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Truth In Lending Rescission in Bankruptcy Court

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					          Chapter 8              Truth In Lending Rescission in Bankruptcy Court
          8.1    TIL Rescission Letter
          This rescission letter is quite detailed. Truth in Lending does not require this type of completeness.
          In fact, the model rescission letter found at National Consumer Law Center, Truth in Lending Appx.
          E (2d ed. 1989 and Supp.) is quite short. Moreover, the Rescission Model Forms in FRB Regulation
          Z, Appendices H-8 and H-9 are shorter still, merely stating "I wish to cancel," and signed and dated
          by the consumer. The consumer's attorneys in the case being reprinted chose a detailed rescission
          letter because they believed it would lead to a quicker and more beneficial settlement of the case --
          that it is best to present to the creditor the consumer's case in as much detail and as persuasively
          as possible as early as possible.
                                                                                               January 22, 1993

          VIA CERTIFIED MAIL
          Susan Black, President
          Street Financial, Inc.
          100 Natick Road
          Worcester MA

          Re:    John Homeowner - Rescission of Mortgage Loan Dated November 29, 1990 Pursuant to
                 Massachusetts General Laws, c. 140D, §10

          Dear Ms. White:


                 I represent John Homeowner, a Street Financial Services, Inc. ("Street") mortgagor. Mr.

          Homeowner refinanced his principal residence with Street on November 29, 1990. On January 15,

          l993, you sent Mr. Homeowner a demand letter informing him that you were to begin foreclosure

          proceedings next week if he did not immediately pay off the Street loan. Because the refinancing

          transaction which you base this demand on contained several violations of the state Truth in Lending

          Act (M.G.L. c.140D, §1 et seq.) ("TILA"), my client has authorized me to rescind the transaction

          pursuant to c.140D, §10, and the Massachusetts Banking Commissioner's Regulations promulgated

          thereunder, 209 CMR 32.23.



                 The following synopsis of the facts and law which outlines Mr. Homeowner's right to rescind

          incorporates citations to the federal Truth in Lending Act (15 USC §1601, et. seq.), the Federal

          Reserve Board Regulations promulgated thereunder (12 CFR §226.1 et. seq., "Regulation Z"); the

          Official Staff Commentary of the Federal Reserve Board; and relevant federal case law. As the

          Massachusetts TILA and regulations are identical to the federal statutory and regulatory scheme in




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          all substantive aspects, the state courts are guided by this federal law in interpreting the cognate

          provisions of state law. Therefore, although reference is made to federal law throughout this letter

          for illustrative purposes, the rescission claim and all other claims made herein are solely grounded

          in state law.



          Truth in Lending: Material Disclosures and Rescission Rights


                  The purpose of TILA is to enable consumers to intelligently shop for credit (15 USC

          §1601(a)). To achieve this purpose, TILA requires that the true "cost" of credit be stated as both an

          interest rate (annual percentage rate, or APR) and as a dollar amount (Finance Charge). The APR

          incorporates certain fees and charges imposed as part of the credit transaction, and which Congress

          has determined to constitute part of the "costs" of obtaining financing. Correspondingly, the finance

          charge discloses the net effect of such additional costs of credit as a dollar figure. Therefore, the

          finance charge may equal the sum of any points, broker's fees, credit insurance, and other charges

          which, in the particular context, TILA requires the disclosure of as credit costs.



                  As such, a note with a ten percent interest rate, executed as part of a transaction which

          imposed such additional "finance charges," may have an APR, or "true" interest rate, of 12%. Only

          when a creditor makes accurate disclosure of the true cost of credit can a consumer compare different

          lenders' offerings and make the informed credit decision which is TILA's goal. To provide a

          self-enforcement mechanism which promotes such accurate disclosures, Congress provided that the

          failure of a creditor to comply with certain of TILA's disclosure requirements (the "material

          disclosures") gives the borrower an extended right to rescind the transaction. See, G.L. c.140D, §10;

          209 CMR 32.23; 15 USC §1635; Regulation Z, §226.23.



                  Here, Street has violated TILA in a number of respects. The violations which give rise to Mr.

          Homeowner's right to rescind this transaction include, but are not limited to, the following.




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          Unfair and Deceptive Conduct and Disclosure Laws Violations


                 In the fall of 1990, Mr. Homeowner responded to Easy Cash Inc. ("Easy Cash") television

          and print advertisements offering low interest rate loans by visiting the Easy Cash offices seeking

          information about obtaining a mortgage loan to refinance his home. Mr. Homeowner met with Easy

          Cash representative Lisa Smith. Ms. Smith informed him that his poor credit precluded a long term,

          low interest rate loan, but that if he took out a two year loan with a balloon payment and made his

          payments on time, that the Easy Cash would then provide long term, low interest refinancing as

          offered in its advertising. Ms. Smith provided Mr. Homeowner with a blank mortgage application

          and procured his signature on it. Mr. Homeowner was never provided with a copy of either the

          application form he signed or the completed application. As such, Mr. Homeowner never received

          the statutorily required notice mandated by Mass. General Laws, c.184, §17B. Mr. Homeowner had

          no further contact with Easy Cash until he was subsequently informed that he had been given a loan

          commitment.



                 Mr. Homeowner was led to believe and did believe that Easy Cash was a lender. In fact,

          Easy Cash does not provide financing, but instead arranges or "brokers" financing with Street and

          other lenders. Easy Cash did not inform Mr. Homeowner either that it was a broker and not a lender,

          or that it would impose a broker's fee for the purported service of arranging the Street loan.



                 Easy Cash is owned, operated and controlled by William Black. Mr. Black is Easy Cash's

          sole shareholder, officer and director. Street is owned, operated and controlled by Susan Black,

          William Black's sister. Ms. Black is Street' sole shareholder, officer and director. At all times

          relevant to this matter, Easy Cash and Street shared the same office address, 100 Natick Road

          Worcester, Massachusetts. Street indirectly imposed the broker's fee by informally requiring that

          all borrowers be channelled to it through Easy Cash or other brokers. This practice was a device to

          accomplish three goals: to increase not only Easy Cash's profit, but Street' as well; to avoid the




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          application of Massachusetts points and fees statute, c.183, §63, which prohibits lenders from

          charging more than two points on any consumer mortgage loan; and to circumvent the application

          of TILA, which requires such conduit "broker's fees" to be disclosed as components of the finance

          charge.



                    On November 29, 1990 Mr. Homeowner drove to the loan closing location, the office of

          attorney Larry Lawyer. Mr. Lawyer's office, like the offices of Street and Easy Cash, was also

          located at 100 Natick Road, Worcester, Massachusetts. Mr. Lawyer was the closing attorney for

          Street. However, it was not until Mr. Lawyer provided him with loan papers indicating that Street

          was the lender that Mr. Homeowner learned that Easy Cash was not directly providing the financing.

          Without Mr. Homeowner's consent or knowledge Easy Cash acted either through a correspondent

          lender contract, as broker, or as Street' agent. In any event, Easy Cash did not act pursuant to any

          agreement with Mr. Homeowner, either written or verbal.               Easy Cash did not act in Mr.

          Homeowners' best interests, but rather as agent for Street, in violation of G.L., c.271, §39.



          TILA: Material Disclosure Violations


                    The conduct described above leading up to the consummation of the loan, in addition to the

          specific statutory violations cited, is rife with violations of c.93A. In addition, this conduct, as well

          as that which took place at the closing, violated TILA and gave rise to Mr. Homeowner's right to

          rescind this transaction. The independent bases on which this rescission right is based are

          detailed below.



          1. Failure to Disclose Broker Fees as Finance Charges



                    One of the documents Mr. Lawyer required Mr. Homeowner to sign as a condition of

          obtaining the loan was a so-called "Consulting Agreement" purporting to authorize the payment of




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          almost ten percent of the loan proceeds, two thousand nine hundred fifty-four ($2,954.00) dollars,

          to Easy Cash. Mr. Homeowner had never seen this agreement before, and had no idea that Easy

          Cash was a broker, much less that it would charge this amount as a fee. (A copy of this "Consulting

          Agreement" is attached to this correspondence as Exhibit "A") [not reprinted infra]. Nevertheless,

          Mr. Homeowner signed the agreement because he was led to believe that execution of the

          "consulting" agreement authorizing Easy Cash's fee of almost ten points was a condition of obtaining

          the financing.



                 In accordance with the purported agreement, Mr. Lawyer subsequently paid a $2,954.00

          broker's fee to Easy Cash. However, this fee was not disclosed to Mr. Homeowner as a finance

          charge. Only the additional one point which Street' charged was disclosed as a finance charge. This

          failure to disclose the broker's fee as a finance charge violates TILA. Where the lender requires the

          payment of a fee to a broker as a condition of or incident to the granting of a loan, the broker's fee

          must be included in the finance charge, and therefore also factored into the calculation of the annual

          percentage rate. 209 CMR 32.4(b)(3); Regulation Z, §226.4(b)(3). See, In re Dukes, 24 B.R. 404

          (Bankr. E.D. Mich. 1982); Johnson v. Fleet Finance, Inc. 1992 WL 37648 (S.D. Ga., Feb. 21, 1992).

          See, e.g. G.L. c.255, §12F (where relative acts as conduit in credit transaction the creditor is subject

          to all claims and defenses borrower may assert against the related party "arranger" of credit). Street

          failed to so disclose the broker's fee as a finance charge and therefore understated both the finance

          charge and the APR in amounts exceeding TILA's error tolerance. In so doing Street also misstated

          the amount financed, which is overstated by the amount of the broker's fee.



          2. Overstated Fees



                 Charges which would otherwise be excludable pursuant to Regulation Z must be disclosed

          as components of the finance charge if they are not bona fide and reasonable. By failing to disclose

          the following charges as components of the finance charge, Street has violated Regulation Z,




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          §226.4(c)(7), and 209 CMR 32.4(c)(7). (All of the following charges are shown on the copy of

          Street' "Loan Accounting and Disbursement Authorization" attached to this correspondence as

          Exhibit "B")



                 Legal and associated fees paid to Larry Lawyer



                 Attorney's Fees                $1,040

                 Document Preparation            $195

                 Amortization Schedules           $25

                 Total                          $1,260



                 The $1,040 charge alone for attorney's fees for closing the loan far exceeds the range of

          charges normally imposed by experienced lender's counsel on loans of this type. As such, the

          excessive portion is an undisclosed finance charge. See R. Rohner, The Law of Truth in Lending

          §3.03(2)(a) (1984). In addition, the $195 charge for document preparation and $25 amortization

          schedules charge are merely disguised as separate costs in order to make the actual $1,260 legal fee

          appear lower. Mr. Homeowner, in fact, neither requested nor received the amortization schedules

          for which he was charged, nor is the $25 charge the bona fide and reasonable cost of producing such

          computer generated schedules on a two year note. Finally, to the extent that the attorney's fees

          charged actually conceal additional lender profit, they constitute an undisclosed finance charge. See

          Therrien v. Resource Financial Group, 704 F.Supp. 322 (D.N.H. 1989).



                 Title and Recording Fees



                 Full Title Examination                                        $250

                 Updating of Title; Recording of Documents $ 50

                 Mortgage Recording                                             $ 25




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                 Assignment of Mortgage                                         $ 10

                 Discharge of Mortgage and Liens                         N/A



                 The two hundred fifty ($250.00) dollar charge for full title examination precludes any need

          to "update" the title. In addition, the only document recorded was the mortgage, for which a separate

          $25 fee was imposed. Nevertheless, Street charged Mr. Homeowner fifty dollars for its purported

          "Updating of Title; Recording of Documents." Some portion of the $50 fee was presumably

          allocated to the cost of the unnecessary "title update" and the remainder to the contrived cost of

          recording non-existent documents. To the extent that these "costs" were not fees paid to public

          officials as indicated, they are finance charges. Regulation Z, §226.4(e)(1); 209 CMR 32.4(e)(1);

          Abbey v. Columbus Dodge 607 F.2d 85 (5th Cir. 1979) (where, contrary to disclosures, creditor

          retained and did not pay to public officials an itemized $37.50 "filing fee," the fee was a finance

          charge).



                 Finally, the $10 fee for the "assignment of mortgage" is also a finance charge. Regulation

          Z, §226.4(b)(6); 209 CMR 32..4(b)(6); In re Brown, 106 B.R. 852, 858-859 (Bankr. E.D. Pa. 1989);

          Cheshire Mortgage Service v. Montes, 223 Conn. 80 (1992).




          Inaccurate Material Disclosures


                 Accordingly, the Truth in Lending Disclosure Statement misstates at least three of the

          material disclosures mandated by law, by its:



                 !failure to accurately disclose the finance charge, in violation of Regulation Z, §226.18(d)
          and 209 CMR 32.18(d);




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                 !failure to accurately disclose the amount financed, in violation of Regulation Z, §226.18(b)
          and 209 CMR 32.18(b); and



                 !failure to accurately disclose the annual percentage rate, in violation of Regulation Z,
          §226.18(e) and 209 CMR 32.18(e).



                 Street' failure to accurately make these material disclosures resulted in a misstated amount

          financed and an understated finance charge and APR in amounts exceeding TILA's error tolerance,

          all in violation of Regulation Z, §226.18(b)(d) and (e), and 209 CMR 32.18(b)(d) and (e).



          Demand for Relief


                 The failure to accurately make the above-noted material disclosures tolls Mr. Homeowner's

          rescission right until the earlier of Street' provision of such rescission right notices and corrected

          material disclosures, or the passage of four years subsequent to consummation of the transaction.

          G.L. c.140D, §10, 209 CMR 32.23(a)(3). Cf., 15 USC 1635, Regulation Z, §226.23(a)(3).



                 Accordingly, please be advised that by this correspondence Mr. Homeowner rescinds Street'

          security interest in his property pursuant to c.140D, §10. As a result of this rescission notice Street'

          security interest is void (209 CMR 32.23(d)(1); Regulation Z, §226.23(d)(1)) and Street is bound to

          immediately terminate such security interest. 209 CMR 32.23(d)(2); Regulation Z, §226.23(d)(2).

          In addition, Street has twenty days from its receipt of this notice to return to my client all monies

          paid in connection with the terms of the mortgage loan which is the subject of this letter. Id. My

          client hereby requests an itemization of such monies. Upon Street' discharge of its statutory duties,

          my client will perform all necessary actions required by G.L. c. 140D, §10.



                 Failure to cancel the security interest and return to my client all monies due may subject




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          Street to actual and statutory damages, pursuant to G.L. c.140D, §32, as well as multiple damages

          for corresponding violations of c.93A. See, G.L. c.140D, §34.



                   Sincerely,

                   Attorney for Homeowner



          cc:      John Homeowner

                   State Attorney General




          8.2 Complaint in Bankruptcy Court Objecting to Secured Claim
                                    UNITED STATES BANKRUPTCY COURT

                                   FOR THE DISTRICT OF MASSACHUSETTS

                                               EASTERN DIVISION

          In Re:

          John Homeowner

                                                       Debtor

          John Homeowner

                                                      Plaintiff

          [vs.]

          Street Financial Services, Inc.

                                                     Defendant



          Chapter 13

          Case No. 93-XXXXX-ABC

          Adversary Proceeding No. 94-XXXX




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                        VERIFIED COMPLAINT OBJECTING TO SECURED CLAIM

                                                      Introduction


                 1. This adversary proceeding is brought by the plaintiff debtor pursuant to 11 U.S.C. §502

          to object to the allowed secured claim of defendant Street Financial Services, Inc. ("Street") on the

          basis that the security interest held by Street has been properly rescinded pursuant to §1635 of the

          Truth-in-Lending Act, (TILA) 15 U.S.C. §1601 et seq. Plaintiff John Homeowner seeks injunctive

          relief and damages to enforce his rescission of a mortgage held by the defendant Street. The plaintiff

          seeks a preliminary injunction to restrain Street from refusing to honor his valid rescission of the

          transaction and by that unlawful refusal preventing a pending mortgage refinancing by US Trust

          Company which would lower his interest rate by approximately thirteen percent, from the nineteen

          percent charged by Street, to the six percent offered by US Trust. The plaintiff also seeks a

          determination on the merits that:



                 !he has properly rescinded the mortgage held by Street and that Street has no valid secured
          or unsecured claim;

                 !that Street' refusal to honor his valid rescission notice in accordance with TILA's
          requirements eliminates any alleged indebtedness to Street: and

                !that Street is required to return to him all monies he has paid in connection with the
          mortgage loan transaction which is the subject of this lawsuit.


                 In addition, the plaintiff seeks statutory damages, costs, and attorney's fees for Street' failure

          to honor his valid rescission notice in conformity with the requirements of TILA. The plaintiff also

          asserts pendent claims pursuant to M.G.L. c. 140D, the state truth in lending act, which contains

          corollary provisions identical to the federal TILA, M.G.L. c.183, §63, and the state common law.




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                                                      Jurisdiction


                 2. Jurisdiction of the Bankruptcy Court in this matter is provided by 28 U.S.C. §§1334 and

          157, as amended. This is a core proceeding.

                                                         Parties


                 3. The Plaintiff, John Homeowner, is a natural person who resides at 10 Joseph Street,

          Boston, Massachusetts. Mr. Homeowner has occupied this home with his family of six for sixteen

          years. Mr. Homeowner is a debtor in this Court, having filed a petition pursuant to Chapter 13 of

          the Bankruptcy Code on October 27, l993.



                 4. Defendant, Street Financial Services, Inc. is a corporation with a principal place of

          business at 100 Natick Road, Worcester MA.

                                                          Facts


                 5. In the fall of 1990, Mr. Homeowner responded to The Easy Cash, Inc. ("Easy Cash")

          television and print advertisements offering low interest rate loans by visiting the Easy Cash offices
          seeking information about obtaining a mortgage loan to consolidate his debts.


                 6. A Easy Cash representative informed Mr. Homeowner that he had poor credit and that this

          precluded Easy Cash from providing him with the long term, low interest rate loan advertised.



                 7. The Easy Cash representative then promised Mr. Homeowner that if he took out a two year

          loan with a balloon payment and made his payments on time, the Easy Cash would then provide long

          term, low interest refinancing as offered in its advertising.



                 8. These inducements persuaded Mr. Homeowner to apply to Easy Cash for such a loan.




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                 9. The Easy Cash representative provided Mr. Homeowner with a blank mortgage application

          and procured his signature on it.



                 10. On information and belief, the Easy Cash representative completed the blank, signed

          application after Mr. Homeowner left and submitted it to Street.



                 11. Mr. Homeowner was never provided with a copy of either the blank application form he

          signed or the completed application.



                 12. Mr. had no further contact with Easy Cash until he was subsequently informed that he

          had been given a loan commitment. The loan terms were not disclosed to Mr. Homeowner until the

          loan closing.



                 13. Unbeknownst to Mr. Homeowner, the loan commitment was given by Street. Neither

          Easy Cash nor Street informed Mr. Homeowner of this fact, which he discovered only upon reading

          the documentation first provided to him at the loan closing.



                 14. On or about November 29, 1990, Street loaned Mr. Homeowner thirty one thousand

          ($31,000.00) dollars, secured by a second mortgage on his home.



          15. The loan terms were as follows:


                 !Upwardly Adjustable Interest rate: The note rate was 15.99% per annum for the first three
          months of the loan, then was to be adjusted to the greater of 18% per annum or the Bank of New
          England prime rate plus ten percentage points. The loan could only be adjusted upward, the rate
          could not decrease, and had to increase by at least two points, to 18%, after the first three months.
          The loan did contain a 36% percent per annum rate ceiling. At the change date the rate was
          increased to nineteen (19%) per annum. The annual percentage rate was disclosed as 26.25%.

                 !Monthly Payments: The loan was non-amortizing, payments were of interest only.
          Monthly payments for the first three months were four hundred thirteen dollars and eight cents
          ($413.08). Payments thereafter were of four hundred ninety dollars and eighty three cents ($490.83).




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                !Loan term: Two years. A balloon payment of the entire principal and any accrued interest
          was due November 28, l992.

                !Points: Street collected and retained an origination fee of one percentage point, three
          hundred ten ($310.00) dollars.

                 !Rate Buydown: Street collected and retained two thousand nine hundred eighty one
          ($2,981.00) dollars as a "rate buydown."

                  !Broker's Fees: Street collected two thousand nine hundred and fifty four ($2,954.00)
          dollars of the loan proceeds and disbursed them to Easy Cash, as a "Financial Consultant."


                 16.Easy Cash, now defunct, was in actuality a mortgage broker, which arranged financing

          for Street and other lenders, and collected a broker's fee drawn from the loan proceeds disbursed by

          the lender.



                 17. Street' sole shareholder, officer and director, Susan Black, is the sister of William Black,

          the sole shareholder, officer and director of Easy Cash during its existence. The siblings, at all times

          relative hereto, shared offices at 100 Natick Road, Worcester, Massachusetts.



                 18. At all times relevant hereto Street was a creditor within the meaning of TILA.



                 19. Mr. Homeowner's secured loan with Street is a consumer credit transaction within the

          meaning of TILA.



                                             Count I: Misrepresentation


                 20. Neither Easy Cash nor Street disclosed the true nature of Easy Cash's role in the loan

          transaction, or the fact that it would impose a broker's fee for the purported service of arranging the

          Street loan.



                 21. Because of various misrepresentations made by Easy Cash, and based on the manner in

          which Easy Cash held itself out, Mr. Homeowner was led to believe that Easy Cash was the lender



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          from whom he would be obtaining his loan.



