Boyce v. Amerihome, Inc. and Planetary Bank N.A.

Ned and Charlotte Boyce (defendants) obtained a mortgage from Wonder Mortgage Company. Wonder sold the loan to Maximum Finance Company. Maximum then sold the loan into a securitization of which Planetary Bank N.A. (plaintiff) was the trustee. A pooling service agreement (PSA) governed the securitization. The Boyces’ initial interest rate was 6.3 percent, fixed for two years. Beginning in the third year, the rate was adjustable based on the U.S. Treasury’s one-year Treasury index (the index). At the time, the index was 5.05 percent. Freddie Farmer, the mortgage broker, told the Boyces that their interest rate would increase only if the index increased. However, the promissory note actually stated the rate would be calculated each year by adding seven percentage points to the then-current index and rounding up to the nearest one-fourth of a percentage point. At the time of the Boyces’ first rate adjustment, the index was 0.62 percent, making the Boyces’ new interest rate 7.75 percent. The Boyces defaulted and Amerihome, Inc. (plaintiff), Planetary’s servicer, commenced foreclosure proceedings. The Boyces argued Farmer committed fraud by misrepresenting the nature of the Boyces’ adjustable interest rate. Despite what Farmer told them, the interest rate would increase after the first two years regardless of the index. The Boyces also argued Amerihome breached the PSA, a fact that Amerihome conceded. The Boyces claimed the breach voided the transfer to Planetary. The trial court denied the Boyces’ motion for summary judgment. The Boyces appealed.