                              In the
    United States Court of Appeals
                For the Seventh Circuit
                           ____________

No. 06-2250
ELIZABETH CUNNINGHAM and
ESTATE OF LOUISE CUNNINGHAM,
                                             Plaintiffs-Appellants,
                                  v.

NATIONSCREDIT FINANCIAL SERVICES CORPORATION
d/b/a EQUICREDIT CORPORATION OF ILLINOIS,Œ
LOAN CENTER, INCORPORATED and MARVIN HUNTER,
                                            Defendants-Appellees.
                           ____________
             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
               No. 02 C 4810—Ruben Castillo, Judge.
                           ____________
    ARGUED JANUARY 12, 2007—DECIDED AUGUST 14, 2007
                     ____________


    Before POSNER, WOOD, and SYKES, Circuit Judges.
  SYKES, Circuit Judge. Elizabeth Cunningham and her
mother refinanced their home and paid more than $10,000
of their loan proceeds to a company previously unknown to


Œ
   Defendant Nationscredit Financial Services Corporation is
the successor by merger to Equicredit Corporation of Illinois,
against which the initial lawsuit was filed. Because Equicredit
is the registered trade name of Nationscredit Financial Services
Corporation, we will refer to this defendant as Equicredit.
2                                               No. 06-2250

them but identified on their loan documents as one of their
creditors. The mystery creditor turned out to be a sham
company operated by the Cunninghams’ loan officer, who
pocketed the money himself. Two years after the loan
closing, Elizabeth and her mother’s estate filed suit,
asserting state-law claims against their mortgage broker
and home improvement contractor and federal claims
against their lender. This appeal is limited to their fed-
eral claims and specifically addresses whether the lender
violated the Truth In Lending Act (“TILA”), as amended
by the Home Ownership and Equity Protection Act
(“HOEPA”), by failing to make required disclosures
applicable to “high-cost” loans. The question is whether the
money stolen by the loan officer should be included in the
calculation of the “total points and fees” paid by the loan
customer, making this a “high cost” loan within the
meaning of HOEPA. The district court said no, and
granted summary judgment in favor of the lender. We
affirm.


                     I. Background
  Elizabeth and her mother, Louise, purchased a home in
Chicago in 1984; Louise lived there until she died in
October 1999. Both women contributed to the monthly
mortgage payments, relying primarily on Louise’s Supple-
mental Security Income and later on Elizabeth’s Social
Security disability benefits.
   In February 1999, Elizabeth and Louise decided to
refinance their mortgage so they could make home re-
pairs. Elizabeth contacted Marvin Hunter, a contractor,
about the repairs, and he recommended Elizabeth contact
Derwin Moore to handle the financing. Moore was a loan
officer and senior executive at the Loan Center, an Illinois-
licensed mortgage broker. He was responsible for taking
loan applications, requesting credit checks, preparing
No. 06-2250                                               3

documents to be sent to lenders, and communicating with
title companies. His compensation was based on a percent-
age of the fees paid to the Loan Center for each loan
transaction he closed.
  Elizabeth met with Moore, who told her she needed a
job—she was unemployed at the time—to qualify for a
loan. Moore went further, however, and instructed Eliza-
beth to falsify a Uniform Residential Loan Application.
Moore told her to state on the application that she worked
at M&M Cleaning Services and was paid $1800 per month
(Elizabeth never worked there) and that she graduated
from high school (she did not). Elizabeth did so, and signed
several additional documents as well, including a Loan
Brokerage Disclosure Statement, a Loan Brokerage Agree-
ment, and a Borrower Information Document. Moore
decided the Cunninghams should request a loan for
$95,200 (Elizabeth was unaware of how he arrived at
this amount), with the broker’s fee set at 10 percent of
the loan amount.
   The Loan Center submitted the Cunninghams’ loan
application in February 1999 to Equicredit, a past lender
to Loan Center clients seeking residential mortgage
refinancings. Two months later, unbeknownst to Eliza-
beth, the Loan Center submitted a revised loan applica-
tion. This unsigned application included additional
fraudulent documentation related to Elizabeth’s nonexis-
tent employment at M&M Cleaning Services, including
fictitious pay stubs and a Request for Verification of
Employment form purportedly signed by the manager of
M&M. These documents falsely represented that Eliza-
beth received $45,000 in wages in 1997; $49,500 in 1998;
and was on her way to receiving over $53,000 in 1999.
  Equicredit approved the loan based on the revised
application in late April or May 1999, obviously failing to
investigate the information in the Residential Loan
4                                              No. 06-2250

Application and other documents. Meanwhile, Elizabeth
obtained several bids for her home-repair work, including
a bid from Hunter. He was not the low bidder, but Eliza-
beth felt obligated to select him because Moore told her
that receipt of the loan was contingent on Hunter doing
the work. Under this constraint, Elizabeth accepted
Hunter’s bid of $32,000.
  Prior to the loan closing, the title company prepared a
Department of Housing and Urban Development Settle-
ment Statement (“HUD-1 Settlement Statement”). This
document reflected that a portion of the loan proceeds
would be used to pay the Loan Center’s broker fee of
$6350, which together with other administrative fees,
amounted to 7.97 percent of the loan amount. Moore did
not explain why the broker fee decreased from the 10-
percent rate he initially quoted Elizabeth; however, by
keeping the fee under 8 percent, Equicredit was not
required to make additional loan disclosures pursuant to
HOEPA. At Moore’s direction, the HUD-1 Settlement
Statement also reflected a $10,500 payment to an entity
called D&E Services. D&E Services was not a creditor of
Elizabeth’s, nor had it ever provided her with any services.
Nevertheless, both Elizabeth and Louise signed the
Settlement Statement at the loan closing.
  Several days after the closing, Moore received the
$10,500 check made out to D&E Services, which he
promptly endorsed and deposited into his personal bank
account. It turns out Moore is the principal of D&E
Services, and Elizabeth was not the only borrower who
unwittingly paid this entity. In almost all of the Loan
Center transactions Moore worked on between April 1998
and October 2000, Moore instructed the title company to
include a payment to D&E Services.
 Two years after the closing, Elizabeth realized something
was awry. In May 2002, Elizabeth’s attorney served
No. 06-2250                                               5

