Mortgage Expert Witness' Statements regarding TILA Rescission Held to Amount to a Legal Conclusion

Mortgage Expert Witness’ Statements regarding TILA Rescission Held to Amount to a Legal Conclusion

This case involved claims under the federal Truth in Lending Act (“TILA”) regarding alleged errors in a loan arranged between Plaintiff and Defendant, as well as claims of slander of title, quiet title, and wrongful foreclosure. Beginning in 2006, Plaintiff owned residential property in Sandy, Utah (the “Property”). Defendant Veritas Funding, LLC is a mortgage lending company based in Midvale, Utah. On June 11, 2018, Plaintiff obtained a Fannie Mae Homestyle Renovation Loan for $370,500.00 from Defendant to remodel the Property, funding the loan by executing a deed of trust.

Plaintiff had stopped making loan payments to Veritas in February 2020, claiming that Defendant’s lending process “was fraught with continual material disclosure errors.” Plaintiff sent a Notice of Rescission to Defendant on May 13, 2020, recorded with the Salt Lake County Recorder’s Office on June 18, 2020. On April 16, 2021, Defendant entered a Notice of Default and Election to Sell the Property (“Default”) and served the notice to Plaintiff. Plaintiff had until July 16, 2021, to cure the Default.

Plaintiff brought this action on May 31, 2021, in the Third Judicial District Court, Salt Lake County, Utah, subsequently removed to Utah District Court on July 13, 2021. Plaintiff recorded a Lis Pendens on the Property with the County Recorder on October 4, 2021, also filed with the Court.

On September 22, 2023, Plaintiff filed a motion for partial summary judgment on the grounds that her Notice of Rescission was valid and proper due to Defendant’s material disclosure errors in violation of the TILA, and Defendant’s subsequent foreclosure of Plaintiff’s home was therefore unlawful. The Defendants filed a motion for summary judgment on the exact same date alleging that (1) Plaintiff’s TILA rescission claim failed as a matter of law because she did not and could not tender the loan principal; (2) Plaintiff’s damages claims related to TILA violations, including actual damages, statutory damages, attorney fees, and finance charges were time-barred; and (3) Plaintiff’s claim for wrongful foreclosure was not supported by evidence of fraud in the foreclosure proceedings.

Plaintiff had served Defendant with the expert report of Nelson Locke, whose testimony the Defendant sought to exclude in its entirety.

Mortgage Expert Witness

Nelson A. Locke has been an active Mortgage Loan Originator and Mortgage Banker from 1991 to 2013. While an active Mortgage Loan Originator and Mortgage Banker, he originated, underwrote, or approved approximately $450,000,000 of residential forward and reverse mortgage loans. From 2003 to 2013, he was the Legal and Compliance Manager for Value Financial, a Florida based HUD approved Direct Endorsement Lender. From 1991 to 2003, he was the CEO and Chairman of Amstar Financial Services, a publicly traded national HUD FHA Mortgage Banker headquartered in Florida. Since 1996, he has been a member in good standing of the Florida Association of Mortgage Professionals (“FAMP”), the largest state Mortgage Originator Association in the country, and a former President of that Association. While he was President, he wrote, produced, and hosted a public television series entitled “Ask Mr. Mortgage.”

Discussion by the Court

Federal Rule of Evidence 702 allows an expert to testify if the proponent has demonstrated by a preponderance of the evidence that:

(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert’s opinion reflects a reliable application of the principles and methods to the facts of the case.

The Defendant’s motion against Locke did not challenge his qualifications per se but was concerned with part (a) of Rule 702. Defendants objected to Locke’s expert opinions by arguing that “they were the type of impermissible legal analysis that attempt to usurp the role of the judge and jury and also because they exceeded their scope by improperly attempting to instruct the Court that Plaintiff had suffered various damages.”

Plaintiff responded by asserting that Locke had the requisite qualifications and that his testimony was relevant and reliable.

The Court observed that Locke, one of America’s foremost mortgage compliance experts, reviewed the Plaintiff’s Complaint, Defendant’s Answer, documents produced by the parties, and the origination and processing of Plaintiff’s Homestyle residential mortgage loan by Defendants in preparation to give his testimony.