                 22. Neither Easy Cash nor Street ever provided Mr. Homeowner with any loan brokerage or

          commission agreement prior to the closing, nor did Mr. Homeowner at any point prior to the closing

          sign such an agreement.



                 23. Neither Easy Cash nor Street ever informed Mr. Homeowner that Easy Cash was not the

          direct lender who would be providing his loan.



                 24.     It was not until he was handed the loan papers at the closing that Mr. Homeowner

          learned that Easy Cash was a broker and that Street was to be his lender.



                 25. Without Mr. Homeowner's consent or knowledge, and without any written or oral

          agreement with the plaintiff, Easy Cash acted as an agent for Street in arranging the loan.



                                           Count II: Breach of Contract


                 26. Street charged Mr. Homeowner two thousand nine hundred eighty one ($2,981.00)

          dollars as a "rate buydown."



                 27. This payment was ostensibly made to reduce his interest rate or to reduce the monthly

          payments he was to make.



                 28. Street did not reduce the note rate.



                 29. Street intended for Mr. Homeowner to make the buydown payment in reliance on its

          representation about the reduced rate and payments, Mr. Homeowner did so rely, and Street




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          intentionally failed to reduce the rate and payments as represented.


                                    Count III: Violation of M.G.L. c. 183, §63


                 30. Massachusetts' points and fees statute, c.183, §63, prohibits lenders from charging more

          than two points on any consumer mortgage loan.



                 31. A "rate buydown" constitutes points within the meaning of the statute.



                 32. Street charged Mr. Homeowner more than ten points on his loan, in violation of c.183,

          §63.



                                          Truth in Lending Act Violations

            Counts IV and V: Failure to Timely Provide the Truth in Lending Disclosure Statement
          and the Notice of Right to Rescind

                 33. At the closing, Street presented Mr. Homeowner with a document entitled "Disclosure

          Statement" and obtained his signature acknowledging receipt of a copy of the document. A copy of

          this document is attached and incorporated herein as Exhibit A. [Not reprinted infra.]



                 34. At the closing, Street presented Mr. Homeowner with a document entitled "Notice of

          Right to Cancel" and obtained his signature acknowledging receipt of two copies of the document.

          A copy of this document is attached and incorporated herein as Exhibit B. [Not reprinted infra.]



                 35. In fact, Street did not provide to Mr. Homeowner a copy of the Disclosure Statement, a

          copy of the Notice of Right to Cancel, or a copy of any other loan documents until more than three

          business days after the loan closing. Street instead informed Mr. Homeowner that all of his loan

          papers and his check would be mailed to him in a few days.




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                 36. Street failure to provide Mr. Homeowner at the loan closing with a copy of his

          Disclosure Statement is a violation of 15 USC §§1638(a) and (b)(1), and M.G.L. c. 140D, §§12(a)

          and (b)(1), entitling Mr. Homeowner to rescind the transaction pursuant to 15 USC §1635(a) and

          M.G.L. c. 140D, §10(a).



                 37. Street' failure to provide Mr. Homeowner at the loan closing with a copy of his notice

          of the right to rescind the transaction is a violation of 15 USC 15 USC §1635(a) and M.G.L. c. 140D,

          §10(a) and 12(a), entitling Mr. Homeowner to rescind the transaction pursuant to 15 USC §1635(a)

          and M.G.L. c. 140D, §10(a).

                                        Failure to Disclose Finance Charges


                 38. At the closing, Street presented Mr. Homeowner with a document entitled "Loan

          Accounting and Disbursement Authorization." A copy of this document is attached and incorporated

          herein as Exhibit C. [Not reprinted infra.]



                 39. Comparison of Street' Disclosure Statement and Loan Accounting and Disbursement

          Authorization shows that it disclosed only its origination fee, odd days interest, and rate buydown

          as finance charges.



                         Count VI: Failure to Disclose Broker Fees as Finance Charges


                 40. Street required Mr. Homeowner to authorize the payment of two thousand nine hundred

          and fifty four ($2,954.00) dollars of the loan proceeds to Easy Cash as a condition of the loan being

          made. A copy of the Easy Cash "consulting" agreement purportedly authorizing this payment is

          attached and incorporated herein as Exhibit C1. [Not reprinted infra.]



                 41. Street informally required that borrowers be channelled to it through Easy Cash or other




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          brokers.



                  42. Street and Easy Cash acted in concert in this enterprise, and engaged in an ongoing

          pattern of similar misrepresentations with respect to substantial numbers. See Exhibit D, Complaint

          of the Attorney General in Commonwealth v. Easy Cash, Inc., Street Financial Services, Inc., and

          William Black, Suffolk Superior Court, Civil Action No. 91-xxxx, and accompanying consumer

          affidavits filed therewith.



                  43. Street's failure to disclose this "broker's fee" as a finance charge is a violation of 15 USC

          §1638(a)(3) and M.G.L. c. 140D, §12(a)(3), entitling Mr. Homeowner to rescind the transaction

          pursuant to 15 USC §1635(a) and M.G.L. c. 140D, §10(a).



                         Count VII: Failure to Disclose Appraisal Fee as Finance Charge

                  44. Easy Cash charged Mr. Homeowner two hundred fifty dollars ($250.00) for an appraisal

          of his home. See Exhibit E, Easy Cash letter re purchase of appraisal.



                  45. The Easy Cash letter describing the "agreement" to purchase the appraisal was presented

          to Mr. Homeowner at the closing by Street' closing attorney.



                  46. The two hundred fifty ($250.00) dollar charge was paid outside of the closing (POC) and

          reflected on Street's itemization of loan proceeds (Exhibit C).



                  47. M.G.L. c. 184, §17C requires first mortgage lenders to provide written notice to

          borrowers of their right to obtain upon request a free copy of the lender's appraisal of the borrower's

          home.



                  48. The charge for the appraisal is neither bona fide nor reasonable.



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                    49. Mr. Homeowner neither requested nor received the appraisal for which he was charged.



                    50. Street's failure to disclose this fee as a finance charge is a violation of 15 USC

          §1638(a)(3) and M.G.L. c. 140D, §12(a)(3), entitling Mr. Homeowner to rescind the transaction

          pursuant to 15 USC §1635(a) and M.G.L. c. 140D, §10(a).



                  Count VIII: Failure to Disclose Amortization Schedule Charge as Finance Charge

                    51. Street charged Mr. Homeowner twenty five dollars ($25.00) for an amortization schedule.



                    52. As this is a non-amortizing loan, there is no need for an amortization schedule.



                    53. Mr. Homeowner neither requested nor received the amortization schedule for which he

          was charged.



                    54. Street' charge for an amortization schedule is neither bona fide nor reasonable.



                    55. Street' failure to disclose this fee as a finance charge is a violation of 15 USC §1638(a)(3)

          and M.G.L. c. 140D, §12(a)(3), entitling Mr. Homeowner to rescind the transaction pursuant to 15

          USC §1635(a) and M.G.L. c. 140D, §10(a).



                             Count IX: Unreasonable and Non-Bona Fide Attorney's Fees


                    56. Street charged Mr. Homeowner one thousand and forty dollars ($1,040.00) in attorneys

          fees.



                    57. The one thousand and forty dollar amount exceeds the range of bona fide and reasonable

          charges normally imposed by experienced lender's counsel on loans similar to Mr. Homeowner's.



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                 58. The attorney's fees are neither bona fide nor reasonable.



                 59. Street's failure to disclose the excessive portion of the attorney's fees as a finance charge

          is a violation of 15 USC §1638(a)(3) and M.G.L. c. 140D, §12(a)(3), entitling Mr. Homeowner to

          rescind the transaction pursuant to 15 USC §1635(a) and M.G.L. c. 140D, §10(a).



                                    Count X: Unreasonable and Non-Bona Fide

                                           Document Preparation Charges


                 60. Street charged Mr. Homeowner one hundred ninety five ($195.00) dollars for document

          preparation.



                 61. This document preparation charge was neither bona fide nor reasonable.



                 62. Street's failure to disclose this fee as a finance charge is a violation of 15 USC

          §1638(a)(3) and M.G.L. c. 140D, §12(a)(3), entitling Mr. Homeowner to rescind the transaction

          pursuant to 15 USC §1635(a) and M.G.L. c. 140D, §10(a).



                              Counts XI and XII: Unreasonable and Non-Bona Fide
                                          Recording and Title Charges

                 63. Street imposed the following title and recording fee charges upon Mr.Homeowner.


                 Full Title Examination                                          $250
                 Updating of Title; Recording of Documents $ 50
                 Mortgage Recording                                              $ 25
                 Assignment of Mortgage                                          $ 10

                 64. Street's two hundred fifty ($250.00) dollar charge for full title examination precluded any

          need to "update" the title.




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                 65. The only document recorded in connection with this transaction was the mortgage, for

          which a separate $25 fee was imposed by the Register of Deeds.



                 66. Street's failure to disclose as a finance charge the portion of the $50 fee allocated to the

          cost of the unnecessary "title update" is a violation of 15 USC §1638(a)(3), entitling Mr. Homeowner

          to rescind the transaction pursuant to 15 USC §1635(a).



                 67. Street's failure to disclose as a finance charge the portion of the $50 fee allocated to the

          cost of "recording of documents," where such "costs" were not fees paid to public officials, is a

          violation of 15 USC §1638(a)(3) and M.G.L. c. 140D, §12(a)(3), entitling Mr. Homeowner to

          rescind the transaction pursuant to 15 USC §1635(a) and M.G.L. c. 140D, §10(a).


                          Count XIII: Failure to Disclose Assignment Recording Cost

                                                  as Finance Charge

                 68. Street imposed a ten dollar ($10.00) fee upon Mr. Homeowner for the cost of recording

          an "assignment of mortgage" but did not record any such assignment.


                 69. Street's failure to disclose this fee as a finance charge is a violation of 15 USC

          §1638(a)(3) and M.G.L. c. 140D, §12(a)(3), entitling Mr. Homeowner to rescind the transaction

          pursuant to 15 USC §1635(a) and M.G.L. c. 140D, §10(a).



                            Counts XIV-XVI: Street' Inaccurate Material Disclosures


                 70. Street' failure to disclose the amounts described above in paragraphs 33 - 69 as finance

          charges pursuant to 15 U.S.C. §1638 and M.G.L. c. 140D, §12 correspondingly rendered the "finance

          charge," "annual percentage rate" and "amount financed" disclosures inaccurate in amounts

          exceeding TILA's error tolerance.




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                 71. By failing to accurately disclose the finance charge, Street violated 15 U.S.C. §1638(a)(3)

          and M.G.L. c. 140D, §12(a)(3).



                 72. By failing to accurately disclose the amount financed, Street violated 15 U.S.C.

          §1638(a)(2)(A) and M.G.L. c. 140D, §12(a)(2)(A).



                 73. By failing to accurately disclose the annual percentage rate, Street violated 15 U.S.C.

          §1638(a)(4) and M.G.L. c. 140D, §12(a)(4).



                       Count XVII: Failure to Honor Mr. Homeowner's Rescission Notice


                 74. Mr. Homeowner made every payment on the loan on or before the due date.



                 75. In mid-summer, l992, with the two year balloon coming due, Mr. Homeowner sought to

          convert the Street loan to the low interest rate, long term loan the Easy Cash representative told him

          he could have if he made his payments on time.



                 76. Easy Cash informed him that they were no longer making or arranging such loans, and

          referred him to Street.



                 77. Street informed Mr. Homeowner that they would not make such a loan, emphasized that

          his balloon note was coming due in a few months and urged him to find alternative financing.



                 78. On or about January 22, 1993 Mr. Homeowner, through his attorney, notified the

          defendant that he was exercising his right to rescind the transaction pursuant to 15 U.S.C. §1635 and

          M.G.L. c. 140D, §10. A copy of the letter by which Mr. Homeowner exercised his rescission rights

          is attached and incorporated herein as Exhibit F [not reprinted infra.].




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                 79. Street refused to honor Mr. Homeowner's rescission of the transaction, in violation of 15

          U.S.C. §1635(b) and M.G.L. c. 140D, §10(b). A copy of the letter by which Street disavowed the

          rescission notice is attached and incorporated herein as Exhibit G [not reprinted infra.].



                 80. Street' failure to honor Mr. Homeowner's rescission notice eliminates Mr. Homeowner's

          obligation to tender the net proceeds of the loan. Pursuant to 15 U.S.C. §1635(b) and M.G.L. c.

          140D, §10(b) Mr. Homeowner has no obligation to now tender that unpaid principal.



                                   Counts XVIII and XIX: Breach of Contract

                                            and Unconscionable Conduct


                 81. US Trust Company issued Mr. Homeowner a loan commitment for forty five thousand

          ($45,000.00) dollars under a special hardship program with a fixed interest rate of six and one-eighth

          percent, to enable him to refinance his first mortgage as well as the Street second mortgage and

          preserve his home.



                 82. The US Trust loan closing was originally scheduled for October 20, l993, but was delayed

          for at least one day by Street' failure to provide a payoff figure. On October 21, 1993 Street

          demanded a payoff which included over ten thousand ($10,000.00) dollars of charges in addition to

          loan principal for accrued interest and legal fees. A copy of the Street payoff communication to US

          Trust is attached as Exhibit H [not reprinted infra.].



                 83. Street was not entitled to these fees under the terms of its loan agreement with Mr.

          Homeowner, nor could it demand such charges be paid after his valid rescission was made.



                 84. Street's attempt to obtain these additional monies prevented Mr. Homeowner from

          closing.




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                 85. Street's conduct was unconscionable and a breach of its contract.



                                  Circumstances Requiring Immediate Issuance

                                              of a Preliminary Injunction


                 86. Mr. Homeowner's US Trust loan commitment expired of its own terms after the aborted

          closing.


                 87. In light of the circumstances, US Trust has agreed to extend the loan commitment through

          January 20, l994.


                 88. Street's continuing refusal to honor Mr. Homeowner's rescission jeopardizes the

          prospective US Trust refinancing.


          89. Unless the Court issues a preliminary injunction to allow Mr. Homeowner to close the US Trust

          loan on or before January 20, l994, his commitment will expire and there is a substantial likelihood

          that he will be unable to requalify for a mortgage refinancing under US Trust's special loan program

          or with any other lender.


                                                   Requested Relief

          WHEREFORE, the plaintiff respectfully requests that this honorable Court:


                 90. Issue an order of notice ordering defendant to appear on or before January 18, 1994 and

          show cause why an injunction should not issue.


                 91. After a hearing, preliminarily enjoin the defendant from failing to:


                 a.      discharge the mortgage it holds on the plaintiff's home to allow the prospective US
                         Trust refinancing to occur;

                 b.      accept from the prospective US Trust refinancing proceeds of thirty-one thousand
                         ($31,000.00) dollars, the principal amount now allegedly owing under the defendant's
                         second mortgage loan; and



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                  c.     immediately upon receipt of these proceeds pay the entire amount into an escrow
                         account established under the court's supervision and control, to be held until a
                         judgment on the merits is rendered.

                  92. After a trial on the merits:


                  a.     declare that the plaintiff has validly rescinded the transaction, that the defendant's
                         security interest is therefore void and the defendant's secured claim is disallowed;

                  b.     declare that the defendant's failure to honor the plaintiff 's valid rescission notice in
                         accordance with the dictates of 15 USC §1635 and M.G.L. c. 140D §10 vests in the
                         plaintiff the right to retain the net loan proceeds and that the defendant has no
                         allowable unsecured claim;

                  c.     enter an order discharging the defendant's second mortgage;

                  d.     enter an order requiring the defendant to refund to the plaintiff all money paid to the
                         defendant in connection with the transaction;

                  e.     award the plaintiff one thousand ($1,000) dollars in statutory damages for the
                         defendant's failure to comply with 15 U.S.C. §1638 and c. 140D §12, and award the
                         plaintiff an additional one thousand ($1,000) dollars in statutory damages for the
                         defendant's failure to comply with 15 U.S.C. §1635(b) and c. 140D §10;

                  f.     award the plaintiff his reasonable attorney's fees and costs; and

                  g.     grant such other relief as the Court deems appropriate and just.


                  Respectfully submitted

                  John Homeowner
                  By his attorney


          Date: January 6, 1994

          VERIFICATION


          COMMONWEALTH OF MASSACHUSETTS

          Suffolk, ss.            January 5, 1994


                  I hereby certify that I have read the foregoing Complaint and that the facts contained therein

          are true.

                                                                                              John Homeowner

                                                                                                     [Notarized]




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          8.3 Memorandum In Support of Preliminary Injunction
                                    UNITED STATES BANKRUPTCY COURT

                                   FOR THE DISTRICT OF MASSACHUSETTS

                                               EASTERN DIVISION

          In Re:

          John Homeowner

                                                                                                    Debtor

          John Homeowner

                                                                                                  Plaintiff

          [vs.]

          Street Financial Services, Inc.

                                                                                                Defendant



          Chapter 13

          Case No. 93-XXXXX-ABC

          Adversary Proceeding No. 94-XXXX



                          MEMORANDUM IN SUPPORT OF PLAINTIFF'S MOTION

                                       FOR PRELIMINARY INJUNCTION



                                                   I. Introduction


                   Pursuant to the federal and state Truth in Lending Acts (15 USC §1601 et seq; M.G.L. c.

          140D §1 et seq., hereinafter referred to as TILA) the plaintiff, John Homeowner, seeks to enforce

          his valid rescission of an unconscionable, high interest rate loan made by the defendant, Street

          Financial Services, Inc. ("Street"). Mr. Homeowner seeks injunctive relief so that he may avert

          Street' threatened foreclosure and close on a US Trust Company loan commitment which would save




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          his home. The proceeds of the US Trust loan, which carries an interest rate thirteen percent lower

          than that of the Street loan, would pay Street whatever, if anything, it is legally owed.

                 On November 29, 1990, Street ostensibly loaned John Homeowner thirty one thousand

          ($31,000.00) dollars. However, of that thirty one thousand dollars, eight thousand and fifteen

          ($8,015.00) dollars was immediately retaken by Street, its attorney, and the mortgage broker which

          arranged the loan. Before Mr. Homeowner left the loan closing, twenty six percent of what he

          thought he was borrowing was recaptured by these three entities, who all shared the same address.



                 Mr. Homeowner only dealt with Street because he was assured that if he proved he was a

          good borrower by making payments on time for the two year term of the note, then instead of calling

          the note and demanding the immediate return of that thirty one thousand dollars, Street would make

          him a long term, low interest rate loan. Mr. Homeowner kept up his end of the bargain, making

          regular payments on time for two years. But Street refused to even discuss the promised new loan,

          called the note and is now attempting to foreclose to harvest the equity in Mr. Homeowner's home.



                 The Attorney General has alleged in a lawsuit that Street and its mortgage broker, Easy Cash,

          engaged in these types of lending practices on a regular basis, preying on substantial numbers of

          unsophisticated Massachusetts consumers by deceptively inducing them to enter into short term, high

          interest rate loans packed with exorbitant fees, most notably thousands of dollars paid to Easy Cash

          from the Street loan proceeds for alleged "consulting fees." See Exhibit D to the Adversary

          Complaint, Complaint of the Attorney General in Commonwealth v. Easy Cash, Inc., Street

          Financial Services, Inc., and William Black, Suffolk Superior Court, Civil Action No. 91-xxxx, and

          accompanying consumer affidavits filed therewith.

                 It is for these reasons that Mr. Homeowner rescinded his Street loan and is now seeking

          injunctive relief from this court to enforce his rescission rights. Mr. Homeowner is entitled to that

          relief because Street has committed ten independent violations of TILA, any one of which entitled

          Mr. Homeowner to rescind his loan. The following fees, enumerated in items 1-5 and 8-10, below,




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          which Street required Mr. Homeowner to pay as a condition of closing the loan, are finance charges

          as defined by TILA. However, Street did not disclose them as such, thereby understating the finance

          charge, annual percentage rate, and amount financed, in violation of TILA. In addition, Street

          withheld from Mr. Homeowner all of the disclosures required by TILA until at least six days after

          the loan closing. When the documents were provided to Mr. Homeowner, the Notice of Right to

          Cancel indicated that his three day rescission period had already passed.



                 1.      Street charged Mr. Homeowner a fee to purchase an amortization schedule for his
                         loan. However, Mr. Homeowner's loan is non-amortizing.

                 2.      Street charged Mr. Homeowner a fee to record an assignment of the mortgage to a
                         third party.

                 3.      Street charged Mr. Homeowner a fee to "update title" after it had already charged him
                         a two hundred fifty ($250.00) dollar fee for "full title examination."

                 4.      Street charged Mr. Homeowner an undisclosed portion of a fifty ($50.00) dollar fee
                         to record documents. But Street imposed separately itemized fees which fully
                         covered the cost of recording the documents involved.

                 5.      Street failed to provide Mr. Homeowner with the Notice of Right to Cancel required
                         by TILA until at least six days after the loan closing.

                 6.      Street failed to provide Mr. Homeowner with the Disclosure Statement required by
                         TILA until at least six days after the loan closing.

                 7.      Street informally required Mr. Homeowner to pay a two thousand nine hundred fifty
                         four ($2,954.00) dollar "consulting fee" to The Easy Cash, a mortgage broker which
                         shared Street's address and which was run by the brother of Street president and sole
                         shareholder.

