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DISTRICT OF COLUMBIA CONSUMER PROTECTION PROCEDURES ACT APPLIES TO REAL ESTATE MORTGAGE FINANCE TRANSACTIONS
The D.C. Court of Appeals has held that the D.C. Consumer Protection Procedures Act applies to any kind of loan which is secured by real estate, and not just to the purchase or lease of real estate. Thus, for example, any reverse mortgage type of loans are subject to the Act. In this case, the Court considered a certified question from the D.C. Circuit, namely, whether D.C. Code § 28-3904(r) applies to real estate mortgage finance transactions? Section 28-3904(r) is part of the D.C. Consumer Protection Procedures Act. The Court held that Section 28-3904(r) does apply to real estate mortgage finance transactions. Such transactions include a consumer loan that was secured by a deed of trust on real estate. The Act’s application is not limited, as the defendant argued, to transactions involving the purchase or lease of real estate. The nature of the transaction was as follows: The plaintiff, who previously owned her home, borrowed $10,000 from the defendant in 1991, secured by a deed of trust on her home. In 1992, the defendant refinanced the debt to $16,500. In 1995, the defendant refinanced again, borrowing $21,000. Later in 1995, the defendant made a final loan of $45,000. The plaintiff subsequently filed suit, alleging that for each loan, she was charged an unconscionable amount in points and other fees. For instance, defendant had charged her $2,500 to borrow $10,000. Plaintiff characterized this as "reverse redlining", defined as a predatory lending practice of making high cost loans to unsophisticated homeowners who have little money but do have substantial equity in their homes. The Court stated, in part, as follows: "In the CPPA, the Council declared its opposition to unconscionable credit transactions exploiting a consumer’s likely inability to make payment in full or otherwise protect her interests. Section 28-3904(r)(1) & (5). The mischief represented by that practice obviously exists whether mortgage financing accompanies the sale of property or is itself the subject matter of the transaction." |
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