Locke’s assignment scope involved assessing Defendant’s handling of Plaintiff’s Homestyle Loan, examining the impact of rescission on foreclosure, and considering potential violations of Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA), and Unfair, Deceptive, or Abusive Acts or Practices (UDAAP). Locke also aimed to consider any other civil torts present in the case file.

Defendant argued that Locke’s expert report contained numerous instances where he offered legal conclusions regarding the alleged facts of the case. For instance, Defendant pointed out that Locke’s statements regarding TILA rescission appeared to resemble legal opinions. Locke referenced relevant statutes and Supreme Court caselaw before concluding with his opinion that Plaintiff complied with both the timing and form of notice requirements, and that all of Plaintiff’s funds should have been immediately returned. Defendant asserted that admitting Locke’s “array of legal conclusions” concerning nearly every element of Plaintiff’s burden of proof could have undermined the Court’s duty to establish the law and the jury’s ability to apply it to the evidence.

The Court granted in part Defendant’s motion to exclude Locke’s testimony. Testimony offering legal conclusions about the elements of the case Plaintiff was required to prove at trial was excluded. However, to the extent that Locke’s expert testimony provided helpful information to the jury regarding the process of obtaining a Homestyle Loan, or otherwise provided context for the mortgage process and other fact issues based on his expertise, it was not excluded.

As for Plaintiff’s motion for partial summary judgment, the Court observed that Plaintiff sent a notice of rescission outside the three-day period, and none of the other required steps in 15 U.S.C. § 1635(b) were completed. The Court denied Plaintiff’s motion because Plaintiff’s Notice of Rescission was not enough alone to make the rescission complete.

Coming to the Defendant’s motion for summary judgment, the Court held that Defendant cannot require Plaintiff to prove her ability to tender the loan proceeds without first petitioning the Court for an equitable reordering of the TILA rescission process. It was noted that Defendant had made no motion requesting that the Court alter the TILA rescission procedure. Therefore, summary judgment in favor of Defendant due to Plaintiff’s alleged inability to tender the loan proceeds was inappropriate and was denied.

However, because the statute of limitations contained in 15 U.S.C. §1640(e) applied to Plaintiff’s damages claim and Plaintiff filed her damages claim three years after the alleged violations and consummation of the sale, the Court granted summary judgment for Defendant on Plaintiff’s damages claim.

Defendant’s knowledge of the initiation of the timely rescission process and its failure to comply with the requirements of TILA after receiving notice of rescission indicated a genuine dispute of material fact as to the existence of unfair dealing in the foreclosure sale process. If the Plaintiff timely rescinded the loan from Defendant, the trust deed executed through the foreclosure sale became void. The Plaintiff had plausibly alleged that her interests were sacrificed based on Defendant’s improper foreclosure of the Property. Defendant was not entitled to summary judgment on the wrongful foreclosure claim based on the Court’s earlier order denying a continued stay of foreclosure. While the Court denied the Plaintiff’s request for continued injunctive relief, the merits of her claim remained to be determined. Therefore, the Court denied summary judgment for Defendant on the wrongful foreclosure claim.

As of February 26, 2024, the Defendant filed a motion requesting the Court to reconsider the the Memorandum Decision denying Veritas’s Motion for Summary Judgment on Plaintiff’s TILA Rescission Claim.


Plaintiff’s motion for partial summary judgment was denied by the Court while the Defendant’s Motion for Summary Judgment was granted in part and denied in part. The Court also granted in part Defendant’s motion to exclude Plaintiff’s Proposed expert Nelson Locke.

The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.

Key Takeaways:

Locke, recognized as a leading mortgage compliance expert in the United States, was evaluated based on his qualifications and the relevance of his testimony within the scope of Rule 702. His analysis focused on assessing the Defendant’s handling of the Plaintiff’s mortgage loan and potential violations of various acts, demonstrating the importance of expert testimony directly addressing the case’s issues. However, the Court differentiated between permissible expert opinions providing helpful information to the jury regarding the mortgage process and impermissible legal conclusions, excluding the latter to avoid usurping the judge and jury’s role in interpreting the law. This decision highlights the necessity of expert testimony adhering to Rule 702’s criteria, including relevance, reliability, and staying within the expert’s scope of expertise.

Case Details:

Case Caption: Drummond V. Veritas Funding
Docket Number:2:21cv423
Court:United States District Court, Utah
Citation:2024 U.S. Dist. LEXIS 22232
Order Date:February 7, 2024