                 8.      Street required Mr. Homeowner to pay an unreasonable and non-bona fide attorney's
                         fee to its closing attorney, who also shared Street's address.

                 9.      Street required Mr. Homeowner to pay an unreasonable and non-bona fide
                         "document preparation fee" to its attorney.

                 10.     Street charged Mr. Homeowner a two hundred fifty ($250.00) dollar fee to purchase
                         his appraisal.


                 In this petition for preliminary relief, only items 1-5 above will be analyzed, as the facts

          concerning the first four are undisputed and pose purely legal questions, and as the circumstances

          surrounding the fifth item demonstrate that Mr. Homeowner is likely to prevail on this issue at trial.




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          The remaining items (6-10) require further discovery in order to demonstrate the requisite likelihood

          of success. However, as even a single violation of the Act's material disclosure provisions justifies

          rescission, the analysis of the first five items demonstrates not just a likelihood of success on the

          merits, but that a determination of the validity of Mr. Homeowner's rescission is almost inescapable.



                                                        II. Facts


                 In the fall of 1990, Mr. Homeowner responded to The Easy Cash Inc.'s ("Easy Cash")

          television and print advertisements offering low interest rate loans by visiting the Easy Cash offices

          seeking information about obtaining a mortgage loan to refinance his home. Mr. Homeowner met

          with Easy Cash representative Lisa Smith. Ms. Smith informed him that his poor credit precluded

          a long term, low interest rate loan, but that if he took out a two year loan with a balloon payment and

          made his payments on time, that the Easy Cash would then provide long term, low interest

          refinancing as offered in its advertising. Ms. Smith provided Mr. Homeowner with a blank mortgage

          application and procured his signature on it. Mr. Homeowner was never provided with a copy of

          either the application form he signed or the completed application. As such, Mr. Homeowner never

          received the statutorily required notice mandated by Mass. General Laws, c.184, §17B. Mr.

          Homeowner had no further contact with Easy Cash until he was subsequently informed that he had

          been given a loan commitment.

                 Mr. Homeowner was led to believe and did believe that Easy Cash was a lender. In fact,

          Easy Cash does not provide financing, but instead arranges or "brokers" financing with Street and

          other lenders. Easy Cash did not inform Mr. Homeowner either that it was a broker and not a lender,

          or that it would impose a broker's fee for the purported service of arranging the Street loan.

                 Easy Cash, now defunct, was owned, operated and controlled by William Black. Mr. Black

          was Easy Cash's sole shareholder, officer and director. Street is owned, operated and controlled by

          Susan Black, William Black's sister. Ms. Black is Street's sole shareholder, officer and director. At

          all times relevant to this matter, Easy Cash and Street shared the same office address, 100 Natick




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          Road, Worcester, Massachusetts.

                 On November 29, 1990 Mr. Homeowner drove to the loan closing location, the office of

          attorney Larry Lawyer. Mr. Lawyer's office, like the offices of Street and Easy Cash, was also

          located at 100 Natick Road, Worcester, Massachusetts. Mr. Lawyer was the closing attorney for

          Street. However, it was not until Mr. Lawyer provided him with loan papers indicating that Street

          was the lender that Mr. Homeowner learned that Easy Cash was not directly providing the financing.

          Without Mr. Homeowner's consent or knowledge Easy Cash acted either through a correspondent

          lender contract, as broker, or as Street' agent. In any event, Easy Cash did not act pursuant to any

          agreement with Mr. Homeowner, either written or verbal.



                 One of the documents Mr. Lawyer required Mr. Homeowner to sign as a condition of closing

          the loan was a so-called "consulting" agreement purporting to authorize the payment of almost ten

          percent of the loan proceeds, two thousand nine hundred fifty-four ($2,954.00) dollars, to Easy Cash.

          Mr. Homeowner had never seen this agreement before, and had no idea that Easy Cash was a broker,

          much less that it would charge this amount as a fee. (A copy of this "Consulting Agreement" is

          attached to the Complaint as Exhibit "C1"). Nevertheless, Mr. Homeowner signed the agreement

          because he was led to believe that execution of the "consulting" agreement authorizing Easy Cash's

          fee of almost ten points was a condition of obtaining the financing.

                 In addition to the broker's fee, Street, through its attorney Larry Lawyer, charged Mr.

          Homeowner a legal fee of one thousand and forty ($1,040.00) dollars, a one hundred ninety five

          ($195.00) dollar charge for document preparation and a twenty five ( $25) dollar charge for

          amortization schedules. Mr. Homeowner, in fact, neither requested nor received the amortization

          schedules for which he was charged, nor is the $25 charge the bona fide and reasonable cost of

          producing such computer generated schedules on a two year note. Most notably, as this was a

          non-amortizing loan, the amortization schedules were of no use to Mr. Homeowner.

                 Street charged Mr. Homeowner two hundred fifty ($250.00) dollars for a "full title

          examination;" fifty ($50.00) dollars for "updating of title; recording of documents;" twenty five




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          ($25.00) dollars for "mortgage recording;" and ten ($10.00) dollars for "assignment of mortgage."

          The only document recorded in connection with this transaction was the mortgage.1

                 Mr. Homeowner was completely unaware of any of the terms of the loan until he was

          presented with the loan documents at the closing. Neither Street nor his "consultant" Easy Cash had

          informed him of the terms prior to the closing. Those terms were both complicated and onerous:



                 !Upwardly Adjustable Interest rate: The note rate was 15.99% per annum for the first three
          months of the loan, then was to be adjusted to the greater of 18% per annum or the Bank of New
          England prime rate plus ten percentage points. The loan could only be adjusted upward, the rate
          could not decrease, and had to increase by at least two points, to 18%, after the first three months.
          The loan did contain a 36% percent per annum rate ceiling. At the change date the rate was
          increased to nineteen (19%) per annum. The annual percentage rate was disclosed as 26.25%.

                 !Monthly Payments: The loan was non-amortizing, payments were of interest only.
          Monthly payments for the first three months were four hundred thirteen dollars and eight cents
          ($413.08). Payments thereafter were of four hundred ninety dollars and eighty three cents ($490.83).

                !Loan term: Two years. A balloon payment of the entire principal and any accrued interest
          was due November 28, l992.

                !Points: Street collected and retained an origination fee of one percentage point, three
          hundred ten ($310.00) dollars.

                 !Rate Buydown: Street collected and retained two thousand nine hundred eighty one
          ($2,981.00) dollars as a "rate buydown."

                  !Broker's Fees: Street collected two thousand nine hundred and fifty four ($2,954.00)
          dollars of the loan proceeds and disbursed them to Easy Cash, as a "Financial Consultant."


                 Neither attorney Lawyer nor Street provided Mr. Homeowner with any of the loan documents

          or the disclosures required by TILA when he left the closing. Mr. Homeowner left the loan closing

          without any papers whatsoever, having been told that the papers would be mailed to him "in a few

          days." Approximately six days later, Mr. Homeowner received the papers, including the TILA

          disclosures, in the mail.



             1
               Street also recorded an assignment of the mortgage to a third party, Blue Mortgage Corp.,
          on December 27, 1990, but as noted infra, an assignment to a third party is a transaction
          independent of the loan closing, for which any charge imposed by the lender on the borrower
          must be disclosed as a finance charge.




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                 Despite the onerous terms and the peremptory way in which they were made known to him,

          Mr. Homeowner made every payment on the loan on or before the due date. In mid-summer, l992,

          with the two year balloon coming due, Mr. Homeowner sought to convert the Street loan to the low

          interest rate, long term loan the Easy Cash representative told him he could have if he made his

          payments on time. Easy Cash informed him that they were no longer making or arranging such

          loans, and referred him to Street. Street informed Mr. Homeowner that they would not make such

          a loan, emphasized that his balloon note was coming due in a few months and urged him to find

          alternative financing.

                 On or about January 22, 1993 Mr. Homeowner, through his attorney, notified the defendant

          that he was exercising his right to rescind the transaction pursuant to 15 U.S.C. §1635 and M.G.L.

          c. 140D, §10.2 A copy of the letter by which Mr. Homeowner exercised his rescission rights is

          attached to the Complaint as Exhibit F. Street categorically refused to honor the valid rescission.

          A copy of the letter by which Street disavowed the rescission notice is attached to the Complaint as

          Exhibit G. Attempts to reach a non-adversarial settlement of the plaintiff's rescission claim

          encompassed the following nine months, during which Mr. Homeowner sought alternative financing.

          During this time, Street commenced foreclosure proceedings.

                 Mr. Homeowner was selected in a lottery held by US Trust Company as a prospective

          recipient of refinancing monies to be used to save his home from Street's threatened foreclosure.3

          US Trust issued Mr. Homeowner a loan commitment for forty five thousand ($45,000.00) dollars

          under this special hardship program to enable him to pay off his first mortgage (of approximately

             2
                As "[t]he relevant disclosure provisions of the state and federal statutes are apparently
          identical, and both federal and state courts have recognized that the policies underlying the two
          statutes are also identical...." Bizier v. Globe Financial Services, Inc., 654 F.2d 1, 2 (1st Cir.
          1981), for the sake of simplicity and brevity, this memorandum will cite only the federal statute,
          regulation, and caselaw.

             3
               US Trust and other institutional lenders had earlier reached agreements with the Attorney
          General to end the Attorney General's investigations into alleged unfair lending practices. The
          lenders agreed to provide approximately thirty million dollars of below market rate financing to
          victims of predatory lending practices and others who met certain demographic criteria and were
          selected in lotteries held under the Attorney General's auspices.




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          ten thousand ($10,000.00) dollars) as well as the Street second mortgage of thirty one thousand

          dollars, and thereby preserve his home. The loan commitment locked in a fixed interest rate of six

          and one-eighth (6.125%) percent.

                 A loan closing was scheduled for October 20, l993. Despite US Trust's earlier request, Street

          did not provide a payoff figure until October 21, 1993, delaying the prospective closing for at least

          a day. When Street' payoff communication was transmitted through its lawyers, it contained a

          demand of almost forty two thousand ($42,000.00) dollars. This demand included over ten thousand

          ($10,000.00) dollars of charges in addition to loan principal for ostensibly accrued interest and legal

          fees. The demand was accompanied by a condition that Mr. Homeowner release his rescission claim

          and all other claims he had against Street. A copy of the Street payoff communication and demand

          for release, addressed to US Trust's settlement agent, is attached to the Complaint as Exhibit H. The

          Street demand exceeded by seven thousand ($7,000.00) dollars the US Trust proceeds which were

          to be available. Mr. Homeowner did not have the seven thousand ($7,000.00) dollars in cash which

          would have been necessary to allow a closing. When the closing was aborted, Street then sought to

          press ahead with a scheduled foreclosure auction sale of Mr. Homeowner's home, necessitating the

          emergency filing of a chapter 13 petition.

                 Mr. Homeowner's US Trust loan commitment expired of its own terms after the aborted

          closing. In light of the circumstances, US Trust has agreed to extend the loan commitment through

          January 20, l994.



                                                     III. Argument



             The Validity of the Plaintiff's Rescission on Any of Four Independent Bases is Evident
          from Undisputed Documents

                 As noted, any of the first four violations itemized in the Introduction of this memorandum

          provide an independent, indisputable basis for rescission. Although these violations do not involve

          large amounts of money, "any understatement of the finance charge is material because any




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          understatement would be of some significance to a reasonable consumer." Steele v. Ford Motor

          Credit Co., 783 F.2d 1016 (11th Cir. 1986). The reasons why Congress created this extraordinary

          remedy of rescission and decided to enforce it through a strict liability standard are best understood

          in the context of the Act's creation and the Congressional policy it serves.



                             TILA is Designed to Protect Consumers by Providing the
                               Information Necessary to Make Intelligent Decisions
                                            in the Credit Marketplace

                 The purpose of TILA is to enable consumers to intelligently shop for credit (15 USC

          §1601(a)).4 In particular, TILA "was passed to aid the unsophisticated consumer so that he would

          not be easily misled as to the total costs of financing." Thomka v. A.Z. Chevrolet, Inc., 619 F.2d 246,

          248 (3d. Cir. 1980); Shepeard v. Quality Siding & Window Factory, Inc., 730 F.Supp. 1295, 1299

          (D.Del. 1990); Morris v. Lomas and Nettleton Co., 708 F.Supp. 1198, 1203 (D.Kan 1989);

          Goldberg v. Delaware Olds, Inc., 670 F.Supp. 125, 127 (D.Del. 1987). See also Mourning v. Family

          Publications Service, Inc., 411 U.S. 356, 363-69, 93 S.Ct. 1652, 1657-60, 36 L.Ed.2d 318 (1973).

          It was thought that "through TILA, Congress [could] remedy the [sq]divergent and often fraudulent

          practices by which credit customers were apprised of the terms of the credit extended to them.'"

          Smith v. Fidelity Consumer Discount Co., 898 F.2d 896, 898 (3d. Cir. 1988). "Congress designed

          the law to apply to all consumers, who are inherently at a disadvantage in loan and credit

          transactions." Jackson v. Grant, 890 F.2d 118, 122 (9th Cir. 1989); Semar v. Platte Valley Federal

          S & L Ass'n,791 F.2d 699, 705 (4th Cir. 1983).

                 To achieve this purpose, TILA requires that the true "cost" of credit be stated as both an

             4
               The House of Representatives report accompanying TILA noted how important the use of
          credit has become in the United States: "Consumer credit has become an essential feature of the
          American way of life. It permits families with secure and growing incomes to plan ahead and to
          enjoy fully and promptly the ownership of automobiles and modern household appliances. It
          finances higher education for many who otherwise could not afford it. To families struck by
          serious illness or other financial setbacks, the opportunity to borrow eases the burden by
          spreading the payments over time." H. Rep. No. 1040, 90th Cong., 1st Sess. 8-9, reprinted in
          1968 U.S. Code Cong. & Admin. News 1965.




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          interest rate (annual percentage rate, or APR) and as a dollar amount (Finance Charge). The APR

          incorporates certain fees and charges imposed as part of the credit transaction, and which Congress

          has determined to be part of the "costs" of obtaining financing. As such, a note with a ten percent

          interest rate, executed as part of a transaction which imposes such additional "finance charges," may

          have an APR, or "true" interest rate, of twelve percent. Correspondingly, the finance charge

          discloses the net effect of such additional costs of credit as a dollar figure. Essentially, "...TILA

          requires a creditor to issue the debtor a disclosure statement summarizing certain information found

          in the loan documents." In re McCausland v. GMAC Mortgage Corp. of Pennsylvania, 63 B.R. 665,

          667 (Bankr. E.D. Pa. 1986). These disclosures are to be set forth "...in writing and in a particular

          manner." Shepeard v. Quality Siding and Window Factory, Inc., supra. at 1299 (emphasis added).



                  The Rescission Remedy Protects Consumers and Provides Congress With a
          Self-Enforcement Mechanism to Ensure the Act's Viability


                 Only when a creditor makes accurate disclosure of the true cost of credit can a consumer

          compare different lenders' offerings and make an informed credit decision. The House of

          Representatives report accompanying TILA provides that "[y]our committee believes that . . . the

          credit disclosure features of [TILA]    . . . [are] fundamental to its legislative purpose. This aspect

          of the bill is designed to provide consumers with basic information in connection with their credit

          transactions so that they may effectively `comparison shop' for credit in order to obtain credit on the

          most favorable terms available in the market place." (Emphasis added.) H. Rep. No. 1040, 90th

          Cong., 1st Sess. 18, reprinted in 1968 U.S. Code Cong. & Admin. News 1975. Thus, TILA seeks

          to effectuate its public policy of promoting the informed use of credit by requiring lenders to disclose

          credit terms to consumers. The House of Representatives report further provides that "[f]or the

          relatively unsophisticated consumer, particularly those of modest means, [TILA] . . . will provide

          their only protection against unscrupulous merchants or lenders. . . . These provisions not only will

          protect the consumer, but will further protect the honest businessman from unethical forms of

          competition engaged in by some unscrupulous creditors who prey upon the poor through deceptive



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          credit practices." H. Rep. No. 1040, 90th Cong., 1st Sess. 18, reprinted in 1968 U.S. Code Cong.

          & Admin. News 1975-76.

                 In addition, when a consumer loan is secured by a mortgage on the borrower's home, he or

          she has an unqualified right to cancel the transaction up to three business days after the closing. 15

          USC §1635. This rescission right provides a borrower the time to examine the TILA disclosures at

          home, reflect on the prudence of the borrowing decision in light of those disclosures, and, if

          discretion seems advised, to cancel the transaction with impunity. To provide a self-enforcement

          mechanism which promotes such accurate disclosures, Congress provided that the failure of a

          creditor to comply with certain of TILA's disclosure requirements (the "material disclosures")5 gives

          the borrower an extended right to rescind the transaction. 15 USC §1635, Regulation Z, §226.23.6
                 The reason that the failure to provide these disclosures extends the rescission right is that

          Congress has determined that without accurate disclosure of these five components of the

          prospective consumer credit transaction, borrowers do not have all information material to their

          borrowing decision, and are therefore presumed unable to make an informed credit decision. As a

          corollary, the Act was amended to include this statutory definition of "material disclosures" in order

          to put creditors "in a better position to know whether a consumer may properly rescind a

          transaction." S. Rep. No. 368, 98th Cong. 2d Sess. at 29, reprinted in l980 U.S. Code Cong. and

          Admin. News 236, 264 (emphasis added).



                        TILA Achieves its Remedial Goals by A System of Strict Liability


                 To further this congressional policy TILA achieves its remedial goals by a system of strict


             5
               The "material disclosures" are the annual percentage rate, the finance charge, the amount
          financed, the total of payments, and the payment schedule. 15 USC §1602(u), Regulation Z,
          §226.23(a)(3), n.48.

             6
                This right extends for three years under the federal statute (15 USC §1635), four years under
          the state law (G.L. c. 140D, §10).




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          liabilit in favor of consumers when mandated disclosures have not been made. 15 U.S.C. §1640(a)

          (emphasis added). The standard applied is considered "strict liability in the sense that absolute

          compliance is required and even technical violations will form the basis for liability." Shepeard v.

          Quality Siding & Window Factory, Inc., supra. at 1299; In re McElvany, 98 B.R. 237, 240 (Bankr.

          W.D. Pa. 1989). This means that "technical or minor7 violations of TILA, or Reg. Z, as well as

          major violations impose liability on the creditor and entitle the borrower to rescind [the loan]."

          Smith v. Wells Fargo Credit Corp., 713 F.Supp. 354, 355 (D.Ariz. 1989); Jackson v. Grant, 890

          F.2d. 118, 120 (9th Cir. 1989); Semar v. Platte Valley Fed. S & L Assoc., supra. at 704.8

                   The first circuit court of appeals has unequivocally stated that any violation of TILA,



             7
                 The error tolerance for finance charges is ten dollars (Regulation Z, §226.18(d), n. 41.

             8
               This rule is inviolate and is followed by courts in all jurisdictions. See, e.g., Smith v.
          Fidelity Consumer Discount Co., 989 F.2d 896, 898 (3rd Cir. 1990)(The federal Truth in Lending
          Act (TILA) achieves its remedial goals by a system of strict liability in favor of consumers when
          mandated disclosures have not been made); Lewis v. Dodge, 620 F.Supp. 135, 138 (D. Conn.
          1985); In re Porter, 961 F.2d 1066 (3rd Cir. 1992); Rowland (John M., Carol S.) v. Magna
          Millikin Bank of Decatur, N.A., 812 F.Supp. 875 (C.D. Ill. 1992) ("even technical violations will
          form the basis for liability"); New Maine Nat. Bank v. Gendron, 780 F.Supp. 52 (D. Me. 1992);
          Dixon v. S & S Loan Service of Waycross, Inc., 754 F.Supp. 1567 (S.D. Ga. 1990); Woolfolk v.
          Van Ru Credit Corp., 783 F.Supp. 724 (D. Conn. 1990) (same with Unfair Debt Collection
          Practices Act); Morris v. Lomas and Nettleton Co., 708 F.Supp. 1198 (D. Kan. 1989); Jenkins v.
          Landmark Mortg. Corp. of Virginia, 696 F.Supp. 1089 (W.D. Va. 1988); Laubach v. Fidelity
          Consumer Discount Co., 686 F.Supp. 504 (E.D. Pa. 1988); Searles v. Clarion Mortg. Co., 1987
          WL 61932 (E.D. Pa. 1987); "Liability will flow from even minute deviations from requirements
          of the statute and Regulation Z." Dixon v. S & S Loan Service of Waycross, Inc., 754 F.Supp.
          1567, 1570 (S.D. Ga. 1990); Shroder v. Suburban Coastal Corp., supra. at 1380; Charles v.
          Krauss Co., Ltd., 572 F.2d 544 (5th Cir. 1978).Shroder v. Suburban Coastal Corp., 729 F.2d
          1371, 1380 (11th Cir. 1984) ; Goldberg v. Delaware Olds, Inc., 670 F.Supp. 125 (D. Del. 1987);
          Curry v. Fidelity Consumer Discount Co., 656 F.Supp. 1129 (E.D. Pa. 1987); Laubach v. Fidelity
          Consumer Discount Co., 1986 WL 4464 (E.D. Pa. 1986); In re Wright, 133 B.R. 704 (E.D. Pa.
          1991); Moore v. Mid-Penn Consumer Discount Co., 1991 WL 146241 (E.D. Pa. 1991); In re
          Marshall, 121 B.R. 814 (Bankr.C.D. Ill. 1990); In re Steinbrecher, 110 B.R. 155 (Bankr.E.D. Pa.
          1990); Nichols v. Mid-Penn Consumer Discount Co., 1989 WL 46682 (E.D. Pa. 1989); In re
          McElvany, 98 B.R. 237 (Bankr.W.D. Pa. 1989); In re Johnson-Allen, 67 B.R. 968 (Bankr.E.D.
          Pa. 1986); In re Cervantes, 67 B.R. 816 (Bankr.E.D. Pa. 1986); In re McCausland, 63 B.R. 665,
          55 U.S.L.W. 2214, 1 UCC Rep.Serv.2d 1372 (Bankr.E.D. Pa. 1986); In re Perry, 59 B.R. 947
          (Bankr.E.D. Pa. 1986); In re Schultz, 58 B.R. 945 (Bankr,E.D. Pa. 1986); Solis v. Fidelity
          Consumer Discount Co., 58 B.R. 983 (E.D. Pa. 1986).




