Rocket faces amended refi lawsuit with fraud, TILA violation claims

Owners of a North Carolina property have filed an amended lawsuit against Rocket Mortgage that claims the lender rejected a refinance application in order to impose a higher rate.  

In an amended complaint, filed Monday, two couples — John Speicher and his wife, Patricia Giles, from Wyomissing, Pennsylvania, and Jeremy and Courtney Speicher from Concord, North Carolina — allege that Rocket created a “bait-and-switch” scenario in which the lender gave the borrowers a lower rate initially but terminated the application in order to offer a higher rate instead.

The incident in question dates back to March 2022 when mortgage rates were still relatively low. The couples claim in the lawsuit that after receiving and signing a disclosure form that locked in a $647,000 loan at 3.99% for a fixed 30-year mortgage, the lender ceased contact for two weeks after the expected closing date. 

The lawsuit alleges that Rocket then told the couples that the mortgage process was terminated due to a lack of activity on the file for three weeks and offered to have them re-apply for a higher rate of 5.5%. 

“Defendant’s (Rocket Morgage’s) true motivation was to avoid selling 30-year mortgage at 3.99% for $647,200 when the rates had dramatically increased to 5.5% in March and April of 2022,” the suit said.

The couples initially sued the lender in October 2022 on seven counts, including breach of contract, negligence and fraud. However, the couples filed an amended suit after a ruling by Judge Joseph Leeson, Jr. of the U.S. District Court for the Eastern District of Pennsylvania last week.

Of the seven initial allegations, the federal judge dismissed in his ruling three claims with prejudice; two others without prejudice; and denied two other accusations.

However, the mortgagors were allowed to file an amended claim if they wished to replead to the counts that had been dismissed with prejudice within seven days of the ruling. The amended lawsuit now includes four different claims of fraud, negligence, violations of the Truth in Lending Act and violations of the Pennsylvania Unfair Trade Practices Act.

In his ruling, Judge Leeson said that termination of the mortgage process is not a breach of contract and lenders do not owe a duty of care to borrowers. However, the mortgagors provided sufficient facts for their fraud and unfair trade practice claims, according to the ruling.

“Because they allege that Rocket Mortgage knowingly misrepresented that plaintiffs would receive a 3.99% interest rate, plaintiffs relied on that representation, and their reliance on that representation resulted in a financial loss,” Judge Leeson said in the ruling.

A spokesperson for Rocket Mortgage said the company is confident that the case will be dismissed.

“The court already dismissed five of the plaintiff’s seven claims and indicated that they are not likely to succeed on summary judgment. We are confident that the case will be fully dismissed once it passes the pleadings phase and we are able to present the full facts,” a spokesperson from Rocket Mortgage said in a statement. 

The mortgagors are demanding in the lawsuit that Rocket pay for the difference of the interest rate of 3.99% for a 30-year fixed mortgage versus the 5.5% interest rate offered by the lender; punitive damages; reasonable counsel fees, interest and costs of the proceeding.

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