Jonathan W. Tappan, Esq., Jonathan W. Tappan PLLC, for Plaintiff.
David R. Mortensen, Esq., Wilford, Geske & Cook, PA, for Plaintiff.
Todd M. Murray, Esq., Friedman Iverson, PLLC, for Defendant.
STEVEN E. RAU, Magistrate Judge.
The above-captioned case comes before the undersigned on AmeriCU Mortgage Company's ("AmeriCU") Motion for Judgment on the Pleadings ("Motion" or "Mot.") as to Steven Frazier's ("Frazier") liability. [Doc. No. 25]. This matter has been referred to the undersigned for the resolution pursuant to 28 U.S.C. § 636(b)(1)(B) and District of Minnesota Local Rule 72.1. (Order of Reference Dated June 12, 2013) [Doc. No. 41]. For the reasons stated below, the Court recommends denying the Motion.
A. Factual Background
The Amended Complaint alleges the following facts: on October 15, 2006, Frazier and Felecia Lockett ("Lockett") completed a Uniform Residential Loan Application (the "Application") seeking a residential mortgage loan (the "Loan") on a real property in Minneapolis. (Amended Compl.) [Doc. No. 14 at ¶ 1]. Frazier submitted the Application to Honeywell Federal Credit Union which is now known as Endura Financial Federal Credit Union, (collectively referred to as, "Honeywell/Endura"). ( Id. ). The Loan closed on December 15, 2006, and required Frazier to make monthly mortgage payments. ( Id. ¶ 9). The Loan was assigned to Towne Mortgage Company ("Towne"), a company directly affiliated with AmeriCU. ( Id. ¶¶ 1, 15). AmeriCU sold the Loan to Federal National Mortgage Association ("Fannie Mae"), and eventually the Loan went into default. ( Id. ¶¶ 16-18). During an investigation of the default, Fannie Mae discovered that Frazier had entered into two loans (collectively, the "Undisclosed Loans") but had not disclosed those loans on the Application. ( Id. ¶ 18). After the investigation, Fannie Mae required AmeriCU to re-purchase the Loan from Fannie Mae for $131, 531. ( Id. ¶¶ 18-20).
Both the Undisclosed Loans were entered into prior to the closing of the Loan. See ( id. ¶¶ 13-14). The Application for the Loan, which was signed by Frazier, required him to:
List the creditor's name, address and account number for all outstanding debts, including automobile loans, revolving charge accounts, real estate loans, alimony, child support, stock pledges, etc
(URLA Applications, at 19, 24); (Amended Compl. ¶¶ 8, 10-11).
In addition, the Application provided that Frazier:
[S]pecifically represent[ed] to Lender and to Lender's actual or potential agents, brokers, processors, attorneys, insurers, servicers, successors and assigns [that]... (1) the information provided in this application is true and correct as of the date set forth opposite my signature and that any intentional or negligent misrepresentation of this information contained in this application may result in civil liability;... (7) the Lender and its agents, brokers, insurers, servicers, successors and assigns may continuously rely on the information contained in the application and I am obligated to amend and/or ...