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          regardless of the technical nature of the violation, must result in a finding of liability against the

          lender. Bizier v. Globe Financial Services, Inc., 654 F.2d 1, 3 (lst Cir. 1981). TILA is a remedial

          statute which is designed to balance the scales "thought to be weighed in favor of lenders," and is

          therefore to be liberally construed in favor of borrowers. Id. A creditor who fails to comply with

          TILA in any respect is liable to the consumer under the statute, regardless of the nature of the

          violation or the creditor's intent. Thomka v. A.Z. Chevrolet Inc., 619 F.2d 246, 249-50 (3d Cir.

          1980). Even if the borrower can demonstrate no actual damages, TILA's penalties are applied

          regardless of whether the borrower was misled or injured. See, Griggs v. Provident Consumer

          Discount Co., 680 F.2d 927, 932-33 (3d Cir.), vacated on other grnds, 459 U.S. 56, 103 S.Ct. 400,

          74 L.Ed.2d 225 (1982).

                 This strict compliance rule is what makes TILA so effective. "This strict interpretation of

          the TILA has largely been responsible for the TILA's success in achieving widespread compliance

          with its requirements." In re Brown, 106 B.R. 852, 857 (Bankr. E.D. Pa. 1989).



                        Street's Failure to Disclose as Finance Charges the Fees for the
                       Amortization Schedule, Assignment Recording, Title Update and
                      Document Recording Entitled Mr. Homeowner to Rescind the Loan

                 As noted in the introduction to this memorandum, Street's failure to disclose the four

          enumerated fees as finance charges presents a purely legal question for the court: "Were any of these

          fees finance charges?" An affirmative answer requires a finding that Mr. Homeowner's rescission

          was valid. As such, Mr. Homeowner will not only have demonstrated a likelihood of success on the

          merits, but a certainty of it. Accordingly, summary disposition in Mr. Homeowner's favor should

          follow. As with the somewhat counterintuitive concept of rescission, the concept of the finance

          charge under TILA is also best understood in the context of the Act's aims and the methods by which

          Congress has sought to meet those aims.




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                             Disclosure of the Finance Charge is at the Heart of TILA


                 Disclosure of the finance charge is at "the heart" of TILA. National Consumer Law Center,

          Truth in Lending 59 (2d. ed. l989). The finance charge and the APR are the most important

          disclosures in the entire Act, accordingly, they must be disclosed more conspicuously than even the

          other "material disclosures." 15 USC §1632(a); Regulation Z, §226.17(a)(2). "The most important

          information in a credit purchase is that which explains differing net charges and rates." Milhollin

          v. Ford Motor Credit Co., 444 US 555, 568-69, 100 S. Ct. 799, 63 L. Ed.2d 22 (l980). TILA's

          material disclosures "serve to provide an easy basis for comparison of the terms offered by

          competing creditors." Grey v. European Health Spas, Inc., 428 F. Supp. 841 (D. Conn. l987).



                 Regulation Z, § 226.4(a) defines the term finance charge as:



                 ...the cost of consumer credit as a dollar amount. It includes any charge payable
                 directly or indirectly by the consumer and imposed directly or indirectly by the
                 creditor as an incident to or a condition of the extension of credit. It does not include
                 any charge of a type payable in a comparable cash transaction.


          This definition is "all-inclusive", i.e., any charge which meets this broad definition is a "finance

          charge," unless specifically excluded from the rule's application by other provisions of TILA. See,

          Rohner, The Law of Truth in Lending, §3.02 (l984). Regulation Z § 226.4(c)(7) sets forth special

          rules which apply only in secured real estate transactions to exclude certain bona fide and reasonable

          charges from classification as finance charges. The specific exclusions are:



                 (i)     Fees for title examination, abstract of title, title insurance, property survey, and
                         similar purposes.

                 (ii)    Fees for preparing deeds, mortgages and reconveyance, settlement, and similar
                         documents.

                 (iii)   Notary, appraisal, and credit report fees.

                 (iv)    Amounts required to be paid into escrow or trustee accounts if the amounts would
                         not otherwise be included in the finance charge.



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                  It is well-established that "only those charges specifically exempted from inclusion in the

          [sq]finance charge' by statute or regulation may be excluded from it." Burford v. American Finance

          Co., 333 F.Supp. 1243, 1247 (N.D. Ga. 1971). See also Abbey v. Columbus Dodge, Inc., 607 F.2d

          85, 86 (5th Cir. 1979); Campbell v. General Finance Co., 523 F.Supp. 989, 992 (W.D.Va. 1981);

          Dalton v. Bob Neill Pontiac, Inc., 476 F.Supp. 789, 794 (M.C.N.C. 1979); and Campbell v. Liberty

          Financial Planning, Inc., 422 F.Supp. 1386, 1388-89 (D.Neb. 1976). See, In re Celona, 90 B.R.

          104, 112 (Bkrtcy.E.D.Pa. 1988). Therefore, only those specific exclusions enumerated in Regulation

          Z §226.4(c)(7) will be excluded from finance charges.

                  The failure to disclose charges which, by the definitions set out in the statute and regulation,

          are clearly finance charges, misinforms the borrower as to the true cost of credit and frustrates the

          policy behind the Act. As outlined below, Street has failed to disclose as finance charges four

          separate charges which meet the law's definition as such and about which there is no factual dispute.

          1. Street Failed to Disclose as a Finance Charge its Twenty Five Dollar Fee for an Unnecessary
          Amortization Schedule

                  Street imposed a twenty five dollar fee on Mr. Homeowner for the ostensible purchase of an

          amortization schedule.      However, as Street made Mr. Homeowner an interest only (i.e.,

          non-amortizing) loan, in essence it charged him twenty five dollars for a useless piece of paper. Mr.

          Homeowner did not request the schedule, nor in fact did he receive it. The charge was simply

          contained on the loan documents which were presented to him at the closing as a fait accompli.

                  Street cannot dispute that the loan is non-amortizing, nor that the twenty five dollar fee was

          imposed, but instead contends that it was independently assessed by its lawyer, and as such, cannot

          be attributed to the lender for purposes of TILA disclosure requirements. This position is completely

          at odds with the Act and Regulation Z.

                  The concept of the term "finance charge" under TILA has been detailed above. With respect

          to this particular type of finance charge, the Federal Reserve Board Commentary to Regulation Z

          states, in relevant part:


                  §226.4(a)(3). Charges by Third Parties.




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                 ...[C]harges imposed on the consumer by someone other than the creditor are finance
                 charges (unless otherwise excluded) if the creditor requires the services of the third
                 party.


                 Street also cannot dispute that it required Mr. Homeowner to pay for attorney Lawyer's fees

          for services he performed on Street' behalf. As the regulation makes clear, the amortization schedule

          charge imposed by Mr. Lawyer is a finance charge "unless otherwise excluded." This charge could

          only be otherwise excluded if enumerated in the specific exclusions to Regulation Z, §22.4(c)7,

          which it clearly is not. Even if it were, it would also have to be bona fide and reasonable. Clearly,

          a fee for a useless document is not bona fide and reasonable.9 See Commonwealth v. DeCotis, 366

          Mass. 234 (1974)(imposing charge for no useful service is unfair and deceptive practice in violation

          of c. 93A). The amortization schedule charge is a finance charge.

                 This violation alone is sufficient to demonstrate that Mr. Homeowner's rescission was valid.

          As such, there is no legal or practical reason for further analysis -- Mr. Homeowner is not only

          entitled to injunctive relief, but to a summary disposition in his favor on his rescission claim. The

          following violations only serve to further illustrate the validity of his claim.



          2. Street Failed to Disclose as a Finance Charge A Future Mortgage Assignment Recording Fee
          of Ten Dollars

                 Street imposed a ten dollar fee on Mr. Homeowner to pay for the cost of recording its


             9
                 In drafting Regulation Z to implement the Truth in Lending Act, the Board was
                 concerned that the exclusion of closing costs from the finance charge might be
                 used by unscrupulous creditors to circumvent the requirements of the Act.
                 Accordingly, the phrase "reasonable in amount" was inserted in paragraph (e) of
                 section 226.4 in order to serve as a warning and barrier to those who otherwise
                 might entertain thoughts of evading disclosure requirements by inflating the
                 closing costs. We have been informed that closing costs vary widely in different
                 parts of the country, and it was our intention that reasonableness would be
                 determined by comparing charges of a particular creditor with the prevailing
                 practices of the industry in his locality. In this way, it will be possible to find
                 those creditors who are failing to make proper disclosures.

          Excerpts from FRB Letter of March 27, l969 by William C. McMartin, Jr., CCH Consumer
          Credit Guide, ¶30,009, Report 27-160 (February 6, l970).




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          assignment of the mortgage to a third party. This fee is also a finance charge. Regulation Z,

          §226.4(b)(6). See In re Brown, 106 B.R. 852, 858-859 (Bankr. E.D. Pa. 1989); Cheshire Mortgage

          Service v. Montes, 223 Conn. 80 (1992).

                   Regulation Z, §226.4(b)(6) states that a finance charge includes "[c]harges imposed on a

          creditor by another person for purchasing...a consumer's obligation, if the consumer is required to

          pay the charges in cash as an addition to the obligation...". In the present case, Street required Mr.

          Homeowner to pay in cash from the loan proceeds a "[charge] imposed on [Street] by another person

          [namely, an assignee,] for purchasing...[Mr. Homeowner's] obligation...".

                   The Connecticut Supreme Court recently articulated the reasoning and policy supporting the

          characterization of an assignment recording fee as a finance charge under TILA. In Cheshire

          Mortgage Service v. Montes, 223 Conn. 80 (1992), the court examined a similar, high interest, short

          term loan, in which approximately fifteen percent10 of the proceeds were retained by the lender as

          prepaid charges. The loan was for $43,500 at nineteen percent interest. The lender retained $6,801

          in points and closing costs. The loan term was three years, with a balloon payment of $44,075.03

          due at the end of the term. Id., at 86. The lender charged the borrowers a thirty two dollar fee for

          recording a future assignment of the mortgage. Id., at 96.11 As the borrower had asserted its right

          to rescind, and was appealing a lower court foreclosure judgment, the court engaged in a thoughtful

          analysis of the issue, concluding that the lender's failure to disclose a mortgage assignment recording

          fee (whether the assignment was made or not) as a finance charge violated TILA's material

          disclosure requirements and entitled the borrowers to rescind the loan. The relevant portions of the

          court's analysis are contained below.

             10
                  As contrasted with the twenty six percent retained here.

             11
                Although the mortgage was never, in fact, assigned. Cf. Shroder v. Suburban Coastal
          Corp., 729 F.2d 1371 (11th Cir. 1984)(court held that failure to include assignment recording fee
          in finance charge was not a violation of TILA. Unlike this case, Cheshire and Brown, Shroder
          was an appeal of denial of class action certification, in which the court decried the game of
          “gotcha” it intimated the plaintiffs were playing in seeking to hold the lender liable to an entire
          class for extremely technical violations of the Act, without any apparent damages having been
          suffered. Id., at 1385.




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                  Regulation Z, §226.4(a) defines a finance charge as "the cost of consumer credit as
                  a dollar amount. It includes any charge payable directly or indirectly the consumer
                  and imposed directly or indirectly by the creditor as an incident to or a condition of
                  the extension of credit." Based on this definition, a fee charged to a borrower to
                  record the future assignment of a mortgage is a finance charge because it certainly is
                  a charge payable directly by the consumer and imposed directly by the creditor as an
                  incident to the extension of credit. This conclusion is bolstered by Regulation Z,
                  §226.4(b)(6) which states that a finance charge includes "[c]harges imposed on a
                  creditor by another person for purchasing . . . a consumer's obligation, if the
                  consumer is required to pay the charges in cash as an addition to the obligation . . .
                  ." In the present case, the plaintiff required the defendants to pay in cash a "[charge]
                  imposed on [the plaintiff] by another person [namely, an assignee,] for purchasing
                  . . . [the defendants'] obligation . . . ." Id., at 97, 98.

                  ...A fee for recording a future assignment of the mortgage does not relate to a
                  perfection of the security interest created by the mortgage. That security interest was
                  perfected when the mortgage itself was recorded....In the present case, the potential
                  assignment of the mortgage to another person would have been unrelated to the loan
                  made to the defendants, but would have related to a separate future transaction
                  between the plaintiff and a buyer of the mortgage loan. Our conclusion is supported
                  by 15 U.S.C. §1605(d) and (e), which exclude certain fees from the definition of
                  finance charge if they are fees "with respect to that transaction." (Court's emphasis.)
                  We conclude, therefore, that a fee charged to a borrower to record the future
                  assignment of a mortgage is a finance charge and that since, in the present case, the
                  charge was paid at the consummation of the transaction, it was a prepaid finance
                  charge. Id., at 99, 100.

                  Having found that the fee should have been disclosed as a finance charge, the court noted that

          although the amount of money involved was perhaps "minuscule," rescission was nevertheless

          mandated by TILA's strict liability standard.


                          Thus, the plaintiff failed accurately to disclose and include the future
                  mortgage assignment recording fee in the prepaid finance charge. Since this charge
                  was not included in the prepaid finance charge, the overall finance charge was also
                  underdisclosed. This resulted in a material nondisclosure in violation of TILA and,
                  therefore, the defendants had the right to rescind the May, 1988 loan transaction. We
                  recognize that non-disclosure of a $55 fee may seem minuscule in the context of a
                  $43,500 loan transaction. "However, once the court finds a violation, no matter how
                  technical, it has no discretion with respect to the imposition of liability." Id., at
                  101-102, quoting Grant v. Imperial Motors, 539 F.2d 506, 510 (5th Cir. 1976).


                  The same rationale applies here.        Street violated the Act and failed to honor Mr.

          Homeowner's rescission notice informing it of those violations. This is another independent basis

          for rescission.


          3. Street Failed to Disclose Non-excludable Title Fees as Finance Charges




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                  Street charged Mr. Homeowner two hundred fifty ($250.00) dollars for a "full title

          examination." This fee is excluded from the finance charges and Mr. Homeowner does not contest

          it. However, Street also charged Mr. Homeowner an additional fifty ($50.00) dollar fee for

          "updating of title, recording of documents." Street did not disclose which portion of this fee was

          allocated to the title update and which was allocated to the recording of documents.

                  Street charged Mr. Homeowner for a "full title examination." Having defined the task as

          such, it is logically estopped from now claiming that the "full" examination had to be "updated" at

          additional cost. The undisclosed portion of the fee for "updating the title" is not excludable. This

          is the third independent basis on which Mr. Homeowner's rescission was justified.


          4. Street Failed to Disclose Non-excludable Recording Fees as Finance Charges

                  Even, assuming arguendo, that the Court found the title update fee to be excludable under

          Regulation Z, §226.4(c)(7)(i), the portion of the fifty dollar lump sum fee allocated to the cost of

          "recording of documents" must be determined to be a finance charge, as Street did not incur any

          non-reimbursed recording costs.

                  The Federal Reserve Board Official Staff Commentary to Regulation Z prescribes the rule

          for allocating non-excludable portions of lump sum charges to the finance charge. Regulation Z,

          §226.4(c)(7) states that:



                  If a lump sum is charged for several services and includes a charge that is not
                  excludable (from the finance charge under Regulation Z, §226.4(c)(7)), a portion of
                  the total should be allocated to that service and included in the finance charge.


                  The only document recorded in connection with this transaction (see 15 USC §1605(d) and

          (e), and Cheshire, supra, at 99-100) was the Street mortgage, for which Street imposed a separately

          itemized twenty five dollar fee.12 As no other documents were recorded, the portion of the fifty

          dollar lump sum fee allocable to recording of documents cannot be valid, and as such, should have

             12
               Of course, Street also imposed a separately itemized ten dollar fee for recording the
          mortgage assignment.




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          been disclosed as a finance charge. Only amounts actually paid to public officials are excludable

          from the finance charge. Regulation Z, §226.4(e)(1); Abbey v. Columbus Dodge 607 F.2d 85 (5th

          Cir. 1979) (where, contrary to disclosures, creditor retained and did not pay to public officials an

          itemized $37.50 "filing fee," the fee was a finance charge). The Federal Reserve Board Official Staff

          Commentary on Regulation Z, §226.4(a)(3) is unequivocal on this point:


                          Charges imposed on the consumer by someone other than the creditor for
                   services not required by the creditor are not finance charges as long as the creditor
                   does not retain the charges. For example:
                                                            ...
                          A tax imposed by a state or other governmental body . . . that is payable by
                   the consumer (even if the tax is collected by the creditor) (emphasis added).

                   This is yet another basis upon which Mr. Homeowner's rescission was valid.



          5. Street Failed to Disclose the "Consulting Fee" Paid to Easy Cash as a Finance Charges


                   The previous four issues are not susceptible of factual dispute. This fifth issue is subject to

          such dispute. However, although Street does dispute that there was a de facto requirement that

          borrowers come to it through Easy Cash or other brokers, the circumstances under which Street paid

          Easy Cash its "consulting" fee out of the loan proceeds demonstrate that it cannot prevail on this

          issue.

                   Mr. Homeowner was led to believe from the outset that Easy Cash was the lender. Easy Cash

          did not inform Mr. Homeowner either that it was a broker and not a lender, or that it would impose

          a broker's fee for the purported service of arranging the Street loan. Mr. Homeowner had no contact

          with or even knowledge of Street until he arrived at the closing. There, attorney Lawyer presented

          Mr. Homeowner with a welter of previously prepared documents, including the so-called

          "consulting" agreement with Easy Cash. Mr. Homeowner had never seen this agreement before, and

          had no idea that Easy Cash was a broker and not a lender. He also did not know that Easy Cash

          would be imposing a fee for its work.

                   Since this loan was made, the Attorney has promulgated mortgage broker and lender

          regulations which prohibit this type of surprise" "agreement" being foisted on an unwitting borrower



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          in the confusing midst of a loan closing. 940 CMR 8.05 requires mortgage brokers to fully disclose

          what they are and how much they will be paid, on a form prescribed by the Attorney General, within

          three days of the first substantive contact with the consumer, weeks or months before any loan

          closing will occur. As neither Easy Cash nor Street made equivalent voluntary disclosures to Mr.

          Homeowner, he signed the agreement because he was led to believe that execution of this

          "consulting" agreement authorizing Easy Cash's fee of almost ten points was a condition of obtaining

          the financing.

                  In accordance with the purported agreement, Mr. Lawyer subsequently paid a $2,954.00

          broker's fee to Easy Cash. However, this fee was not disclosed to Mr. Homeowner as a finance

          charge. This failure to disclose the broker's fee as a finance charge violates TILA.

                  Where the lender formally or informally requires the payment of a fee to a broker as a

          condition of or incident to the granting of a loan, the broker's fee must be included in the finance

          charge, and therefore also factored into the calculation of the annual percentage rate. 209 CMR

          32.4(b)(3); Regulation Z, §226.4(b)(3). As illustrated by the consumer affidavits attached to the

          Attorney General's Complaint against Street and Easy Cash, it is apparent that this was the regular,

          de facto practice of these two entities. If "the creditor in the transaction (i.e., the lender) actually

          imposes and collects the broker's fees, or requires that the broker's services be utilized..." the fee is

          a finance charge. In re Grigsby, 119 B.R. 479, 486 (Bkrtycy. E.D.Pa. 1990), citing R. Rohner, The

          Law of Truth in Lending, ¶ 3.02[1][c], at 3-12.

                  Here, Easy Cash's consulting services consisted of placing Mr. Homeowner with a lending

          operation run by a sibling, sharing the same address,13 which provided such onerous financing terms

          and conditions that it would be difficult to find a more disadvantageous loan. Easy Cash did not

          perform any service for Mr. Homeowner, rather it did him a substantial disservice. In a similar case,

             13
                As previously noted, Easy Cash was owned, operated and controlled by William Black, the
          brother of Susan Black, Street's sole shareholder, officer and director. At all times relevant to
          this matter, Easy Cash and Street shared the same office address. This relationship is not without
          legal significance. See, e.g. G.L. c.255, §12F (where relative acts as conduit in credit transaction
          the creditor is subject to all claims and defenses borrower may assert against the related party
          "arranger" of credit).




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          In re Dukes, 24 B.R. 404, 407-408, 410-13 (Bkrtcy. E.D. Mich 1982), the court held that, "where an

          alleged broker performed no services for the borrower and had a very large volume of business with

          the lender, its fees must be included in the finance charge in that transaction."

