## Facts

- Elderly single women homeowners alleged they were targeted for high-cost mortgage loans marketed as modest home-improvement financing.
- Plaintiffs alleged lenders and related participants misrepresented loan terms, inflated income/employment information on applications, and steered borrowers into unaffordable loans that stripped home equity.
- In an illustrative transaction, an 87-year-old homeowner contracted for siding work and was told financing would cover the improvement and other expenses.
- She alleged she signed numerous documents at home and at closing without meaningful review, did not receive copies, and was not informed of a three-day right to cancel.
- The closing documents listed a lender and a loan amount far larger than the stated home-improvement price; plaintiffs alleged they discovered the true terms only when foreclosure was pursued.
- Plaintiffs asserted federal and state claims, including Fair Housing Act (FHA), Equal Credit Opportunity Act (ECOA), Truth in Lending Act (TILA), Ohio civil-rights claims, fraud, conspiracy, Ohio RICO, and unconscionability.
- The lender moved to dismiss the Second Amended Complaint under Rule 12(b)(6), arguing failure to state a claim and that claims were time-barred.

## Issues

1. Whether FHA § 3604(b) applies to allegedly discriminatory, predatory mortgage loans involving homes already owned by the borrowers.
2. Whether reverse-redlining allegations state a claim under FHA § 3605 for discrimination in residential real estate-related transactions.
3. Whether reverse-redlining allegations state a claim under ECOA for discrimination in any aspect of a credit transaction.
4. Whether the complaint plausibly alleged TILA disclosure and rescission-notice violations.
5. Whether limitations defenses warranted dismissal at the pleading stage or whether equitable tolling was plausibly supported by allegations of concealment and misrepresentation.
6. Whether the pleaded Ohio statutory and common-law claims (including civil-rights, fraud, conspiracy, Ohio RICO, and unconscionability) stated claims for relief.

## Decision

- The court granted the motion to dismiss in part and denied it in part.
- The FHA § 3604(b) claim was dismissed for failure to state a claim in this lending context.
- Claims under FHA § 3605, ECOA, and TILA were allowed to proceed.
- The court declined to dismiss the surviving federal claims as time-barred at the Rule 12 stage, finding equitable tolling plausibly alleged.
- Most Ohio statutory and common-law claims (including discrimination, fraud, conspiracy, Ohio RICO, and unconscionability) were allowed to proceed.

## Legal Principles

- FHA § 3604(b) is directed to discrimination in the sale or rental of housing and related terms of obtaining housing; it does not generally reach post-acquisition mortgage financing of already-owned homes.
- FHA § 3605 applies to “residential real estate-related transactions,” including making or purchasing loans to improve, repair, or maintain a dwelling or loans secured by residential real estate.
- “Reverse redlining” may be actionable under FHA § 3605 when a plaintiff plausibly alleges discriminatory targeting of a protected class for unfavorable, predatory credit terms.
- ECOA reaches discrimination “with respect to any aspect of a credit transaction,” including discriminatory terms and targeting in loan origination.
- At the pleading stage, allegations that defendants concealed material loan terms, failed to provide required documents, and delayed discovery of injury can support equitable tolling sufficient to defeat dismissal on limitations grounds.
- Allegations of failure to provide required disclosures and notice of rescission rights can state TILA claims at the Rule 12(b)(6) stage.
- Detailed allegations of coordinated misrepresentations and a broader scheme can be sufficient to plead state-law fraud, conspiracy, racketeering, and unconscionability.

## Conclusion

The court limited FHA liability by dismissing the § 3604(b) theory but permitted plaintiffs to pursue reverse-redlining and related claims under FHA § 3605 and ECOA, as well as TILA and multiple Ohio-law claims, and it treated limitations defenses as premature where concealment-based equitable tolling was plausibly alleged.


Matthews v. New Century Mortg. Corp., 185 F. Supp. 2d 874 (S.D. Ohio 2002)