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Alexander v. Ameripro Funding, Inc.

United States Court of Appeals, Fifth Circuit

February 16, 2017

TINA ALEXANDER; SHEILA ALEXIS; EVELYN BAINES; SHAUNTAY BENNINGS; NYO HAYGOOD; TABITHA HENRY; CHEYANNE JONES; ROSLYN JONES; KENDRA WILLIAMS; KYSHIA WOODS; ZACHARY BAYLOR; TRACEY KENNERLY, Plaintiffs-Appellants
v.
AMERIPRO FUNDING, INCORPORATED; AMEGY BANK NATIONAL ASSOCIATION; WELLS FARGO BANK, N.A., Defendants-Appellees

         Appeals from the United States District Court for the Southern District of Texas

          Before JOLLY, BARKSDALE, and SOUTHWICK, Circuit Judges.

          E. GRADY JOLLY, Circuit Judge

         The Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. § 1691 et seq., was enacted, in relevant part, in order to "promote the availability of credit to all creditworthy applicants without regard to . . . the fact that all or part of the applicant's income derives from a public assistance program." See 12 C.F.R. § 202.1. The ECOA specifically makes it illegal "for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction . . . because all or part of the applicant's income derives from any public assistance program." 15 U.S.C. § 1691(a)(2).

         Plaintiffs are twelve individuals in the Houston, Texas, area who receive Section 8 housing assistance.[1] Each plaintiff wanted to purchase a home, and each wanted to obtain a mortgage in order to finance their proposed purchase of a home. Each plaintiff either applied for a mortgage or sought information regarding a mortgage from either AmeriPro Funding, Inc., or Wells Fargo Bank, N.A.

         Wells Fargo, they allege, was engaged in the business of investing in or buying mortgages originated by other financial institutions, including AmeriPro. AmeriPro, as an originator, interacted with borrowers, made credit decisions, and actually gave mortgages to home buyers. Wells Fargo, as a purchaser and investor in mortgages, promulgated guidelines for its secondary-market mortgage purchases, stating that it would only buy mortgages that are not based on Section 8 income.

         Those plaintiffs who applied for mortgages with AmeriPro allege that, with the Wells Fargo guidelines in mind, AmeriPro refused to consider their Section 8 income in assessing their creditworthiness in its evaluation of their mortgage applications so that it could sell the mortgages to Wells Fargo on the secondary market.

         Other plaintiffs applied directly to Wells Fargo in its capacity as a mortgage originator, and they allege that it similarly refused to consider their Section 8 income.

         The plaintiffs filed suit against both AmeriPro and Wells Fargo, claiming that they discriminated against them in violation of the ECOA on the basis of their receipt of public assistance income. The district judge granted defendants' Rule 12(b)(6) motion and dismissed all of plaintiffs' claims. Plaintiffs have timely appealed.

         We affirm the dismissal of several, but not all, of plaintiffs' claims: some plaintiffs failed plausibly to allege that they were "applicants" under the ECOA; some plaintiffs failed plausibly to allege that Wells Fargo was a "creditor" under the ECOA; and some plaintiffs failed plausibly to allege that Wells Fargo engaged in any discriminatory conduct against them. We hold, however, that some plaintiffs did plausibly allege ECOA violations by AmeriPro, and reverse the district court's dismissal of those claims. In short, we affirm in part and reverse and remand in part.

         I.

         In reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), this Court "accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff." Martin K. Eby Const. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004) (citations and quotations omitted). Keeping in mind that the ECOA prohibits "discriminat[ion] against any applicant, with respect to any aspect of a credit transaction . . . because all or part of the applicant's income derives from any public assistance program, " 15 U.S.C. § 1691(a)(2), we set forth the allegations in the plaintiffs' Complaint.[2]

         As we have noted, plaintiffs are twelve individuals in the Houston, Texas area. All sought to qualify for a loan to purchase a home. All received public assistance income in the form of Section 8 housing vouchers, and all sought to use that income to make payments towards their desired new home mortgages.