                  The broker's fee here is an undisclosed finance charge.



                                           This Case Meets All the Criteria
                                           for the Issuance of an Injunction
                  Mr. Homeowner seeks a preliminary injunction to bar Street's threatened foreclosure sale of

          his home. The standard for the issuance of a preliminary injunction is well-known. The Court must

          find:


                  (1)      that plaintiff will suffer irreparable injury if the injunction is not granted;
                  (2)      that such injury outweighs any harm which granting injunctive relief would inflict on
                           the defendant;
                  (3)      that plaintiff has exhibited a likelihood of success on the merits; and
                  (4)      that the public interest will not be adversely affected by the granting of the
                           injunction.

          Planned Parenthood League of Mass. v. Bellotti, 641 F.2d 1006, 1009 (1st Cir. 1981) citing

          Women's Community Health Ctr., Inc. v. Cohen, 477 F.Supp. 542, 544 (D.Me. 1979); Coastal Fuels

          v. Carribean Petroleum, 990 F.2d 25, 26 (1st Cir. 1993); Williams v. Poulos, 801 F.Supp. 867

          (D.Me. 1992); Project B.A.S.I.C. v. Kemp, 721 F.Supp. 1501 (D.R.I. 1989). The plaintiff has met

          all these criteria.



                  Irreparable Harm -- without the injunction Mr. Homeowner may lose his US Trust loan

          commitment and with it the only realistic chance he has of saving his home.

                  Likelihood of Success on the Merits -- the foregoing analysis demonstrates a substantial

          likelihood of success on the merits. "[O]nce the court finds a violation, no matter how technical, it

          has no discretion with respect to liability." In re Wright, supra. at 708; In re Porter v. Mid-Penn

          Consumer Discount Co., 961 F.2d 1066, 1078 (3d. Cir. 1992); Smith v. Fidelity Consumer Discount

          Co., supra. at 898. "Any misgivings creditors may have about the technical nature of the

          requirements should be addressed to Congress or the Federal Reserve Board, not the courts. A strict



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          interpretation furthers the congressional goal of standardizing terminology and procedures in credit

          transactions." April v. Union Mortgage Co., 709 F.Supp. 809, 811 (N.D. Ill. 1989); Smith v. No. 2

          Galesburg Crown Furnace Corp., 615 F.2d 407, 416 (7th Cir. 1980).

                  Balance of Harms -- if the injunction is not issued, Mr. Homeowner may lose his home. If

          the injunction is issued, Street is still assured of recouping its principal, it still keeps the already

          collected two years of payments from Mr. Homeowner at eighteen and nineteen percent interest, and

          it still keeps the twenty six percent of the original loan principal of $31,000 which it took at the loan

          closing itself. If Street wins a judgment against Mr. Homeowner for any excess over what it has

          already taken or is secured in escrow by the injunction, it can still attach his house, so it is fully

          secured.

                  Public Interest -- the public interest is clearly served by the protection of the borrower's home

          and the judicial correction of the wrongs perpetrated by Street.


                         The Injunctive Relief Sought in this Case is a Mandatory Result
                           of a Finding That Mr. Homeowner's Rescission Was Valid
                  When a consumer validly rescinds a mortgage pursuant to 15 USC §1635 the mortgage is

          automatically voided by operation of law. When Mr. Homeowner served Street with his rescission

          notice, as a matter of statutory law Street's mortgage became void (15 USC §1635(b)) and Street

          became bound to immediately take the appropriate steps to reflect that fact. Regulation Z,

          §226.23(d)(2). Specifically, 15 USC §1635(b) provides, in relevant part:



                  When an obligor exercises his right to rescind under subsection (a):

                  -- He is not liable for any finance or other charge, any security interest given by the
                  obligor becomes void upon such a rescission.

                  -- Within twenty (20) days after receipt of a notice of rescission, the creditor shall
                  return to the obligor any money or property given as earnest money or down
                  payment, or otherwise, and shall take any action necessary or appropriate to reflect
                  the termination of any security interest created under the transaction.

                  -- If the creditor has delivered any property on the obligor, the obligor may retain
                  possession of it. Upon the performance of the creditor's obligation under this
                  section, the obligor shall tender the property to the debtor (emphasis added). The
                  procedures prescribed by this subsection shall apply except when otherwise ordered



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                 by a court.

                 Mr. Homeowner's rescission was valid for any of the numerous reasons detailed in the above

          memorandum. As a consequence of the automatic voiding of Street' mortgage, it has no basis for

          the threatened foreclosure auction sale, nor for preventing the prospective US Trust refinancing. 15

          USC §1635(b), Regulation Z, §226.23(d)(1)).



                                                    IV.Conclusion


                 Given the undisputed violations of the TILA material disclosure requirements shown on the

          face of the documents before the court, there is more than ample evidence on the record for the court

          to make a summary determination that the rescission is valid. As a matter of law, the strict liability

          rule of TILA compels a finding that the rescission was valid and that Street has no secured interest

          in the Homeowner home. Accordingly, the plaintiff respectfully requests that the court enter a

          preliminary injunction in the form contained in the Complaint.


                                                                                       Respectfully submitted

                                                                                             John Homeowner
                                                                                               By his attorney
          Date: January 5, 1993




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          8.4     Plaintiff's Motion for Partial Summary Judgement

                                     UNITED STATES BANKRUPTCY COURT
                                    FOR THE DISTRICT OF MASSACHUSETTS
                                             EASTERN DIVISION

          In Re:
          John Homeowner
                                                                                                         Debtor
          John Homeowner
                                                                                                        Plaintiff
          [vs.]

          Street Financial Services, Inc.
                                                                                                     Defendant

          Chapter 13
          Case No. 93-XXXXX-ABC
          Adversary Proceeding No. 94-XXXX


                       PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT
                  The plaintiff, John Homeowner moves for Partial Summary Judgment on his claim that

          the defendant, Street Financial Services, Inc., violated the federal and state truth in lending acts,

          15 USC §1601 et seq, and M.G. L. c. 140D, §1 et seq., (hereinafter TILA) by failing to accurately

          disclose the finance charges in a November 29, 1990 mortgage loan transaction and by failing to

          honor Mr. Homeowner's rescission notice.



                  1. The plaintiff moves for partial summary judgment on five counts of the Verified

          Complaint. Each of the following counts concerns a charge imposed by Street which was not

          disclosed as a finance charge, in violation of TILA.

                  a.     Street required Mr. Homeowner to pay a two thousand nine hundred fifty four
                         ($2,954.00) dollar brokerage commission to The Easy Cash, Inc., a mortgage
                         broker which shared Street' address and which was run by the brother of Street's
                         president and sole shareholder. (Count VI).

                  b.     Street charged Mr. Homeowner a fee to purchase an amortization schedule for his
                         non-amortizing loan. (Count VIII).

                  c.     Street charged Mr. Homeowner a fee to record an assignment of the mortgage to a
                         third party. (Count XIII).




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                 d.      Street charged Mr. Homeowner a fee to "update title” after it had already charged
                         him a two hundred fifty ($250.00) dollar fee for "full title examination." (Count
                         XI).

                 e.      Street charged Mr. Homeowner an undisclosed portion of a fifty ($50.00) dollar
                         fee to record documents even though Street imposed separately itemized fees
                         which fully covered all its recording costs. (Count XII).

                 2. That these fees were imposed on Mr. Homeowner as a condition of or an incident to

          the extension of the loan at issue is not capable of dispute. All of the fees imposed and the

          conditions under which they were assessed are shown on Street' own correspondence and loan

          documents, attached hereto as Exhibits B through E [not reprinted infra].



                 3. These fees are finance charges as defined by TILA. Failure to accurately disclose the

          finance charge in a refinancing transaction in which a security interest is taken in the consumer's

          home entitles the borrower to rescind the loan. 15 USC §1635.



                 4. Mr. Homeowner rescinded the transaction at issue via correspondence dated January

          22, 1993. A copy of Mr. Homeowner's rescission notice is attached to this motion as Exhibit F

          [not reprinted infra].



                 5. Street refused to honor Mr. Homeowner's rescission notice. A copy of Street'

          disavowal of Mr. Homeowner's rescission notice is attached to this motion as Exhibit G [not

          reprinted infra].



                 6. To prevail on this motion the plaintiff need only show that the above described charges

          were finance charges as defined by TILA, that they were not disclosed as such on the required

          disclosure statement, and that he rescinded the transaction.



                 The plaintiff has submitted an affidavit in support of his motion, attached hereto as

          Exhibit A [not reprinted infra]. In addition, the plaintiff has submitted a memorandum in




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          support of his motion, and an affidavit of counsel regarding the authenticity of other documents

          submitted herewith as Exhibits.



                   Wherefore, the plaintiff respectfully requests that this court enter summary judgment in

          his favor, and award the relief requested in the Verified Complaint, in the form of proposed

          judgment attached hereto.



                                                                                      Respectfully submitted



                                                                                           John Homeowner

                                                                                             By his attorneys



          Date: September 6, 1994



          8.5      Memorandum in Support of Plaintiff's Motion for Summary
                   Judgement

                                      UNITED STATES BANKRUPTCY COURT

                                    FOR THE DISTRICT OF MASSACHUSETTS

                                                 EASTERN DIVISION

          In Re:

          John Homeowner

                                                                                                      Debtor

          John Homeowner

                                                                                                     Plaintiff

          [vs.]

          Street Financial Services, Inc.

                                                                                                   Defendant




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          Chapter 13

          Case No. 93-XXXXX-ABC

          Adversary Proceeding No. 94-XXXX



                         PLAINTIFF'S MEMORANDUM IN SUPPORT OF MOTION

                                    FOR PARTIAL SUMMARY JUDGMENT



                                                     Introduction


                         Pursuant to the federal and state Truth in Lending Acts (15 USC §1601 et seq;

          M.G.L. c. 140D §1 et seq., hereinafter referred to as TILA)14, the plaintiff, John Homeowner,

          seeks summary judgment on his claim that he validly rescinded a second mortgage loan made by

          the defendant, Street Financial Services, Inc. ("Street"). The defendant Street filed a chapter 7

          bankruptcy petition on April 7, 1994. The Trustee has employed the firm of Sharp and Sharp as

          special counsel to defend this action. Summary judgment is appropriate because the TILA

          violations which gave rise to at least five of Mr. Homeowner's nine independent grounds for

          rescission are contained on the face of Street' own correspondence and loan documents. As such

          these documents are not subject to genuine dispute, and the material facts they contain establish

             14
                The Massachusetts version of TILA, the Consumer Credit Cost Disclosure Act
          ("CCCDA"), is virtually identical to the federal law with respect to required disclosures and
          remedies. As such, the Court of Appeals in Bizier v. Globe Financial Services, Inc., 654 F.2d 1,
          2 (1st Cir. 1981) treated the two laws (and the body of case law interpreting them) essentially as
          one, concluding that "this interplay [between the state and federal acts] will with minor
          exceptions not require separate analysis of the two acts and we will rely where they do not differ
          on prior analysis of the more widely considered federal act." Accordingly, for brevity and clarity,
          the two acts will be treated as one throughout this brief, and simply referred to as TILA, except
          where the context requires otherwise. For the same reasons, citations will be limited to the
          federal act, its implementing Regulation Z (12 CFR §226.1 et seq.), and Official Staff
          Commentary of the Federal Reserve Board, which further interprets the Act. An addendum
          outlining the parallel citations of the federal and state laws and regulations is attached to this
          memorandum.




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          that Mr. Homeowner's rescission was valid as a matter of law.

                  Each of the five charges enumerated below, which Street required Mr. Homeowner to pay

          as a condition of closing the loan, are finance charges as defined by TILA. However, Street did

          not disclose them as such, thereby inaccurately disclosing to Mr. Homeowner the true cost of his

          loan.



                  1.     Street required Mr. Homeowner to pay a two thousand nine hundred fifty four
                         ($2,954.00) dollar brokerage commission to The Easy Cash, Inc., a mortgage
                         broker which shared Street' address and which was run by the brother of Street'
                         president and sole shareholder. (Count VI).

                  2.     Street charged Mr. Homeowner a fee to purchase an amortization schedule for his
                         non-amortizing loan. (Count VIII).

                  3.     Street charged Mr. Homeowner a fee to record an assignment of the mortgage to a
                         third party. (Count XIII).

                  4.     Street charged Mr. Homeowner a fee to "update title” after it had already charged
                         him a two hundred fifty ($250.00) dollar fee for "full title examination." (Count
                         XI).

                  5.     Street charged Mr. Homeowner an undisclosed portion of a fifty ($50.00) dollar
                         fee to record documents even though Street imposed separately itemized fees
                         which fully covered all its recording costs.15 (Count XII).


                  A finding that Mr. Homeowner's rescission was valid correspondingly means that Street

          violated TILA by failing to honor that rescission notice. (Count XVII) 15 USC §1635.

             15
                Street also committed the following violations of TILA, which are not apparent on the face
          of the documents and so are disputed by Street. Accordingly, they are not subject to
          determination on summary judgment.

                  Street failed to provide Mr. Homeowner with the Notice of Right to Cancel required by
          TILA until at least six days after the loan closing. Affidavit of John Homeowner, ¶13, attached
          to the Motion for Summary Judgment as Exhibit A.

                   Street failed to provide Mr. Homeowner with the Disclosure Statement required by TILA
          until at least six days after the loan closing. Exhibit A, Homeowner Affidavit, ¶13.

                   Street required Mr. Homeowner to pay an unreasonable and non-bona fide attorney's fee
          to its closing attorney, who also shared Street' address.

                 Street required Mr. Homeowner to pay an unreasonable and non-bona fide "document
          preparation fee" to its attorney.




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          Accordingly, on summary judgment Mr. Homeowner also prospectively seeks an order directing

          Street' forfeiture of its conditional entitlement to tender of the net loan proceeds in accordance

          with TILA's express creditor forfeiture provision. 15 USC §1635(b).



                                                  Statement of the Case

                  On November 29, 1990, Street ostensibly loaned John Homeowner thirty-one thousand

          ($31,000.00) dollars. However, of that thirty one thousand dollars, eight thousand and fifteen

          ($8,015.00) dollars was immediately retaken by Street, its attorney, and the Easy Cash. Before

          Mr. Homeowner left the loan closing, twenty-six percent of what he thought he was borrowing

          was recaptured by these three entities, who all shared the same address.

                  Mr. Homeowner only dealt with Street because he was assured that if he proved he was a

          good borrower by making payments on time for the two year term of his note, then instead of

          calling the note and demanding the immediate return of that thirty one thousand dollars, Street

          would make him a long term, low interest rate loan. Mr. Homeowner kept up his end of the

          bargain, making regular payments on time for two years. But Street refused to even discuss the

          promised new loan, called the note and attempted to foreclose on Mr. Homeowner's home.

          Exhibit A, Homeowner Affidavit.

                  The Attorney General has alleged in a lawsuit that Street and its mortgage broker, Easy

          Cash, engaged in these types of lending practices on a regular basis, preying on substantial

          numbers of unsophisticated Massachusetts consumers by deceptively inducing them to enter into

          short term, high interest rate loans packed with exorbitant fees, most notably thousands of dollars

          paid to Easy Cash from the Street loan proceeds for alleged "consulting fees." See Exhibit D to

          the Adversary Complaint, Complaint of the Attorney General in Commonwealth v. Easy Cash,

          Inc., Street Financial Services, Inc., and William Black, Suffolk Superior Court, Civil Action No.

          91-xxxx, and accompanying consumer affidavits filed therewith.

                  It is for these reasons that Mr. Homeowner rescinded his Street loan and is now seeking

          final relief from this court to enforce his rescission rights.



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                           Statement of Facts as to Which there is No Genuine Dispute

                 1. The Plaintiff, John Homeowner, is a natural person who resides at 10 Joseph Street,

          Boston, Massachusetts. Verified Complaint, ¶3.

                 2. Mr. Homeowner has occupied this home with his family of six for sixteen years.

          Verified Complaint, ¶3.

                 3. Mr. Homeowner is a debtor in this Court, having filed a petition pursuant to Chapter 13

          of the Bankruptcy Code on October 27, l993.

                 4. Defendant, Street Financial Services, Inc. is a corporation with a principal place of

          business at 100 Natick Road, Worcester, MA. Answer, ¶4.

                 5. Mr. Homeowner applied through The Easy Cash Inc. ("Easy Cash") for a second

          mortgage loan on his home. Exhibit A, Homeowner Affidavit, ¶3; Verified Complaint, ¶8,9.

                 6. Easy Cash submitted Mr. Homeowner's loan application to Street. Exhibit A,

          Homeowner Affidavit, ¶¶4, 7; Verified Complaint, ¶¶10-13.

                 7. Easy Cash, now defunct, was a mortgage broker, which collected a broker's fee or

          "consulting fee" drawn from the proceeds of a loan Street made to Mr. Homeowner on November

          29, 1990. Exhibit D, Truth in Lending Disclosure Statement.

                 8. Street' sole shareholder, officer and director, Susan Black is the sister of William

          Black, the sole shareholder, officer and director of Easy Cash during its existence. The siblings,

          at all times relevant hereto, had the same address, 100 Natick Road, Worcester, Massachusetts.

          Answer, ¶17.

                 9. Mr. Homeowner did not sign any loan brokerage or commission agreement with Easy

          Cash at any date prior to the closing. Exhibit A, Homeowner Affidavit, ¶8.

                 10. On or about November 29, 1990, Street loaned Mr. Homeowner thirty-one thousand

          ($31,000.00) dollars, secured by a second mortgage on his home. Answer, ¶14.

                 11. The loan terms were as follows:

                 a.      Upwardly Adjustable Interest rate: The note rate was 15.99% per annum for the
                         first three months of the loan, then was to be adjusted to the greater of 18% per
                         annum or the Bank of New England prime rate plus ten percentage points. The



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                         loan could only be adjusted upward at the first change date. The rate could not
                         decrease, and had to increase by at least two points, to 18%, after the first three
                         months. The loan did contain a 36% percent per annum rate ceiling. At the
                         change date the rate was increased to nineteen (19%) per annum. The annual
                         percentage rate was disclosed as 26.25%.16 A copy of the Note is attached to the
                         Motion for Summary Judgment as Exhibit B.

                  b.     Monthly Payments: The loan was non-amortizing, payments were of interest
                         only. Monthly payments for the first three months were four hundred thirteen
                         dollars and eight cents ($413.08). Payments thereafter were of four hundred
                         ninety dollars and eighty three cents ($490.83).

                  c.     Loan term: Two years. A balloon payment of the entire principal and any accrued
                         interest was due November 28, l992.

                  d.     Points: Street collected and retained an origination fee of one percentage point,
                         three hundred ten ($310.00) dollars.

                  e.     Rate Buydown: Street collected and retained two thousand nine hundred eighty
                         one ($2,981.00) dollars as a "rate buydown."

                  f.     Broker's Fees: Street required that Mr. Homeowner pay Easy Cash a brokerage
                         fee as a term and condition of making this loan to him. A copy of a November 6,
                         1990 letter from Susan Black to John Homeowner, setting out this condition, is
                         attached to the Motion for Summary Judgment as Exhibit C. Street collected two
                         thousand nine hundred and fifty four ($2,954.00) dollars of the loan proceeds and
                         disbursed them to Easy Cash, as a "Financial Consultant."


                  12. Street made more than six mortgage loans to consumers in 1990.

                  13. Mr. Homeowner used the funds from the Street loan to pay off some consumer debt

          and to make repairs to his house. Exhibit A, Homeowner Affidavit, ¶12; Exhibit E, Loan

          Accounting and Disbursement Authorization.

                  14. At the closing, Street had Mr. Homeowner sign a document entitled "Disclosure

          Statement." Answer, ¶33. A copy of this document is attached to the Motion for Summary

          Judgment as Exhibit D.

                  15. At the closing, Street had Mr. Homeowner sign a document entitled "Loan

          Accounting and Disbursement Authorization." A copy of this document is attached to the Motion

          for Summary Judgment as Exhibit E.


             16
              Since the interest rate was increased by three points after only three months, the effective
          APR for all but the first three months of the loan was in excess of 29%.




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                 16. Street also imposed the following charges upon Mr. Homeowner at the closing,

          deducting each from the loan proceeds:



                 a.         twenty five ($25.00) dollars for "Amortization Schedules;"

                 b.         ten ($10.00) dollars for the cost of recording an "Assignment of Mortgage;"

                 c.         two hundred fifty ($250.00) dollars for a "Full Title Examination;"

                 d.         fifty ($50.00) dollars upon Mr. Homeowner for "Updating of Title; Recording of
                            Documents;" and

                 e.         twenty five ($25.00) dollars for recording its mortgage.


          All of these charges are shown on Exhibit E.



                 17. On November 30, 1990, Street recorded its mortgage on Mr. Homeowner's home.

                 18. Street recorded an Assignment of this mortgage on December 27, 1990. The

          obligation was assigned to Third Mortgage Corp.

                 19. The only document recorded in connection with this transaction to perfect Street

          security interest was the mortgage, for which a separate $25 fee was imposed by the Register of

          Deeds. G.L. c. 262, §38.

                 20. Mr. Homeowner regularly made all payments on the loan. Exhibit A, Homeowner

          Affidavit, ¶14.

                 21. In mid-summer, l992, with the two year balloon coming due, Mr. Homeowner sought

          to convert the Street loan to a long term loan. Exhibit A, Homeowner Affidavit, ¶14.

