaction of the requirement and the loan’s closing,
and the word “required” means just that—necessary for the transaction to move forward.
The plaintiffs’ preferred interpretation of this phrase, by contrast, reads the word
“transaction” out of the statute entirely, since in their view a mortgage insurance
“requirement” could come into existence at any time during the life of the loan. An
interpretation that would render part of the key phrase superfluous must be rejected.
Our conclusion is further confirmed by considering the goals Congress sought to
advance by mandating disclosures about the advantages and disadvantages of LPMI.
Residential mortgages are among the largest and most complex financial transactions
many individuals will undertake. With the significant sums and decades-long
commitment often involved, not to mention the variety of legal and financial
requirements, even a sophisticated borrower may struggle to identify and weigh all the
relevant information. Mortgage insurance is unlikely to be top of mind, and the
differences between types of mortgage insurance are unlikely to be obvious. Thus,
borrowers may “pay[] for private mortgage insurance that is no longer needed” for the
life of the loan, 143 Cong. Rec. S2514 (daily ed. March 19, 1997) (Sen. Richard Bryan),
or fail to consider the possibility that lender paid mortgage insurance could “fold[] the
insurance payment into a slightly higher interest rate,” 144 Cong. Rec. S8268 (daily ed.
July 15, 1998) (Sen. Carol Moseley-Braun). Such mistakes might lead consumers to pay
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more than necessary for their mortgages. The HPA-mandated disclosures directly address
these concerns by highlighting how mortgage insurance might affect a borrower’s bottom
line so that borrowers “can assess the benefits and drawbacks of this product.” Id.
But such considerations are relevant to a borrower only to the extent that mortgage
insurance could affect the terms of his loan. If there is no mortgage insurance
requirement influencing their loan terms, there is no reason for borrowers to ponder the
theoretical effect of a hypothetical requirement. From a borrower’s perspective, LPMI
disclosures under those circumstances would make no practical difference. That Congress
limited the mandatory disclosures to situations in which LPMI is “required in connection
with a residential mortgage transaction” makes clear that Congress did not intend the
disclosures as a general education effort. Instead, the disclosures are designed to provide
specific information to those most in need of it at precisely the time that it can be most
useful.
From the bank’s perspective, too, the disclosure requirements are most coherent if
limited to circumstances in which loans are conditioned on LPMI. Given the decades-
long lifespan of many residential mortgages, it may be impossible to know at the time of
closing whether LPMI will ever be needed on a particular loan. For example, a bank may
close and fund a mortgage with no intention of obtaining LPMI, but later find that market
conditions or the bank’s own financial circumstances make LPMI desirable. But from the
plaintiffs’ perspective, a bank that responds to changing circumstances by purchasing
LPMI would be in violation of the Homeowners Protection Act if they had not disclosed
information about LPMI before closing, even if closing was decades before.
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If we were to read the HPA that broadly, a bank might rationally conclude that the
safest option is to provide mortgage insurance disclosures to every potential borrower.
Such blanket disclosures would protect the bank’s ability to obtain LPMI, and would be
unlikely to turn away potential borrowers if accurately framed as boilerplate with no
implications for the borrowers’ loan terms. Yet, as noted above, the HPA was clearly not
intended to create a scheme of LPMI disclosures with every loan.
In sum, the language and design of 12 U.S.C. § 4905(c) reveal a single plausible
meaning: banks must provide LPMI disclosures only when LPMI is a condition of a loan
at closing.
III.
As the district court concluded, the evidence shows that LPMI was not “required
in connection with a residential mortgage transaction” within the meaning of the statute.
It is undisputed that securing LPMI was not an explicit condition of any of the plaintiff’s
loans, all of which were closed and funded before LPMI was purchased for them. Nor
was LPMI an implicit condition, because, contrary to the plaintiffs’ allegations, the
evidence shows that the bank’s post-closing purchase of LPMI did not affect the interest
rates of the loans or any other loan terms. These facts foreclose the plaintiffs’ HPA
claims, because the allegedly neglected disclosure requirements were not actually
triggered. They also foreclose the plaintiffs’ state claims, which the plaintiffs argue
should survive summary judgment based wholly on the faulty premise that there is a
“genuine issue of material fact regarding the rate increase issue.” Plaintiffs’ Opening Br.
39. Further, to the extent the state law claims are rooted in Bank of America’s failure to
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disclose information about LPMI, they are preempted by the HPA, which explicitly
preempts state laws “relating to . . . any disclosure of information addressed by” the
HPA. 12 U.S.C. § 4908(a)(1); see also Ciolino v. Seterus, Inc., 202 F. Supp. 3d 841, 844–
47 (N.D. Ill. 2016) (collecting cases).
Perhaps recognizing that the record evidence cannot support their claims, the
plaintiffs devote much of their argument to complaints about the discovery process.
Specifically, the plaintiffs assert that additional discovery could have uncovered evidence
that Bank of America always intended to purchase LPMI on their loans and incorporated
the cost of LPMI into the plaintiffs’ interest rates. The plaintiffs also assert that the
district court should have reconsidered its decision in light of the additional declaration
the plaintiffs provided after summary judgment. We review complaints about
management of the discovery process and motions for reconsideration for abuse of
discretion. See Bresler v. Wilmington Trust Co., 855 F.3d 178, 189 (4th Cir. 2017); Lee-
Thomas v. Prince George’s Cty. Pub. Sch., 666 F.3d 244, 247 (4th Cir. 2012). No such
abuse occurred here.
Plaintiffs are not entitled to endless discovery to search for evidence for their
claims. In this case, even after extensive and wide-ranging discovery, extending over
fourteen months and resulting in production of over 88,000 Bank of America documents,
the plaintiffs were unable to refer to record evidence to suggest that their claim was
meritorious or that additional discovery was likely to provide the evidence they needed.
Instead, the plaintiffs repeatedly point to an e-mail and declaration from a former Bank of
America employee questioning the No Fee Mortgage Plus loans’ advertising based on his
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speculation that the interest rates might incorporate the cost of the waived fees. But a
former bank employee with no personal knowledge of how the rates were set cannot
overcome extensive evidence of how those rates were actually set. Moreover, the
plaintiffs did not identify additional persons for deposition until the defendant’s motion
for summary judgment was pending and the most relevant witnesses had already been
deposed. In light of the speculative nature of the plaintiffs’ claims, the district court was
well within its discretion to end the already protracted discovery process and grant
summary judgment to the defendant.
IV.
For the foregoing reasons, the judgment of the district court is
AFFIRMED.
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