H&R Block and Option One

This narrative is composed of allegations taken from the complaint filed by the plaintiff:

        Mrs. Lucy Chapman, age 72, is the mother of nine children and has 20 grandchildren. She has resided at the same address in Chattanooga, Tennessee for over 30 years.

        Mrs. Chapman is retired and disabled and now receives income of $565 per month in SSI and Social Security benefits. She has high utility bills, regular unreimbursed medical expenses, and other expenses that consume substantially all her income.

        At the time of the transaction giving rise to litigation, the mortgage indebtedness on Mrs. Chapman’s home totaled only $1,318. The interest rate was 7.0% per annum.

        Mrs. Chapman had acquired the home in 1971 and its assessed value for real property tax purposes was $48,000 in the year 2000.

        On or about August 8, 2000, Mrs. Yvonne Daniels, the daughter of Mrs. Chapman, applied by telephone to the Pleasanton, California office of H&R Block for a $60,000 mortgage loan. The application recorded that the borrower would be Mrs. Chapman (not Mrs. Daniels) and did not indicate that Mrs. Daniels was acting in behalf of her mother. Actually, Mrs. Daniels had no authority to act for her mother. In fact, at the time Mrs. Chapman knew nothing of the loan application.

        The application does not show the name of Mrs. Daniels on it even though one of the purposes of the loan was said to be bill consolidation, even though all of the $47,112 bills to be consolidated were those of Mrs. Daniels and not her mother, and even though there was room on the application for a co-borrower to be shown.

        The loan application listed the correct social security number of Mrs. Chapman but incorrectly showed her age to be 79 rather than 71 at that time. It showed her telephone number to be one which actually was the telephone number of Mrs. Daniels and not her mother. It said that Mrs. Chapman had $674 monthly income from SSI, which was an overstatement, and an additional $1,000 monthly income from self-employment as an “elderly sitter,” which was also incorrect. Mrs. Chapman is elderly herself and does not earn income by that or other means.

        The loan application was not signed by Mrs. Daniels or anyone in the place for a borrower or a co-borrower to sign.

        Separately, on a document dated both August 9, 2000 and August 17, 2000, and bearing the typed name of “Lucy Chapman” and the signature of “Lucy R. Chapman,” someone authorized the lender to verify financial information about the borrower. The person who signed the document was not the plaintiff in this lawsuit.

        Only $49,500 was approved for the loan. Whether or not necessary, a new loan application was prepared. This time the lower amount for the loan was shown. This time the “business phone” of the borrower was described in two places, as well as the borrower’s “home phone” in a third place. In all three cases, the number shown was the home telephone number of Mrs. Daniels and not her mother, Mrs. Chapman. Once again, the overstatement in total government benefits ($674 rather than $530 at the time) was made. This time the misinformation about Mrs. Chapman being self-employed was shown twice. This time the monthly income from alleged employment was revised slightly upward to $1,007.09. No interviewer signed this revised application. Mrs. Chapman did sign it later on September 20, 2000 at the closing of the transaction, although someone else inserted the date in his or her handwriting.

        For the purpose of supporting the loan to Mrs. Chapman, her home was valued at $77,000 by an appraiser selected by H&R Block or General American, the closing agent, an amount far in excess of the appraised value for real estate tax purposes and considerably more than the probable fair market value.

        The loan closing took place on Wednesday, September 20, 2000 in Mrs. Chapman’s home in Chattanooga, rather than the office of Great American 30 miles away in Cleveland, Tennessee. Three people were present: Mrs. Chapman, Mrs. Daniels, and a person who did not identify herself and who remained silent throughout the loan closing. Mrs. Chapman believes the third person was someone other than Dana M. Wiseman, the person whose name appears as the notary public on three separate documents discussed below.

        Mrs. Chapman signed or initialed at least 20 separate documents in at least 32 places. In each instance where her signature appears (at least 24 places) or her initials (at least 8 places), she wrote or initialed with the assistance of Mrs. Daniels, who guided her hand to the appropriate places. No one had previously read or explained the documents to Mrs. Chapman. No one did so on September 20, 2000.

        At the time, Mrs. Chapman had two cataracts in her eyes that prevented her from reading the numerous documents, from understanding or seeing even such essential features as the amount of the loan and the places for her signature. Mrs. Chapman’s eye condition has since been corrected in significant measure.