                 22. Street informed Mr. Homeowner that it would not make such a loan. Exhibit A,

          Homeowner Affidavit, ¶14; see also Answer ¶75.

                 23. On or about January 22, 1993 Mr. Homeowner, through his attorney, notified Street

          that he was exercising his right to rescind the transaction pursuant to 15 U.S.C. §1635 and

          M.G.L. c. 140D, §10. A copy of the letter by which Mr. Homeowner exercised his rescission

          rights is attached to the Motion for Summary Judgment as Exhibit F. See Answer, ¶78.




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                 24. Street refused to honor Mr. Homeowner's rescission notice. A copy of the letter by

          which Street disavowed the rescission notice is attached to the Motion for Summary Judgment as

          Exhibit G.

                 25. Attempts to reach a non-adversarial settlement of the rescission claim encompassed

          the following nine months, during which Mr. Homeowner sought alternative financing. During

          this time, Street commenced foreclosure proceedings.

                 26. In May, 1993, Mr. Homeowner was selected in a lottery held by USTrust Company as

          a prospective recipient of refinancing monies to be used to save his home from Street' threatened

          foreclosure. Exhibit A, Homeowner Affidavit, ¶¶15, 16.

                 27. On August 12, 1993 USTrust issued Mr. Homeowner a loan commitment for forty

          five thousand ($45,000.00) dollars. A copy of this letter is attached to the Motion for Summary

          Judgment as Exhibit H.

                 28. This USTrust loan was sufficient to pay off Mr. Homeowner's first mortgage (of

          approximately ten thousand ($10,000.00) dollars) as well as the principal amount of the Street

          second mortgage of thirty one thousand dollars. Exhibit A, Homeowner Affidavit, ¶18.

                 29. The USTrust loan commitment locked in a fixed interest rate of six and one-eighth

          (6.125%) percent. Exhibit H.

                 30. Mr. Homeowner proposed to pay Street $31,000 out of the prospective USTrust loan

          proceeds. Exhibit A, Homeowner Affidavit. Exhibit A, Homeowner Affidavit, ¶¶19, 20.

                 31. A loan closing was scheduled to take place on or about October 20, l993. Exhibit A,

          Homeowner Affidavit, ¶21.

                 32. When Street' payoff communication was transmitted to USTrust it contained a

          demand of almost forty two thousand ($42,000.00) dollars. This demand included over ten

          thousand ($10,000.00) dollars of charges in addition to loan principal for ostensibly accrued

          interest and legal fees. The demand was accompanied by a condition that Mr. Homeowner

          release his rescission claim and all other claims he had against Street. Answer, ¶82. A copy of

          the Street payoff communication and demand for release, addressed to USTrust's settlement




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          agent, is attached to the Motion for Summary Judgment as Exhibit I.

                  33. The Street demand exceeded by seven thousand ($7,000.00) dollars the USTrust

          proceeds which were to be available. Exhibit A, Homeowner Affidavit, ¶23.

                  34. Mr. Homeowner did not have the seven thousand ($7,000.00) dollars in cash which

          would have been necessary to allow a closing. Exhibit A, Homeowner Affidavit, ¶2.

                  35. When the closing was aborted, Street then sought to press ahead with a foreclosure

          auction sale of Mr. Homeowner's home, scheduled for October 28, 1993.

                  36. On October 27, 1993 Mr. Homeowner filed this chapter 13 proceeding, on an

          emergency basis, to save his home.


                                                 Prior Proceedings

                  This adversary proceeding was filed on January 6, 1994. On January 14, 1994 the Court

          issued a preliminary injunction requiring the discharge of Street's second mortgage to allow the

          closing of the prospective USTrust first mortgage loan. Pursuant to the Court's order, the parties

          entered into a Stipulation and Escrow Agreement filed with and approved by the Court, the terms

          of which required that the net proceeds of the USTrust closing be held in escrow pending a final

          determination by the Court of the adversary proceeding. Copies of the Court's Order, the

          Stipulation and the Escrow Agreement are attached to the Motion for Summary Judgment as
          Exhibits J, K, and L respectively.

                  The USTrust refinancing occurred on March 17, 1994. The sum of $34,847.73 was

          placed in escrow. On April 7, 1994, Street filed its Chapter 7 bankruptcy petition.17 On August

          11, 1994 Judge Boroff granted Mr. Homeowner's motion for relief from stay in order to conclude

          this adversary proceeding.


             17
                For inexplicable reasons, Street listed Mr. Homeowner without an address on its creditor
          matrix. As a consequence, Mr. Homeowner never received any notice of the chapter seven filing
          from Street until his counsel specifically requested Street's bankruptcy schedules. Mr.
          Homeowner learned of the Street chapter seven filing only through courtesy correspondence
          provided to his counsel.




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                                                       Argument


                                    Summary Judgment Is Proper In This Case
                 The debtor is entitled to summary judgment where the "pleadings, depositions, answers to

          interrogatories, and admissions on file, together with the affidavits, if any, show that there is no

          genuine issue as to any material fact and that the moving party is entitled to judgment as a matter

          of law." Fed. R. Civ. P. 56(c) (made applicable to adversary proceedings in the Bankruptcy Court

          by Rule 7056 of the Federal Rules of Bankruptcy Procedure). Anderson v. Liberty Lobby, Inc.,

          477 U.S. 242 (1986); Committee for the First Amendment v. Campbell, 962 F.2d 1517 (10th Cir.

          1992); U.S. v. Nanlo Inc., 519 F.2d 723 (1st Cir. 1981). A motion for summary judgment may

          be granted in whole or in part as to the various issues in the case. Weva Oil Corp. v. Belco

          Petroleum Corp., 68 F.R.D. 663 (D. W.Va. 1975). Based on the undisputed facts set forth

          above, Mr. Homeowner is entitled to judgment as a matter of law on his truth in lending claims.



                           The Truth in Lending Act is Designed to Protect Consumers
                                       and Achieves its Remedial Purpose
                                      Through a System of Strict Liability
                 The federal Truth in Lending Act was enacted in 1968 to regulate the disclosure of the
          terms of consumer credit transactions and to "aid the unsophisticated consumer so that he would

          not be easily misled as to the total costs of financing." Thomka v. A.Z. Chevrolet, Inc., 619 F.2d
          246, 248 (3d Cir. 1980); Mourning v. Family Publications Service, Inc., 411 U.S. 356, 363-69,

          93 S.Ct. 1652, 1657-60, 36 L.Ed.2d 318 (1973). By requiring a set of uniform disclosures of

          credit terms, the Act allows consumers to compare different financing options and their costs. 15

          U.S.C. §1601; Ford Motor Credit v. Millhollin, 444 U.S. 555, 559 (1980). Prior to its enactment,

          consumers had no easy way to compare various credit options because creditors were not

          required to use a uniform method of calculating interest.

                 TILA is a remedial statute designed to protect consumers, who are not on an equal footing

          with creditors, either in bargaining for credit terms or in knowledge of credit provisions. Bizier

          v. Globe Financial Services, Inc., 654 F.2d 1 (lst Cir. 1981); Mechanics Bank of Worcester v.



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          Killeen, 377 Mass. 100 (1979); Shepard v. Finance Associates of Auburn, Inc., 355 Mass. 182

          (1974). It was thought that "through TILA, Congress [could] remedy the 'divergent and often

          fraudulent practices by which credit customers were apprised of the terms of the credit extended

          to them.'" Smith v. Fidelity Consumer Discount Co., 898 F.2d 896, 898 (3d. Cir. 1988). As such,

          it is to be liberally construed in favor of consumers. Shepard, 355 Mass. 182; citing N.C. Freed

          Co. Inc. v. Governors of Fed. Reserve Sys., 473 F.2d 1210, 1214 (2d Cir. 1973), cert. denied, 414

          U.S. 827 (1973); Thomka v. A.Z. Chevrolet, Inc., 619 F.2d 246, 248 (3d Cir. 1980).

                  To encourage compliance, TILA violations are measured by a strict liability standard -

          "strict liability in the sense that absolute compliance is required and even technical violations will

          form the basis for liability." Shepeard v. Quality Siding & Window Factory, Inc., 730 F. Supp.

          1295, 1299 (D. Del. 1990); In re McElvany, 98 B.R. 237, 240 (Bankr. W.D. Pa. 1989). This

          means that "technical or minor violations of TILA, or Reg. Z, as well as major violations impose

          liability on the creditor and entitle the borrower to rescind [the loan]." Smith v. Wells Fargo

          Credit Corp., 713 F. Supp. 354, 355 (D. Ariz. 1989); Jackson v. Grant, 890 F.2d. 118, 120 (9th

          Cir. 1989); Semar v. Platte Valley Fed. S & L Assoc., 791 F.2d 699, 704 (9th Cir. 1986).

                  A creditor who fails to comply with TILA in any respect is liable to the consumer under

          the statute, regardless of the nature of the violation or the creditor's intent. Thomka v. A.Z.

          Chevrolet Inc., 619 F.2d 246, 249-50 (3d Cir. 1980). The first circuit court of appeals has

          unequivocally stated that any violation of TILA, regardless of the technical nature of the

          violation, must result in a finding of liability against the lender. Bizier v. Globe Financial

          Services, Inc., 654 F.2d 1, 3 (lst Cir. 1981). Because TILA is a strict liability statute, it is no

          defense to TILA that the consumer was not misled or deceived by the violation, did not rely on

          the violation, or was not injured. Griggs v. Provident Consumer Discount Co., 680 F.2d 927,

          932-33 (3d Cir.), vacated on other grnds, 459 U.S. 56, 103 S.Ct. 400, 74 L.Ed.2d 225 (1982).

          See also Porter v. Mid-Penn Consumer Discount, 961 F. 2d 1066 (3rd Cir. 1992); In re Norris,

          138 B.R. 467 (E.D. Pa. 1992).

                  This strict compliance rule is what makes TILA so effective. "This strict interpretation of




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          the TILA has largely been responsible for the TILA's success in achieving widespread

          compliance with its requirements." In re Brown, 106 B.R. 852, 857 (Bankr. E.D. Pa. 1989).



           The Rescission Remedy Protects Consumers and Provides Congress With a Self-Enforcement
          Mechanism to Ensure the Act's Viabilit


                  TILA subjects violators to claims for statutory damages, actual damages18 and attorneys'

          fees for disclosure violations. 15 U.S.C. §1640. In addition, where a non-purchase money

          security interest is taken in the borrower's home, the borrower has the unqualified right to

          "rescind," or cancel the loan for three days after the transaction. A creditor's failure to accurately

          make any of the five "material disclosures" gives the borrower an extended19 right to rescind the
          transaction. 15 USC §1635. The "material disclosures" are the annual percentage rate (APR),

          the finance charge, the amount financed, the total of payments, and the payment schedule. 15

          USC §1602(u), Regulation Z, §226.23(a)(3), n.48.

                  When a consumer rescinds a loan, TILA requires the creditor to perform its statutory

          obligation (i.e., discharge the mortgage and return all monies paid on the loan) before the

          borrower's duty to return the net proceeds of the loan is engaged. As a result, "because rescission

          is such a painless remedy under the statute, placing all burdens on the creditor, it acts as an

          important enforcement tool, insuring creditor compliance with TILA disclosure requirements."

          Williams v. Homestake Mortgage Company, 968 F. 2d 1137, 1140 (11th Cir. 1992).

                  The strength of this protection reflects the strength of Congress' desire to ensure that

          homeowners are informed of the true cost of their mortgage loans. The House of

          Representatives report accompanying TILA provides that:



             18
                Actual damages include undisclosed finance charges. In Re Russell, 72 B.R. 855, 864
          (Bkrtcy. E.D. Pa. 1987).

             19
               This right extends for three years under the federal statute (15 USC §1635), four years
          under the state law (G.L. c. 140D, §10).




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                  ... [f]or the relatively unsophisticated consumer, particularly those of modest
                  means, [TILA] . . . will provide their only protection against unscrupulous
                  merchants or lenders. . . . These provisions not only will protect the consumer,
                  but will further protect the honest businessman from unethical forms of
                  competition engaged in by some unscrupulous creditors who prey upon the poor
                  through deceptive credit practices." H. Rep. No. 1040, 90th Cong., 1st Sess. 18,
                  reprinted in 1968 U.S. Code Cong. & Admin. News 1975-76.

                  TILA was amended in 1980, at least partially in response to creditor complaints that it

          was unfair to apply a strict liability standard, especially to rescindable transactions, without some

          tolerance for error and clear guidance as to what was and was not a rescindable violation. The

          "material disclosures" were added to the Act as part of TILA's 1980 amendment in order to put

          creditors "in a better position to know whether a consumer may properly rescind a transaction."

          S. Rep. No. 368, 98th Cong. 2d Sess. at 29, reprinted in 1980 U.S. Code Cong. and Admin. News

          236, 264.

                  Here, each of the five bases for rescission involve undisclosed finance charges. One of

          the ways in which the amended Act helped creditors evaluate whether a loan could be rescinded

          was Regulation Z's addition of an error tolerance for finance charge disclosures. The old

          Regulation Z contained no tolerances within which a creditor could safely err in computing a

          finance charge, and many courts took the view that any understatement of the finance charge was

          a material nondisclosure. The amended Regulation Z provides a ten dollar error tolerance. Reg.

          Z §226.18(d), n. 4120

            Accordingly, "[a]ny discrepancy of more than $10 above or below the true finance charge is

          considered inaccurate in a transaction involving more than $1,000..." and entitles the borrower to

          rescind. Abel v. Knicherbocker Realty Trust, 1994 U.S. Dist. LEXIS 2946 *5 (D.Md. 1994).



             Any Finance Charge Disclosure Error of More than Ten Dollars Entitles the Borrower to
          Rescind the Loan


                  The Supreme Court has directed the courts to unwaveringly follow the direction

             20
               There is a similar tolerance of one eighth of one percent for the APR. Regulation Z,
          §226.22(a)(2).




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          contained in Regulation Z. Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 100 S. Ct. 789, 63

          L.Ed.2d 22 (1980)(Courts should give high degree of deference to Federal Reserve Board

          interpretation of TILA as contained in Regulation Z and the Official Staff Commentary. This

          interpretation is dispositive unless "demonstrably irrational."). Accordingly, in cases involving

          the non-disclosure of finance charges the courts have uniformly held that the misdisclosure of

          even nominal fees, "like any technical but clear violation of TILA,... trigger[s] the full panoply of

          remedies available to the consumer under TILA when a creditor understates the finance charge."

          In re Brown, 106 B.R. 852, 861 (Bankr. E.D. Pa. 1989).21

                  The most recent federal articulation of this rule of law is contained in Rodash v. AIB

          Mortgage Co., 16 F. 3d 1142 (11th Cir. 1994). In Rodash, the 11th Circuit Court of Appeals

          held that the failure to disclose a twenty-two ($22.00) dollar Federal Express fee as part of the

          finance charge violated TILA as a matter of law and thereby entitled the plaintiff to rescind the

          loan. The court explained that the Federal Express fee was "undoubtedly part of the finance

          charge" because it met Regulation Z's definition and did not meet any of its exclusions. The

          court noted that its finding was "buttressed" by the public policy behind TILA, which is to

          prevent lenders from burying "an costs of credit" and thereby hindering "consumers in comparing


             21
                 Similarly, the Courts of the various jurisdictions have consistently held that debtors are
          entitled to rescind their loans when other material disclosures are not made properly, regardless
          of the dollar amount of the inaccuracy or the ostensibly technical nature of the offense. The
          caselaw on the right to rescind for seemingly minor violations is too great to be included in the
          body of this brief. See, e.g., Shepeard v. Quality Siding & Window Factory, Inc., 730 F. Supp. at
          1304 (rescission based on lender's failure to disclose payment schedule in writing upheld despite
          admission of oral disclosure); Smith v. Wells Fargo Credit Corp., 713 F. Supp. at 356 (creditor
          failed to provide debtor with a new notice of right to rescind when the original loan documents
          were amended to correct clerical error); Semar v. Platte Valley Fed. S & L Assoc., 791 F.2d 699,
          704, (9th Cir. 1986)(debtor could rescind loan because the notice of right to rescind did not list
          the actual date of expiration, but read "three business days after July 16" instead); Reynolds v. D
          & N Bank, 792 F.Supp. 1035, 1038 (E.D. Mich. 1992); New Maine Nat. Bank v. Gendron, 780
          F.Supp. 52, 55 (D.Me. 1991); Mayfield v. Vanguard Sav. & Loan Ass'n, 710 F.Supp. 143, 145
          (E.D. Pa 1989)(The Courts in each allowed rescission because the expiration date for the Notice
          of Right to Rescind was left blank); Nichols v. Mid-Penn Consumer Discount Co., 1989 U.S.
          Dist. Lexis 4796 at 6; Mayfield v. Vanguard, supra. at 146; In re Abele, 77 B.R. 460, 465 (Bankr.
          E.D. Pa. 1987)(Security interests held by creditors in the property of debtors were not adequately
          disclosed). See also Memorandum in Support of Motion for Preliminary Injunction, at p. 15, for
          further citations.




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          credit terms and making the best informed decision on the use of credit." Id. at 1148 (emphasis

          added).



                    The following cases illustrate uniform application of this rule of law. In all of these

          cases, the debtor was held entitled to rescind the loan based on the undisclosed finance charge.

          Plaintiff's counsel are aware of no relevant cases to the contrary.



                    !Brodo v. Bankers Trust Co., 847 F. Supp. 353,358 (E.D. Pa. 1994). Lender charged
          recording fee of $35 to borrower, although actual recording fee was only $25. "The $10

          overcharge in the amount financed therefore constitutes a material TILA violation which,

          standing alone, entitled plaintiff to rescind the transaction."

                    !Steele v. Ford Motor Credit Company, 783 F.2d 1016, 1018 (11th Cir. 1986). Lender
          failed to disclose unearned interest of $24 as a finance charge.

                    !In re Brown, 106 B.R. 852, 859 (Bankr. E.D. Pa. 1989). Lender failed to disclose a $25
          mortgage assignment fee as a finance charge.

                    !Cheshire Mortgage Service, Inc. v. Montes, 223 Conn. 80, 99-100 (1992). Lender
          failed to disclose a $32.50 mortgage assignment fee as a finance charge.

                    !Therrien v. Resource Financial Group, Inc, 704 F. Supp. 322, 327 (D.N.H. 1989).
          Lender failed to disclose double charge of $56 for recording and discharge fees.

                    !Harris v. Tower Loan of Mississippi, Inc., 609 F.2d 120, 122 (5th Cir. 1980). Lender
          failed to disclose a $68 fire insurance fee as a finance charge.

                    !In re Steinbrecher, 110 B.R. 155, 162 (Bankr. E.D. Pa. 1990). Lender failed to disclose
          a $165 fee for fire insurance as a finance charge.22

             22
                 Cf. Malfa v. Household Bank, FSB, 825 F. Supp. 1018 (S.D. Fla. 1993)( no rescindable
          violation where lender itemized and disclosed fees which were prescribed by law, but on the
          wrong form. The lender itemized the fees on the HUD - 1 Settlement Statement but not on the
          TILA disclosure statement. The court found that disclosure on the wrong form in this case
          amounted to only a technical violation of TILA. Although the Malfa court did not specifically
          cite them, this holding is supported by two TILA provisions: Regulation Z §226.17, n. 38 which
          states that recording fees may be disclosed separately from other disclosures, and Commentary



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                  This inviolate rule of law was most recently applied in Massachusetts in Mayo v. Key

          Financial Services, Inc., No. 92-6441-D, slip op. (Suffolk Superior Court June 22, 1994). A copy

          of the Mayo decision is attached as an addendum to this memorandum [not reprinted infra]. In

          Mayo the Superior Court granted summary judgment on the plaintiffs' rescission claims, based in

          part on the lender's failure to disclose $28.00 in assignment fees and overcharged recording fees

          as a finance charge. This most recent decision is simply the latest and most local reiteration of

          the unanimous and unequivocal rule of law on which TILA rescission claims for finance charge

          misdisclosure is based: the failure to disclose a finance charge of more than ten dollars entitles

          the borrower to rescind as a matter of law.23 See also Ford Motor Credit Co. v. Milhollin, 444

          U.S. 555 (1980). "There is no such thing as substantial compliance with the Truth in Lending

          Act, either you are or you aren't." Ranck v. Fulton Bank, 1994 WL 37744 *3 (E.D. Pa. 1994).



                                    Street Violated TILA By Failing To Disclose
                                     All Finance Charges To Mr. Homeowner
                  As set out by the Rodash court, the finance charge analysis is very simple. First,

          determine whether the charged fee fits into the general definition of a finance charge set forth in

          Reg. Z, §226.4(a). If it does, then determine whether it is nevertheless specifically excluded

          from the finance charge. Reg. Z, §§226.4 (c), (d), and (e). If the charge does not fall under any

          listed exclusion, it is a finance charge. Rodash, 16 F. 3d at 1148-49.




          §226.18 (o)-1 which provides that such information is sufficiently disclosed if it is included on a
          RESPA statement such as the HUD -1 form used in this case. See discussion in Mayo v. Key
          Financial Services, slip op. at 14-15.

             23
                This result is also compelled by elementary rules of statutory construction. Since the
          regulation specifically sets forth margins for error in disclosing the finance charge and APR,
          these explicit directives cannot be altered by any implied intent to the contrary. Expressio unius
          est exclusio alterius (expression of one thing is the exclusion of another). Sutherland, Statutory
          Construction §47.23 (4th Ed.).




