Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 17

Real Estate Financing. Jane Lane refinanced her mortgage with Central Equity, Inc. Central Equity split the transaction into two separate loan documents with separate Truth-in-Lending disclosure statements and settlement statements. Two years later, Lane sought to exercise her right to rescission under the Home Ownership and Equity Protection Act (HOEPA), but Central Equity refused. Central Equity responded that the original transactions comprised two separate loan transactions and because neither loan imposed sufficient fees and costs to trigger HOEPA, its protections did not apply. Lane claims that if the costs and fees were combined into a single transaction (which Lane expected the loan to be), they would surpass the HOEPA threshold and trigger its protections. In turn, because Central Equity did not provide the necessary disclosures under HOEPA, Lane argues that she can properly rescind under its provisions. Is Lane correct? Does loan splitting allow the lender to count each loan transaction with a borrower separately for HOEPA purposes? Why or why not?