Campidoglio LLC v. Wells Fargo & Company
Facts: A borrower obtains a mortgage from a lender. The lender is acquired by a second lender which notifies its primary regulator of its intent to substitute the cost of savings index (COSI) used to calculate the mortgage’s interest rate to another. The primary regulator allows 30 days to lapse without objecting. The mortgage’s interest rate is calculated based on the new COSI.
Claim: The borrower seeks to have their mortgage’s interest rate calculated based on the first lender’s COSI, claiming the second lender used unapproved indexes to calculate their mortgage’s interest rate since the regulator did not affirmatively approve the COSI substitution.
Counterclaim: The second lender seeks to continue calculating the mortgage’s interest rate based on the new COSI, claiming the substitution was approved since approval only requires their regulator not object within 30 days of a lender’s notice.
Holding: A California court of appeals holds the second lender may continue calculating the mortgage’s interest rate based on the new COSI since their regulator approved the substitution by allowing 30 days to lapse without objecting. [Campidoglio LLC v. Wells Fargo & Company (September 12, 2017)_CA5th_]