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                  Regulation Z, § 226.4(a) defines the term finance charge as:

                  ...the cost of consumer credit as a dollar amount. It includes any charge payable
                  directly or indirectly by the consumer and imposed directly or indirectly by the
                  creditor as an incident to or a condition of the extension of credit. It does not
                  include any charge of a type payable in a comparable cash transaction.

          Charges imposed on the borrower by parties other than the lender must also be disclosed as part

          of the finance charge so long as they fit this definition. Rodash, 16 F. 3d at 1147-48 (Federal

          Express charges); Brodo v. Bankers Trust Co., 847 F. Supp. 353,357 (E.D. Pa. 1994)(lawyer's

          fees); First Acadiana Bank v. FDIC, 833 F. 2d 548, 550-51 (5th Cir. 1987)(lawyers' fees).

                  Regulation Z § 226.4(c)(7) sets forth special rules which apply only in secured real estate

          transactions to exclude certain charges from classification as finance charges. Only charges

          which are bona fide and reasonable in amount may be excluded. The specific exclusions are:



                  (i)     Fees for title examination, abstract of title, title insurance, property survey, and
                          similar purposes.

                  (ii)    Fees for preparing deeds, mortgages and reconveyance, settlement, and similar
                          documents.

                  (iii)   Notary, appraisal, and credit report fees.

                  (iv)    Amounts required to be paid into escrow or trustee accounts if the amounts would
                          not otherwise be included in the finance charge.24


                          Any exclusions from the finance charge should be narrowly construed. Equity

          Plus Consumer Finance and Mortgage Company Ltd. v. Howes, 861 P. 2d 214, 217 (N.M.

          1993). See also In re Celona, 90 B.R. 104 (Bankr. E.D. Pa. 1988). It is well-established that

          "only those charges specifically exempted from inclusion in the 'finance charge' by statute or

          regulation may be excluded from it." Buford v. American Finance Co., 333 F. Supp. 1243, 1247

          (N.D. Ga. 1971). See also, Abbey v. Columbus Dodge, Inc., 607 F.2d 85, 86 (5th Cir. 1979);

          Campbell v. General Finance Co., 523 F. Supp. 989, 992 (W.D.Va. 1981); Dalton v. Bob Neill

             24
                 Other specific exclusions are detailed in Reg. Z, §226.4(c), (d) and (e). These include, inter
          alia, application fees, late fees, sellers' points, certain insurance premiums and security interest
          taxes and fees prescribed by law and actually paid.




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          Pontiac, Inc., 476 F. Supp. 789, 794 (M.D.N.C. 1979); and Campbell v. Liberty Financial

          Planning, Inc., 422 F. Supp. 1386, 1388-89 (D. Neb. 1976).

                  Applying this analysis to the five enumerated charges which this motion challenges

          shows that they are each finance charges. Accordingly, Mr. Homeowner was entitled to rescind

          the loan on at least five discrete grounds, as described below.



                              Street Required that Mr. Homeowner Pay a Broker's Fee
                                  to Easy Cash as a Term and Condition of the Loan;
                    Therefore, Its Failure to Disclose this Fee as a Finance Charge Violates TILA


                  Street made payment of the Easy Cash broker's fee a term and condition of the loan.

          Exhibit C, November 6, 1990 letter.25 As such, it is a finance charge. Fees imposed on the

          borrower by the lender as an incident to or a condition of the extension of credit ... are finance

          charges. Reg. Z §226.4(a). The Official Staff Commentary (§226.4(b)-3) uses broker's fees as

          an illustrative example:

                  . . . charges imposed by someone other than the creditor are finance charges
                  (unless otherwise excluded) if the creditor requires the services of the third party.
                  For example:

                  A fee charged by a loan broker if the consumer cannot obtain the same credit
                  terms from the creditor without using the broker.

          Required broker's fees are not contained in any of Regulation Z's specific exclusions. As such,

          the Easy Cash broker's fee is a finance charge. When "the creditor in the transaction actually

          imposes and collects the broker's fees, or requires that the broker's services be utilized," the fee

          becomes a finance charge. In re Grigsby, 119 B.R. 479, 486 (Bankr. E.D.Pa. 1990), citing R.

          Rohner, The Law of Truth in Lending, ¶ 3.02[1][c], at 3-12. See also Hunter v. Richmond

          Equity, 1987 WL 109703 at 3 (N.D. Ala.) ("the broker's fee was a charge which was paid by the

          consumer and which was imposed by the creditor as an incident to the extension of credit"); In re


             25
                 Although Mr. Homeowner disputes having ever seen or received this letter prior to this
          litigation, as Street has submitted the document in opposition to Mr. Homeowner's rescission
          claim, for the purposes of this proceeding Street is estopped from denying its authenticity.




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          Dukes, 24 B.R. 404, 407-408 (Bankr. E.D. Mich 1982)("where an alleged broker performed no

          services for the borrower and had a very large volume of business with the lender, its fees must

          be included in the finance charge in that transaction."26



                  Street's failure to disclose the broker's fee as a finance charge entitled Mr. Homeowner to

          rescind the loan. This violation alone is sufficient to demonstrate that Mr. Homeowner's

          rescission was valid. As such, there is no legal or practical reason for further analysis -- Mr.

          Homeowner is entitled to a summary disposition in his favor on his rescission claim. The

          following violations only serve to further illustrate the validity of his claim.



                            Street Failed to Disclose as a Finance Charge its Twenty-Five
                                Dollar Fee for an Unnecessary Amortization Schedule


                         Street imposed a twenty-five dollar fee on Mr. Homeowner for the ostensible

          purchase of an amortization schedule. However, as Street made Mr. Homeowner an interest only

          (i.e., non-amortizing) loan, an amortization schedule would be at worst deceptive, and at best of

          absolutely no use to him. Mr. Homeowner did not request the schedule, nor in fact did he receive

          it. Exhibit A, Homeowner Affidavit. The charge was simply contained on the loan documents

          which were presented to him at the closing as a fait accompli.

                         Street cannot dispute that the loan is non-amortizing, nor that the twenty-five

          dollar fee was imposed, but instead has contended that it was independently assessed by its

          lawyer, and as such, cannot be attributed to the lender for purposes of TILA disclosure

          requirements. This position is completely at odds with the Act and Regulation Z.

                  The concept of the term "finance charge" under TILA has been detailed above. With

          respect to this particular type of finance charge, the same Federal Reserve Board Commentary


             26
                Cf. Johnson v. Fleet Finance, Inc., 4 F.3d 946, 949-950 (11th Cir. 1993)(fee held not
          finance charge because debtor sought assistance of broker and creditor did not require that
          services of the broker be utilized).




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          section which applied to the broker's fee demonstrates that this fee is a finance charge as well:


                  §226.4(a)(3). Charges by Third Parties.

                  ...[C]harges imposed on the consumer by someone other than the creditor are
                  finance charges (unless otherwise excluded) if the creditor requires the services of
                  the third party.

                  Like any other fees, fees charged by an attorney must be disclosed as part of the finance

          charge unless the fee falls under a specific statutory exclusion. Equity Plus, 861 P.2d at 21727;

          Mayo, slip op. at 5; Brodo, 847 F. Supp. at 357 (portion of lawyer's fees attributable to

          non-excludable work is finance charge); First Acadiana Bank v. FDIC, 833 F. 2d 548, 550-51

          (5th Cir. 1987) (required lawyers' fees).

                  Street cannot dispute that it required Mr. Homeowner to pay for attorney Lawyer's fees

          for services he performed on Street' behalf. As the regulation makes clear, the amortization

          schedule charge imposed by Mr. Lawyer is a finance charge "unless otherwise excluded," which

          it clearly is not. Even, assuming arguendo, that the fee were excluded, it would still have to be

          bona fide and reasonable. Without question, a fee for a useless document is not bona fide and

          reasonable.28 See Commonwealth v. DeCotis, 366 Mass. 234 (1974)(imposing charge for no
          useful service is unfair and deceptive practice in violation of c. 93A).

                  Even if Street had given Mr. Homeowner an amortizing loan, the cost of an amortization


             27
                The Equity Plus court held that because the evidence in that case did not establish that all
          of the attorney's fees were properly excludable from the finance charge, a TILA violation had
          occurred. Equity Plus, 861 P. 2d at 217.

             28
                  In drafting Regulation Z to implement the Truth in Lending Act, the Board was
                  concerned that the exclusion of closing costs from the finance charge might be
                  used by unscrupulous creditors to circumvent the requirements of the Act.
                  Accordingly, the phrase "reasonable in amount" was inserted in paragraph (e) of
                  section 226.4 in order to serve as a warning and barrier to those who otherwise
                  might entertain thoughts of evading disclosure requirements by inflating the
                  closing costs .... In this way, it will be possible to find those creditors who are
                  failing to make proper disclosures.

          Excerpts from FRB Letter of March 27, l969 by William C. McMartin, Jr., CCH Consumer
          Credit Guide, ¶30,009, Report 27-160 (February 6, l970).




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          schedule would still be a finance charge. In addition to the list of exclusions, TILA also includes

          a list of examples of finance charges. Reg. Z, §226.4(b). An amortization schedule falls

          squarely into the category of "costs of doing business" which the Commentary explicitly deems a

          finance charge "if the creditor separately imposes a charge on the consumer to cover [the] costs."

          Commentary §226.4(a)(2). The fee could also be construed to be a "service, transaction, activity

          [or] carrying charge" all defined as finance charges by TILA. 15 U.S.C. §1605(a)(2); 12 C.F.R.

          §226.4(b)(2). See Rodash, supra, at 114-48

                 Finally, on an amortizing loan, an amortization or other payment schedule would provide

          Street with information for use in its preparation of the disclosure statement. The Commentary

          to Regulation Z of TILA expressly states that "[f]ees for preparing a TILA disclosure statement"

          must be included in the finance charge. Commentary, §226.4(c)(7); Brodo, 847 F. Supp. at 357.

          A fee for an amortization schedule, which on an amortizing loan is "inextricably related to the

          preparation of the disclosure statement" is part of the finance charge. Cohen v. Regal Funding

          Corporation, No. 94-1158, slip op. (Bankr. E.D. Mass. August 22, 1994).


                                   Street Failed to Disclose as a Finance Charge
                            A Future Mortgage Assignment Recording Fee of Ten Dollars


                 Street imposed a ten ($10.00) dollar fee on Mr. Homeowner to pay for the cost of

          recording its assignment of his mortgage to a third party. This fee is also a finance charge.

          Regulation Z, §226.4(b)(6). See Mayo v. Key Financial Services, Inc., No. 92-6441-D, slip op.

          (Suffolk Superior Court June 22, 1994); In re Brown, 106 B.R. 852, 858-859 (Bankr. E.D. Pa.

          1989); Cheshire Mortgage Service v. Montes, 223 Conn. 80 (1992).


                 Regulation Z, §226.4(b)(6) provides that the finance charge must include:



                 Charges imposed on a creditor by another person for purchasing or accepting a
                 consumer's obligation, if the consumer is required to pay the charges in cash, as an
                 addition to the obligation, or as a deduction from the proceeds of the obligation.

                 In addition to the plain language of the regulation, the policy behind TILA compels the




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          conclusion that an assignment fee is a finance charge. In Cheshire Mortgage Service v. Montes,

          223 Conn. 80 (1992), the Supreme Court of Connecticut analyzed this policy in its examination

          of a high interest, short term loan, similar to Mr. Homeowner's loan, in which approximately

          fifteen (15%) percent29 of the proceeds were retained by the lender as prepaid charges. The

          lender charged the borrowers a thirty-two ($32.00) dollar fee for recording a future assignment of

          the mortgage which was not disclosed as a finance charge. Id. at 96. Engaging in a thoughtful

          analysis of the issue, the Court concluded that the lender's failure to disclose a mortgage

          assignment recording fee (whether the assignment was made or not) as a finance charge violated

          TILA's material disclosure requirements and entitled the borrowers to rescind the loan. In

          addition to citing the controlling language of Regulation Z, §¶226.4(a) and 226.4(b)(6), the Court

          reasoned that,


                   ...A fee for recording a future assignment of the mortgage does not relate to a
                   perfection of the security interest created by the mortgage. That security interest
                   was perfected when the mortgage itself was recorded....In the present case, the
                   potential assignment of the mortgage to another person would have been unrelated
                   to the loan made to the defendants, but would have related to a separate future
                   transaction between the plaintiff and a buyer of the mortgage loan. Our
                   conclusion is supported by 15 U.S.C. §1605(d) and (e), which exclude certain fees
                   from the definition of finance charge if they are fees "with respect to that
                   transaction." (Court's emphasis.) We conclude, therefore, that a fee charged to a
                   borrower to record the future assignment of a mortgage is a finance charge and
                   that since, in the present case, the charge was paid at the consummation of the
                   transaction, it was a prepaid finance charge.

          Id. at 99, 100.

                   Having found that the fee should have been disclosed as a finance charge, the court noted

          that although the amount of money involved was perhaps "minuscule," rescission was

          nevertheless mandated by TILA's strict liability standard.


                           Since this [mortgage assignment] charge was not included in the prepaid
                   finance charge, the overall finance charge was also underdisclosed. This resulted
                   in a material nondisclosure in violation of TILA and, therefore, the defendants had
                   the right to rescind the May, 1988 loan transaction. We recognize that
                   non-disclosure of a $55 fee may seem minuscule in the context of a $43,500 loan

             29
                  As contrasted with the twenty six percent retained here.




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                  transaction. "However, once the court finds a violation, no matter how technical,
                  it has no discretion with respect to the imposition of liability."

          Id., at 101-102, quoting Grant v. Imperial Motors, 539 F.2d 506, 510 (5th Cir. 1976).

                  Similarly, in Mayo v. Key Financial Services, Inc. , supra, the Massachusetts Superior

          Court unequivocally held that a ten ($10.00) dollar assignment recording fee is a finance charge

          as a matter of law. Adopting the reasoning of In re Brown and Cheshire, the Mayo court

          concluded that the plain language of the statute and commentary compels a finding that

          assignment fees are finance charges.30



                  The same conclusion is compelled in this case. Street required Mr. Homeowner to pay in

          cash from the loan proceeds a "[charge] imposed on [Street] by another person [namely, an

          assignee,] for purchasing...[Mr. Homeowner's] obligation...." Street thereby violated the Act by

          failing to include the ten dollar fee in the disclosed finance charge. This is another independent

          basis for rescission.



                                  Street Failed to Disclose Non-excludable Title Fees
                                       and Recording Fees as Finance Charges

                  In addition to separate charges for title examination and mortgage recording fees, Street

          also charged Mr. Homeowner a combined fifty ($50.00) dollar fee for "updating of title,

          recording of documents." Street did not disclose which portion of this fee was allocated to the

          title update and which was allocated to the recording of documents and excluded the entire

          amount from the finance charge. The Federal Reserve Board Official Staff Commentary to

          Regulation Z prescribes the rule for allocating non-excludable portions of lump sum charges to


             30
                 Cf. Shroder v. Suburban Coastal Corp., 729 F.2d 1371 (11th Cir. 1984)(court held that
          failure to include assignment recording fee in finance charge was not a violation of TILA.).
          Brown, Cheshire and Mayo specifically reject Shroder's reasoning. One explanation for
          Shroder's result, if not its reasoning, is that the case was an appeal of denial of class action
          certification, in which the court decried the game of "gotcha" it intimated the plaintiffs were
          playing in seeking to hold the lender liable to an entire class for extremely technical violations of
          the Act, without any apparent damages having been suffered. Id., at 1385.




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          the finance charge. Commentary §226.4(c)(7) states that:



                 If a lump sum is charged for several services and includes a charge that is not
                 excludable (from the finance charge under Regulation Z, §226.4(c)(7)), a portion
                 of the total should be allocated to that service and included in the finance charge.


          See, e.g., Brodo, 847 F. Supp. at 356-357(portion of lawyer's fee attributable to preparation of

          TILA documents should have been disclosed as finance charge).



                 In this case neither the portion of the fifty dollar fee used for "updating of title" nor the

          portion used for "recording of documents" should have been excluded from the finance charge.

          Therefore, by excluding the full amount of the fee from the finance charge, Street committed two

          material violations of TILA.



                                  A "Full" Title Exam Does Not Need to be Updated



                 Street charged Mr. Homeowner $250.00 separately for a "full title examination." Having

          defined the task as such, it is logically estopped from now claiming that the "full" examination

          had to be "updated" at additional cost. The undisclosed portion of the fee for "updating the title"

          is therefore, not a bona fide and reasonable charge. As such, this amount should have been

          disclosed as part of the finance charge. See, e.g., Mayo, slip op. at 6. This is the fourth

          independent basis on which Mr. Homeowner's rescission was justified.



                               Double Charged Recording Costs Are Finance Charges


                  Even assuming, arguendo, that this Court were to find the title update fee to be

          excludable under Regulation Z, §226.4(c)(7)(i), the portion of the fifty dollar lump sum fee

          allocated to the cost of "recording of documents" must be determined to be a finance charge, as

          Street did not incur any non-reimbursed recording costs.




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                 The only excludable recording fee in this transaction (see, Cheshire, supra, at 99-100)

          was the Street mortgage, for which Street imposed a separately itemized twenty-five ($25.00)

          dollar fee. As previously noted, Street was also reimbursed for the $10 dollar cost of recording

          its future mortgage assignment. Street was not required to pay any other recording costs, as no

          other documents were recorded. As such, the portion of the fifty dollar lump sum fee allocated to

          recording of documents cannot be bona fide and reasonable, and should have been disclosed as a

          finance charge. Therrien v. Resource Financial Group, Inc, 704 F. Supp. 322, 327 (D.N.H.

          1989)(double charge of $56 for recording and discharge fees hidden in lawyer's fee was

          undisclosed finance charge. "[D]ouble charges are neither bona fide nor reasonable.").

                 Although certain security interest fees may be excluded from the finance charge, only

          amounts prescribed by law which are actually paid to public officials are excludable from the

          finance charge. Regulation Z, §226.4(e)(1); Abbey v. Columbus Dodge 607 F.2d 85 (5th Cir.

          1979) (where, contrary to disclosures, creditor retained and did not pay to public officials an

          itemized $37.50 "filing fee," the fee was a finance charge). This is yet another basis upon which

          Mr. Homeowner's rescission was valid.



           Street' Refusal to Comply with TILA's Mandated Rescission Procedure Requires that it
                                         Return
          Forfeit its Conditional Entitlement toof the Net Loan Proceeds
                                Street' Refusal to Accept Mr. Homeowner's Tender Via
                                        the October, 1993 USTrust Loan Closing
                         Explicitly Vests Ownership of the Loan Proceeds in Mr. Homeowner

                 The foregoing analysis demonstrates Mr. Homeowner's entitlement to the entry of

          summary judgment on his TILA rescission claims. Although TILA is a strict liability statute, and

          although a finance charge disclosure error of more than ten dollars entitles the borrower to

          rescind the loan, it is important to note that here Street' violations were anything but technical.

          Including only the finance charges challenged in this motion for summary judgment, Street failed

          to disclose finance charges totaling $3,039. "It is difficult to imagine a more blatant and

          fundamental violation of the TILA ...." In re Russell, supra, at 864 (characterizing failure to

          disclose total of $1,490 in broker's fee and points).



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                  In addition, because Street refused to accept Mr. Homeowner's offer to tender the entire

          principal amount of the loan at his scheduled October, 1993 USTrust loan closing, TILA dictates

          that Street forfeit all loan proceeds pursuant to its explicit vesting provision. Rescission under

          TILA calls for a sequential set of events. 15 USC §1635(b) provides, in relevant part:

                  When an obligor exercises his right to rescind under subsection (a):

                  [Step 1] -- He is not liable for any finance or other charge, and any security
                  interest given by the obligor ... becomes void upon such a rescission.

                  [Step 2] -- Within twenty (20) days after receipt of a notice of rescission, the
                  creditor shall return to the obligor any money or property given as earnest money
                  or down payment, or otherwise, and shall take any action necessary or appropriate
                  to reflect the termination of any security interest created under the transaction.

                  [Step 3] -- If the creditor has delivered any property on the obligor, the obligor
                  may retain possession of it. Upon the performance of the creditor's obligation
                  under this section, the obligor shall tender the property to the creditor ... . If the
                  creditor does not take possession of the property within twenty days after tender
                  by the obligor, ownership of the property vests in the obligor without obligation
                  on his part to pay for it.

                  The procedures prescribed by this subsection shall apply except when otherwise
                  ordered by a court. (Emphases added).31



                  TILA makes the consumer's obligation to tender the net proceeds of the loan (Step 3)

          expressly conditioned upon the creditor's performance of its duty to honor the rescission notice

          pursuant to Steps 1 and 2. If and when the creditor does so, the consumer is then obligated to

          return to the creditor the original principal balance, or, if the creditor merely sets off the monies

          paid on the loan against that principal, the consumer would tender the net balance. As the Act

          makes explicitly clear, if the consumer offers to pay the net balance, but the creditor refuses to

          accept it within twenty days of the tender, the creditor forfeits its entitlement to the remainder of

          the proceeds. 15 USC §1635(b).

