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Deutsche Bank Nat'l Trust Co. v. Burke

United States District Court, S.D. Texas, Houston Division

December 21, 2017

Deutsche Bank Nat'l Trust Co., as Trustee of the Residential Asset Securitization Trust 2007-A8, Mortgage Pass-Through Certificates, Series 2007-H under the Pooling and Servicing Agreement dated June 1, 2007, Petitioner,
v.
John Burke and Joanna Burke, Defendants.

          SECOND AMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW

          STEPHEN WM SMITH UNITED STATES MAGISTRATE JUDGE

         Plaintiff Deutsche Bank National Trust Co. sued to foreclose a lien created under the Texas Home Equity Amendment against defendants John Burke and Joanna Burke. Deutsche Bank seeks a declaration that it is vested with all title and interest in the property, as well as an order authorizing it to proceed with foreclosure pursuant to Texas Property Code § 51.002. The parties consented to magistrate judge jurisdiction.

         After a bench trial on February 6, 2015, judgment was entered in favor of the Burkes. Findings of fact and conclusions of law were entered in support of the judgment. Those findings and conclusions were later amended in light of the bank's post-trial motion, but the final judgment remained the same. That judgment was vacated on appeal, and the case remanded for further proceedings. The court now makes the following Second Amended Findings of Fact and Conclusions of Law. Any finding of fact that should be a conclusion of law is deemed a conclusion of law, and vice versa.

         Findings of Fact

         1. Deutsche Bank National Trust Company is a corporation with its principal place of business in Santa Ana, California, and brings this suit in its capacity as Trustee of the Residential Asset Securitization Trust 2007-A8, Mortgage Pass-Through Certificates, Series 2007-H under the Pooling and Servicing Agreement dated June 1, 2007 (“Deutsche Bank”).

         2. Defendants John and Joanna Burke are individuals and homeowners residing at 46 Kingwood Greens Drive, Kingwood, Texas 77339.

         2007 Home Equity Loan

         3. In 2007, the Burkes applied for a home equity loan, which was initially rejected by IndyMac Bank, F.S.B. because they had no income. (Dkt. 74, Tr. 81-82)

         4. Some time later, a different representative of IndyMac Bank called to advise that the loan would be approved, and that the Burkes' previous contact at the bank had been fired. (Tr. 82)

         5. On May 21, 2007, Joanna Burke alone executed a note containing a promise to pay IndyMac Bank $615, 000 plus interest in certain monthly installments in exchange for a loan from IndyMac Bank in that amount. (P.Ex. 3; D.Ex. 11;Tr. 36-37, 45-48)

         6. The note was secured by a Texas Home Equity Security Instrument (a deed of trust) placing a lien on their home in Kingwood, Texas. (P.Ex. 1)

         7. Under the deed of trust, John and Joanna Burke were the borrowers and IndyMac Bank was the secured lender as well as the loan servicer. (P.Ex. 1; Tr. 62-63)

         8. At closing the Burkes signed an affidavit expressly representing that the amount of the loan did not exceed eighty percent (80%) of the fair market value of the property on the date the extension of credit was made. (D.Ex. 11) No evidence at trial was offered to contradict this representation.

         9. The closing of the loan occurred more than twelve (12) days after the Burkes' initial loan application.

         10. At all times relevant to this case, the Burkes were retired and had no employment income. (Tr. 81)

         11. Four days after closing, the Burkes received a copy of the final loan application as well as all documents signed by the Burkes at closing. This documentation included an unsigned loan application form falsely declaring that the borrowers' employment income was $10, 416.67 monthly (or exactly $125, 000 per year). (Tr. 79; D.Ex. 2)

         12. This false income declaration was knowingly made by IndyMac because the Burkes never claimed any employment income during the loan process. (Tr. 80-82)

         13. The Burkes promptly notified IndyMac of the inaccurate income figure, but no satisfactory answer was ever given. (Tr. 83-84)

         Events of 2008-2009

         14. On July 11, 2008, IndyMac Bank was closed by the Office of Thrift Supervision and substantially all of its assets were transferred to IndyMac Federal Bank, FSB. (P.Ex. 6)

         15. During that year, the Burkes repeatedly complained to IndyMac Federal that their monthly payments were being placed in suspense, rather ...


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