        Three of the documents bear the signature of a notary, Dana M. Wiseman, and each is dated September 20, 2000. The “Owner/Seller Affidavit” states that the owner, Mrs. Chapman, signed it in Hamilton County. The “Borrower Affidavit” states that Mrs. Chapman signed it in Bradley County. The “Deed of Trust” omits the county altogether although there is a place for it to be shown, and that place is checked (so as to indicated it should be signed) on the copy available to Mrs. Chapman. None of the copies of the three documents shows the seal of the notary public. No seal was placed on these documents in the presence of Mrs. Chapman. Mrs. Chapman did not sign them in the presence of Ms. Wiseman. Nor did Ms. Wiseman sign them in the presence of Mrs. Chapman.

        Prior to the visit to her home when the loan documents were signed, Mrs. Chapman had been approached by her daughter about financial assistance. Mrs. Chapman understood only three things: that the amount of the loan would be $10,000, that her daughter would make all payments upon it, and her home would be mortgaged. She did not know that the loan application was originally for $60,000 or that it was approved for $49,500. She believed that her daughter could and would make all the payments, and that the deed of trust posed no real threat to her home in view of the foregoing.

        Within hours after the loan documents were signed, Mrs. Chapman learned from other family members that her assumptions had been wrong. She immediately told her daughter, Mrs. Daniels, that she wanted to cancel the loan, as she had a right to do. Mrs. Daniels said that she would not assist her mother. Mrs. Daniels would not tell Mrs. Chapman how she could exercise her rights within the three-business-day limit accorded by the loan documents. Mrs. Daniels criticized her mother for wanting to cancel.

        In vain, Mrs. Chapman called H&R Block or Option One (she is not sure which) in order to cancel. She was told by one of its representatives that the three-day period expired on Saturday after the Wednesday closing when in fact Monday thereafter was the final day. (The Notice of Right to Cancel also stated mistakenly that September 23, 2000, a Saturday, was the last day.) Nonetheless, she tried on Monday, September 25, 2000 to send a cancellation by fax from a Kinko’s Copy Center, but her efforts were unsuccessful. She was told that cancellation would not be permitted because her prior mortgage had been paid in full.

        At the time of the closing an important and unexpected change had been made. Some $16,623 was originally scheduled to be paid to Mitsubishi Motor for Mrs. Daniels’ debt. Instead, no money was disbursed for this purpose. To this day, Mrs. Chapman does not know why. Approximately a month later, Mrs. Daniels brought to Mrs. Chapman a cashier’s check payable to Mrs. Chapman. Mrs. Daniels tricked her mother into converting the check into cash which she then took from Mrs. Chapman without permission.

        For reasons not apparent to Mrs. Chapman, credit histories were completed after the loan closing. They manifest incorrect information, showing charge accounts and other information about Mrs. Daniels not Mrs. Chapman. Although the reports list Mrs. Chapman as the person investigated and even though her social security number is given, the address and telephone number of the debtor are those of daughter not mother.  They too are part of a scheme to substantiate a fraudulent transaction that was of no benefit to Mrs. Chapman.

        The settlement statement and other loan closing documents were prepared and signed by a representative of General American and evidence its participation in this fraudulent scheme.

        Mrs. Chapman believes that, contemporaneously with or within a short time of the closing, H&R Block sold the loan, in whole or in part, to Option One and the latter agreed to service the loan to Mrs. Chapman.

        Mrs. Chapman’s payment to Option One under the loan transaction is $702 per month (principal and interest of $532, plus the tax and insurance escrow of $170). This is an amount in excess of her income which is now $565 per month.

        Within the first year of the contract, Mrs. Daniels had fallen behind in the payments she promised her mother that she would make to H&R Block or Option One. Were it not for the restraining order we obtained, Mrs. Chapman would be in danger of losing her home at any time.

        The complaint against the defendants alleges fraud, misrepresentation, conversion, and violations of the Tennessee Consumer Protection Act, the Truth in Lending Act, the Real Estate Settlement Procedures Act, and the obligations of a notary public. It seeks compensatory, statutory, and punitive damages, along with the award of attorney fees.