                  Here, Mr. Homeowner tendered the entire principal amount of the Street loan when he

          scheduled the October, 1993 USTrust closing so that Street would obtain its tender from the loan

             31
                Regulation Z, §226.23(d)(4) makes clear that a court may modify only Steps 2 and 3, and
          not Step 1.




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          proceeds. This tender far exceeded what TILA would have required of Mr. Homeowner, for two

          reasons: 1.) his tender obligation had not yet arisen, because Street had not met its statutory

          duties; and 2.) even if Street had complied with the statute, at most Mr. Homeowner's tender

          obligation would have been approximately $13,000 ($31,000 loan principal minus approximately

          $18,000 paid on the loan and as transaction fees). 15 USC §1635(b).

                 Even though Street disavowed Mr. Homeowner's rescission notice, in order to save his

          home he was willing to pay Street $31,000 rather than risk losing his USTrust loan commitment.

          However, Street not only disavowed his rescission notice, it also refused his $31,000 tender by

          demanding instead even more money than it knew Mr. Homeowner had to give. Street

          deliberately subverted every requirement and protection of TILA, making it impossible for Mr.

          Homeowner to enforce his right to rescind and close on his USTrust loan without seeking this

          court's intervention.

                 As §1635(b) makes clear, upon rescission Mr. Homeowner was no longer "liable for any

          finance or other charge ...." Therefore, at best, Street was entitled to the $31,000 in principal,

          subject, of course, to its returning to Mr. Homeowner the approximately $18,000 he had paid on

          the loan. Its demand for $42,000 was in flagrant contravention of the statute, as this figure far

          exceeded the amount Street was even conditionally entitled to under TILA. Accordingly, in these

          circumstances, TILA explicitly dictates that Street forfeit the entire loan amount.

                  This mandated forfeiture can only be averted or modified if this Court deems it

          inequitable. The equities however, are all in Mr. Homeowner's favor, and so the Court should let

          the statutory forfeiture provision stand. As Judge David Scholl, perhaps the most prolific author

          of bankruptcy court decisions interpreting TILA has stated in a similar case:



                 In its initial response to the notice of rescission, the lender is obliged to return
                 "any money . . . given as earnest money, downpayment, or otherwise" (emphasis
                 in original) which would require repayment to the borrower of all installments
                 made. Furthermore, if the lender fails to properly accept a tender made by the
                 borrower, "ownership of the property [of the obligor offered to the creditor in the
                 tender] vests in the obligor without obligation on his part to pay for it." These
                 harsh directives of §1635(b) are tempered only by the last sentence which gives a
                 court a power to "otherwise order" if it believes that the equities justify a different



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                  result. However, as we stated in Tucker, 74 B.R. at 933, to read this sentence and
                  the companion regulation, 12 C.F.R. §226.23(d)(4), too broadly would constitute
                  "an overprotective attitude towards creditors [which] would fly in the face of the
                  clear language of §1635(b) and eliminate any incentive to creditors to utilize the
                  self-enforcing aspects of §1635(b) by voluntarily agreeing to tender the
                  performance contemplated by the first sentence of §1635(b)."

           In re Celona, 90 B.R. 104, 114 (Bkrtcy.E.D.Pa. 1988).


                             Street' Refusal to Honor Mr. Homeowner's Rescission Notice
                                   Eliminates Mr. Homeowner's Tender Obligation,
                                     Entitling Him to Keep the Proceeds of the Loan
                                     Pursuant to TILA's Implicit Vesting Provision


                  TILA explicitly mandates forfeiture of the loan proceeds when the creditor refuses to

          accept the borrower's tender of the net loan proceeds. In addition, it implicitly mandates that

          same forfeiture where, as here, the creditor refuses to properly respond to a rescission notice. If

          the creditor does not comply with the statute (Steps 1 and 2), the consumer's obligation to tender

          (Step 3) is never triggered. In such cases, courts have held that the creditor's recalcitrance creates

          a presumptive right in the consumer to retain the net loan proceeds. See, e.g., Shepeard v. Quality

          Siding & Window Factory, Inc., 730 F. Supp. 1295, 1306 (D. Del. 1990)(creditor's failure to

          respond may eliminate obligation to tender); In re Gurst, 79 B.R. 969, 979 (Bankr. E. D. Pa.

          1987)(debtor's obligation to creditor eliminated entirely by creditor's failure to properly respond

          to rescission notice).

                  This implicit vesting right is consistent with longstanding Federal Reserve Board

          Interpretation of TILA, and so, consistent with the US Supreme Court's interpretation of TILA,

          Ford Motor Credit Co. v. Milhollin, 444 U.S. 555 (1980), that administrative interpretation of the

          Act should be followed unless "demonstrably irrational." On this issue, in response to a letter

          requesting guidance on a rescinded transaction, an FRB staff letter provides, in relevant part:



                  Where the creditor has delivered property to the customer, §226.9(d) [now
                  §226.23(d)] provides that he may retain possession of it; only upon the creditor
                  fulfilling his obligations under the subsection is the customer required to make
                  tender of the property to the creditor. If the creditor fails within ten days [now 20
                  days] to terminate any security interest and return the payments which he has
                  received from the customer, he has by definition not fulfilled the requirements of



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                  the subsection, and staff is of the opinion that the customer need make no tender
                  of the proceeds to the creditor, retaining them without further obligation.


          FRB Staff Letter of May 29, 1975 [1974-1977 Transfer Binder] Consumer Credit Guide (CCH)
          ¶31,230 (emphasis added).


                  This implicit vesting right contained in the "creditor-forfeiture" provision of the Act

          provides a distinct disincentive for lenders to back borrowers into a corner by disavowing a

          clearly valid rescission notice. Consistent with the FRB's interpretation of TILA, the controlling

          precedent within the jurisdiction of the First Circuit on this issue is French v. Wilson, 446

          F.Supp. 216 (D.R.I. 1978), which unequivocally requires such forfeiture under the implicit

          vesting provision. "Congress' intended operation of the statute, as evidenced by the §1635(b)

          creditor-forfeiture provision, clearly calls for a debtor ‘windfall' if the creditor does not . . . "

          respond to a valid rescission notice by following the statutory dictates. Id., at 220. "Such a result

          helps to assure self-enforcement and ultimately promotes uniform compliance by creditors with

          the Truth in Lending Act." Id. Accord Sosa v. Fite, 498 F.2d 114 (5th Cir. 1974); In re Gurst,

          79 B.R. 969, 978 (Bkrtcy.E.D.Pa. 1987); Gill v. Mid-Penn Consumer Discount Company, 671

          F.Supp. 1021, 1026 (E.D.Pa. 1987); Aquino v. Public Finance Consumer Discount Company,

          606 F.Supp. 504, 508 (E.D. Pa. 1985); ; Strader v. Beneficial Finance Company of Aurora, 551

          P.2d 720, 726 (Colo. 1976).

                  As is the case here, in French, the borrower rescinded the loan but the creditor did not

          honor the rescission notice, instead attempting to foreclose. Id., at 219. Having failed to comply

          with the statutory dictates, the lender "bec[ame] amenable to the rather harsh legislative remedy

          which the Truth in Lending Act imposes upon errant creditors." French, supra, at 220.



                  Under the aforementioned statutory guidelines for rescinded transactions,
                  defendant ..., having continued in its "untoward ways" in this case by failing to
                  give effect to plaintiffs' notice of rescission, must therefore cancel the October 1,
                  1973 mortgage, as well as return the note to plaintiffs together with all monies
                  paid by them under such note." Id.


                  Street refused to honor Mr. Homeowner's clearly valid rescission notice, refused to allow



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          his proffered tender, and purported to hold its coercive auction sale under color of law, even

          though it knew or should have known that the sale was legally improper. If Street had legitimate

          questions about the validity of the rescission notice, it could simply have filed a declaratory

          judgment action and asked a court to enter appropriate orders. Aquino v. Public Finance

          Consumer Discount., 606 F.Supp. 504, 508 (E.D.Pa. 1985). Instead, it chose to play hardball in

          an attempt to chill the exercise of Mr. Homeowner's rights.32

                  This Court should invoke TILA's self-enforcement mechanism by declaring the tender

          requirement eliminated and enter an order consistent with the precedent of French v. Wilson and

          the relief requested by the plaintiff. "Where the nature of an act is remedial, as here, it should be

          construed liberally in an attempt to provide the remedy, not avoid it." French, supra, at 220,

          quoting Starks v. Orleans Motors, Inc., 372 F. Supp. 928, 932 (E.D. La. 1974), aff'd mem., 500 F.

          2d 1182 (5th Cir. 1974).



                                                       Conclusion
                  The violations of the material disclosures outlined above are clear on the face of the

          documents. As a matter of law, the strict liability rule of TILA compels a finding that the

          rescission was valid.33 "[W]here, as here, the confusing, misleading, and inaccurate character of

             32
                Despite the obvious validity of Mr. Homeowner's rescission notice, Street' counsel made
          implicit threats that it would seek Rule 11 and other sanctions against plaintiff's counsel for
          pursuing his rescission claims. See, Exhibit G, p. 4. These totally inappropriate bullying tactics
          serve only to harm Street's cause.

             33
                Where a debtor rescinds within the context of a bankruptcy, courts have held that the
          rescission effectively voids the security interest, rendering the debt, if any, unsecured. See, e.g.,
          In re Perkins, 106 B.R. 863, 874 (Bankr. E.D.Pa. 1989). See also, In re Brown, 134 B.R. 134
          (Bankr. E.D.Pa. 1991); In re Moore, 117 B.R. 135 (Bankr.E.D. Pa. 1990); In re Brown, 106 B.R.
          852, 862 (Bankr.E.D. Pa. 1989). The creditor would then be entitled to payment upon the same
          terms as other unsecured creditors.
          "[O]nce the court finds a violation, no matter how technical, it has no discretion with respect to
          liability." In re Wright, supra. at 708; In re Porter v. Mid-Penn Consumer Discount Co., 961
          F.2d 1066, 1078 (3d. Cir. 1992); Smith v. Fidelity Consumer Discount Co., supra. at 898. "Any
          misgivings creditors may have about the technical nature of the requirements should be
          addressed to Congress or the Federal Reserve Board, not the courts. A strict interpretation
          furthers the congressional goal of standardizing terminology and procedures in credit
          transactions." April v. Union Mortgage Co., 709 F.Supp. 809, 811 (N.D. Ill. 1989); Smith v. No.



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          the disputed disclosure is so clear that it cannot reasonably be disputed, summary judgment for

          the plaintiff is appropriate." Griggs v. Provident Consumer Discount Co., supra, 503 F. Supp. at

          250; Hemauer v. ITT Financial Services, 751 F. Supp. 1241, 1244 (W.D. Ky. 1990).

                   Further, given Street's recalcitrance in refusing to honor this clearly valid assertion of

          federally mandated rights, it is appropriate in this instance to give effect to the clear language of

          §1635(b), and declare that the tender obligation has been vitiated by the lender's violation of

          TILA, requiring the intervention of this court in a matter which is clearly not subject to either

          factual or legal dispute.



                                                                                         Respectfully submitted

                                                                                               John Homeowner

                                                                                                 By his attorneys



          Date: September 6, 1994



          8.6      Plaintiff's Affidavit In Support of Summary Judgment
                                      UNITED STATES BANKRUPTCY COURT

                                      FOR THE DISTRICT OF MASSACHUSETTS

                                                  EASTERN DIVISION

          In Re:

          John Homeowner

                                                                                                          Debtor

          John Homeowner

                                                                                                         Plaintiff

          [vs.]



          2 Galesburg Crown Furnace Corp., 615 F.2d 407, 416 (7th Cir. 1980).



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          Street Financial Services, Inc.

                                                                                                     Defendant

          Chapter 13

          Case No. 93-XXXXX-ABC

          Adversary Proceeding No. 94-XXXX



                                            AFFIDAVIT OF John Homeowner
                 I, John Homeowner, hereby depose and state as follows:



                 1. In the fall of 1990, I responded to The Easy Cash Inc. ("Easy Cash") television and

          print advertisements offering low interest rate loans by visiting the Easy Cash offices seeking

          information about obtaining a mortgage loan to refinance my home.

                 2. I met with Easy Cash representative Lisa Smith. Ms. Smith informed me that my poor

          credit precluded a long term, low interest rate loan, but that if I took out a two year loan with a

          balloon payment and made my payments on time, that the Easy Cash would then provide long

          term, low interest refinancing as offered in its advertising.



                 3. Ms. Smith had me sign a blank mortgage application. I was never provided with a

          copy of either the application form I signed or the completed application.



                 4. I had no further contact with Easy Cash until I was subsequently informed that I had

          been given a loan commitment.



                 5. On November 29, 1990 I drove to the loan closing location, the office of attorney Larry

          Lawyer, located at 100 Natick Road, Worcester Massachusetts.



                 6. The offices of Street Financial Services, Inc. ("Street") and Easy Cash were also




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          located at 100 Natick Road, Worcester, Massachusetts.



                  7. Mr. Lawyer told me that he was the closing attorney for Street. Until he told me this,

          however, I had thought that Easy Cash was going to be making the loan. It was not until Mr.

          Lawyer told me, as he provided me with loan papers indicating that Street was the lender, that I

          learned that Easy Cash was not directly providing the financing.



                  8. One of the documents Mr. Lawyer had me sign was a so-called "consulting" agreement

          purporting to authorize the payment of two thousand nine hundred fifty-four ($2,954.00) dollars,

          to Easy Cash. I had never seen this agreement before, and had no idea that Easy Cash was a

          broker, much less that it would charge this amount as a fee. I signed the agreement because I

          thought it was a condition of obtaining the financing.

                  9. Street charged me a $25 dollar fee for amortization schedules. At the time of this loan

          closing I did not know what an amortization schedule was. For this reason alone I did not

          request that Street provide me with one. I also never received an amortization schedule.



                  10. I was completely unaware of any of the terms of the loan until I was presented with

          the loan documents at the closing. Neither Street nor Easy Cash had informed me of the terms

          prior to the closing.



                  11. In particular, I never saw or received the letter dated November 6, 1990 from Susan

          Black (which is attached to the Motion for Partial Summary Judgment as Exhibit C), until it was

          shown to me at the preliminary injunction hearing. If I had seen that letter prior to my Street

          loan closing I would have questioned why Street was making the loan instead of Easy Cash,

          objected strongly to the insulting tone used in the third paragraph, and, if I decided to take the

          loan from Street, would only have done so if Street honored the promise made by Easy Cash

          when I first applied for my loan. I would not have taken this loan if Street had disclosed to me at




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          the outset that it would not extend the loan term even if I made all my payments on time for two

          years.



                   12. I used the funds from the Street loan to pay off some consumer debt and to make

          needed repairs to my house.



                   13. Neither attorney Lawyer nor Street provided me with any of the loan documents or

          truth in lending disclosures at the closing. I left the loan closing without any papers whatsoever,

          as I was told been told that the papers would be mailed to me "in a few days." Approximately six

          days later, I received the papers, including the truth in lending disclosures, in the mail.

                   14. I made every payment on the loan. In mid-summer, l992, with the two year balloon

          coming due, I sought to convert the Street loan to the low interest rate, long term loan the Easy

          Cash representative told me I could have if I made all my payments on time. Easy Cash

          informed me that they were no longer making or arranging such loans, and referred me to Street.

          Street informed me that they would not make such a loan, emphasized that my balloon note was

          coming due in a few months and urged me to find alternative financing.



                   15. It was at this point that I sought out legal counsel and was subsequently placed in the

          Attorney General's refinancing lottery.



                   16. In May, 1993, we received a call from USTrust Company informing us that we had

          been picked in the Attorney General's refinancing program lottery and that within 6-8 weeks we

          would be informed whether we qualified for enough money to save our home from Street'

          threatened foreclosure.



                   17. On August 12, 1993 USTrust issued me a loan commitment for forty five thousand

          ($45,000.00) dollars.




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                 18. This USTrust loan was sufficient to pay off our first mortgage (of approximately ten

          thousand ($10,000.00) dollars) to Crestar Mortgage Corp., as well as the principal amount of the

          Street second mortgage of thirty-one thousand dollars.



                 19. When we did not seem to making progress in negotiating a settlement with Street I

          asked John Roddy whether I could take the USTrust loan and pay off Street in order to insure that

          I would keep my home, and then after USTrust held the mortgage on my house instead of Street

          still pursue my truth in lending claims against Street. He told me that this plan was feasible.



                 20. I told USTrust that I would pay Street their $31,000 in order to not to lose the loan.



                 21. A loan closing was scheduled to take place on or about October 21, l993.



                 22. The closing couldn't go through because Street' payoff demand was almost forty two

          thousand ($42,000.00) dollars. This demand included a condition that I release all my claims

          against Street.



                 23. The Street demand exceeded by seven thousand ($7,000.00) dollars the USTrust

          proceeds which were to be available.



                 24. I did not have nor could I have obtained the seven thousand ($7,000.00) dollars in

          cash which would have been necessary to allow a closing, even if I had wanted to release my

          claims against Street, which I did not.



                 25. The following documents attached to the Motion for Partial Summary Judgment are

          true and accurate copies of documents which I received from Street Financial Services, Inc., at or

          after the closing on my second mortgage loan with Street:




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          Exhibit A - Street Promissory Note

          Exhibit D - Disclosure Statement

          Exhibit E - Loan Accounting and Disbursement Authorization

          Exhibit F - Notice of Right to Cancel



                   Signed under the pains and penalties of perjury this 3rd day of September, 1994.

          John Homeowner

          [Notarized]

           8.7     Proposed Order for Partial Summary Judgment for the Plaintiff
                                     UNITED STATES BANKRUPTCY COURT

                                    FOR THE DISTRICT OF MASSACHUSETTS

                                                  EASTERN DIVISION

          In Re:

          John Homeowner

                                                                                                       Debtor

          John Homeowner

                                                                                                      Plaintiff

          [vs.]

          Street Financial Services, Inc.

                                                                                                  Defendant



          Chapter 13

          Case No. 93-XXXXX-ABC

          Adversary Proceeding No. 94-XXXX




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                                                      (Proposed)

                                                       ORDER


                 This matter having come before me for hearing on the plaintiff's motion for partial

          summary judgment, after notice and a hearing, and upon consideration of the respective

          submissions of the parties, and for good cause appearing, it is hereby ORDERED AND

          DECREED that:


                 1. Judgment is entered in favor of the plaintiff-Debtor, John Homeowner (hereinafter "the

          Debtor") on Counts VI, VIII, XI, XII and XIII set forth in his Verified Complaint against the

          Defendant, Street Financial Services, Inc. (hereinafter referred to as "Defendant").


                 2. It is DECLARED that the Debtor properly exercised his right to rescind the November

          29, 1990 mortgage loan transaction between the parties pursuant to the TILA and that therefore

          this contract is deemed RESCINDED.


                 3. The Defendant has no allowable secured or unsecured claim and the Proof of Claim

          filed by Defendant in the Debtor's main bankruptcy case is disallowed in its entirety.


                 4. Defendant is directed to satisfy and discharge any and all remaining mortgages which it

          has against the Debtor's residential real estate at 10 Joseph Street, Dorchester, Massachusetts,

          within fifteen (15) days from the date of this Order.


                 5. Defendant's failure to honor the plaintiff 's valid rescission notice in accordance with

          15 USC §1635 and M.G.L. c. 140D §10 vests in the Debtor the right to retain the net loan

          proceeds and all interest accrued thereon now held in escrow pursuant to the Stipulation and

          Escrow Agreement previously filed with the Court. The signatories to the Stipulation and

          Escrow Agreement are directed to release all funds in the Escrow Account and pay them over to

          the Chapter 13 Trustee, within fifteen (15) days from the date of this Order. The said Trustee

          shall determine whether these sums or any part thereof may be claimed as part of the Debtor's



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          exemptions, and, if they are, he shall forward the sums which are includable in his exemptions to

          the Debtor forthwith.


                 6. In accordance with the constraints of its Chapter 7 proceeding, Defendant is directed

          to:



                 a.      refund to the Debtor all money paid to the Defendant in connection with the
                         November 29, 1990 mortgage loan transaction;

                 b.      pay to the Debtor one thousand ($1,000) dollars in statutory damages pursuant to
                         15 U.S.C. §1640(a)(2)(A)(i) for the Defendant's failure to comply with 15 U.S.C.
                         §1638 and c. 140D §12, and an additional one thousand ($1,000) dollars in
                         statutory damages for the Defendant's failure to comply with 15 U.S.C. §1635(b)
                         and c. 140D §10; and

                 c.      pay to the Debtor the sum of three thousand thirty nine ($3,039.00) dollars as
                         actual damages pursuant to 15 U.S.C. §1640(a)(1).

          These funds are to be paid over to the Chapter 13 Trustee if the Debtor's Chapter 13 proceeding

          is still pending when such funds become available, otherwise the funds are to be paid over to Mr.

          Homeowner pro-rata in accordance with the Chapter 7 Trustee's distribution of assets.



                 7. The parties are urged to attempt to agree upon reasonable attorneys' fees and costs

          which are due to the Debtor's counsel pursuant to 15 U.S.C. §1640(a)(3). If this matter is not

          resolved within fifteen (15) days, the Debtor's counsel may, within thirty (30) days of this Order,

          file a Motion requesting such fees. If the Debtor's counsel has made a reasonable request for

          such fees which is refused, said counsel may recover compensation for time spent on the fee

          application as well.


          By the Court

          United States Bankruptcy Judge
          Dated:




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