         The essence of the plaintiffs' claim is that the lenders to whom they applied-defendants AmeriPro Funding, Inc. and Wells Fargo Bank, N.A.- refused, in violation of the ECOA, to consider their Section 8 voucher income in determining whether they were financially qualified for a loan.[3] Plaintiffs claim that Wells Fargo had an explicit, publicly-available policy stating that in its secondary mortgage purchasing division-which would invest in or purchase mortgages originated by another financial institution-it would not purchase mortgages based on Section 8 income. As the Complaint alleges:

76. During all relevant periods of time, Defendant Wells Fargo Bank was a correspondent lender, who set up guidelines to purchase certain closed loans from creditors such as Defendant AmeriPro Funding.
77. In its capacity as a correspondent lender, Defendant Wells Fargo Bank provided lending guides required to be utilized by creditors, such as Defendant AmeriPro Funding, seeking to sell its loans and in extending credit to applicants, such as Plaintiffs. . . .
79. Wells Fargo Bank's own publically available policy states:
Wells Fargo will not accept transactions including, but not limited to, the following:
. . .
FHA Section 8 loans
Wells Fargo Funding Seller Guide 600.02(b).

         It further alleges that AmeriPro, a mortgage originator, unlawfully refused to consider Section 8 income so that it could sell its newly-originated mortgages to Wells Fargo:

69. Additionally, Defendant AmeriPro Funding denied credit and financing to Plaintiffs . . . because it claims it did not have an investor that would purchase a loan that allowed for their Section 8 income to be utilized in calculating the debt to income ratio and for qualifying purposes.
70. Because Defendant AmeriPro Funding would not use the Section 8 voucher in its loan decision, Plaintiffs . . . could not secure a certain size mortgage. . . .
72. Defendant AmeriPro Funding sold their mortgage loans to other financial institutions, including Defendant Wells Fargo Bank.
73. As part of the correspondent lending practices of Wells Fargo Bank, any loans that Defendant AmeriPro Funding sold to Defendant Wells Fargo Bank had to meet the lending guidelines for Wells Fargo Bank.
74. During the time of Plaintiffs' loans and loan inquires made the basis of this lawsuit, Defendant AmeriPro Funding was informed by Defendant Wells Fargo Bank that the bank's lending guidelines did not allow the receipt of Section 8 income to be considered as qualifying income for determining whether an applicant qualifies for a loan and the calculation of the amount the applicant would be able to borrow.

         Under these broad allegations, the plaintiffs appear to fall into three distinct groups.

         A.

         The first group includes four plaintiffs-Alexander, C. Jones, Williams, and Woods-the "AmeriPro Applicants." The AmeriPro Applicants allege that they actually applied for loans with AmeriPro:

75. At least four Plaintiffs (Tina Alexander, Cheyanne Jones, Kendra Williams and Kyshia Woods), applied for loans with Defendant AmeriPro Funding which Defendant AmeriPro Funding processed with the intention of selling the loan to Defendant Wells Fargo Bank.

         Each of the AmeriPro Applicants specifically alleges that she applied for a mortgage through AmeriPro, that the mortgage was processed with respect to Wells Fargo's lending guidelines, that her Section 8 income was not included for consideration as part of the application, and that she obtained a mortgage on less favorable terms than if that income had been considered. For example:

85. Plaintiff Cheyanne Jones applied for a mortgage loan in approximately the summer of April 2012 with Defendant AmeriPro Funding which was processed using Defendant Wells Fargo Bank's lending guidelines since Defendant AmeriPro Funding intended to sell this loan to Defendant Wells Fargo Bank.
86. Plaintiff Cheyanne Jones' Section 8 income was not included for consideration as part of her mortgage application.
87. As a result of her Section 8 income not being considered as income on her mortgage application, Cheyanne Jones obtained less favorable mortgage terms and qualified for a mortgage at a lesser amount than if her Section 8 income had been considered.[4] Plaintiff Tina ...

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