Equicredit with a notice rescinding Elizabeth’s loan
transaction pursuant to 15 U.S.C. § 1635 and requesting
that Equicredit return all the money she paid in connec-
tion with the loan. That same day, Elizabeth and her
mother’s estate filed a 13-count complaint in state court
against Equicredit, the Loan Center, and Hunter.1
Equicredit removed the suit to federal court based on
federal-question jurisdiction, as two of the counts alleged
Equicredit violated TILA by failing to make certain
disclosures required for “high-cost” loans. Equicredit
moved for summary judgment. The district court granted
the motion and declined to exercise supplemental juris-
diction over the remaining state-law claims. Elizabeth and
her mother’s estate appealed.


                     II. Discussion
  We review the district court’s grant of summary judg-
ment de novo, viewing the facts in the light most favorable
to the Cunninghams. Valentine v. City of Chi., 452 F.3d
670, 677 (7th Cir. 2006). Summary judgment is appropri-
ate “if the pleadings, depositions, answers to interrogato-
ries, and admissions on file, together with the affidavits,
if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a
judgment as a matter of law.” FED. R. CIV. P. 56(c); Celotex
Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
  TILA was enacted to protect consumers by requiring
lenders to make meaningful disclosures about loans and
their costs so “the consumer will be able to compare more
readily the various credit terms available to him and avoid
the uninformed use of credit, and to protect the consumer


1
  Shortly after the litigation commenced, Elizabeth sold her
home because she could not afford the loan payments.
6                                                  No. 06-2250

against inaccurate and unfair credit billing.” 15 U.S.C.
§ 1601(a); see generally id. §§ 1601-1667f. It was subse-
quently amended by HOEPA, which requires lenders to
make additional disclosures to borrowers of “high-cost” or
“high-rate” loans. See id. § 1639.
   The facts of this case involve multiple parties and give
rise to several claims, but the legal question before us is
narrow. Specifically, this appeal concerns only the question
whether the Cunninghams’ loan was “high cost” and thus
subject to HOEPA disclosures, which Equicredit concedes
it did not provide. A high-cost HOEPA loan is “a consumer
credit transaction that is secured by the consumer’s
principal dwelling, other than a residential mortgage
transaction . . . if . . . the total points and fees payable by
the consumer at or before closing will exceed the greater
of . . . 8 percent of the total loan amount; or . . . $400.” Id.
§ 1602(aa)(1). “Points and fees” include “all compensation
paid to mortgage brokers.” Id. § 1602(aa)(4)(B). The
parties’ dispute centers on whether the total points and
fees paid to mortgage brokers on this loan exceeded
8 percent of the loan amount.2
  Equicredit argues that because the Loan Center was the
only mortgage broker involved in this transaction, the


2
  The $400 statutory alternative is not at issue here; it would
apply only to very small loans ($400 would exceed 8 percent
on loans of less than $5000). Although we have found no cases
discussing this alternative, Congress apparently intended to
permit mortgage brokers to collect fees of up to $400 for loans
of less than $5000 without triggering the enhanced disclosure
requirements applicable to “high cost” loans. For example, a
mortgage broker processing a $3000 loan would be entitled to
fees up to $400 without HOEPA’s heightened disclosures kick-
ing in (the alternative statutory measure, 8 percent of $3000, is
$240). We also note that the $400 figure is adjusted annually
for inflation. 12 C.F.R. § 226.32(a)(1)(ii).
No. 06-2250                                                7

$6350 broker fee it received pursuant to the HUD-1
Settlement Statement represents the total mortgage
broker fee paid by the Cunninghams. The Loan Center’s
$6350 fee, together with several remaining administrative
fees disclosed on the Settlement Statement, amounts to
7.97 percent of the Cunninghams’ loan—falling short of
the 8 percent required to trigger HOEPA disclosures. Id.
§§ 1602(aa)(1)(B)(i), 1639. The Cunninghams contend the
$10,500 payment to D&E Services was a disguised broker
fee, considering Moore cashed the check and received its
proceeds, and thus should be included in the total points
and fees paid to a mortgage broker for purposes of TILA
and the enhanced disclosure requirements of HOEPA.
  The Cunninghams’ argument must be rejected; neither
D&E Services nor Moore was their mortgage broker. The
HUD-1 Settlement Statement listed D&E Services as a
creditor, and the Cunninghams signed the Settlement
Statement, confirming that it was an accurate descrip-
tion of how their loan proceeds were to be distributed. The
Cunninghams also signed a Loan Brokerage Agreement
that made the Loan Center their sole mortgage broker,
granting the Center the “exclusive right to negotiate a
mortgage loan” on their behalf.
  We have said before that TILA “is not a general prohibi-
tion of fraud in consumer transactions or even in consumer
credit transactions. Its limited office is to protect consum-
ers from being misled about the cost of credit.” Gibson v.
Bob Watson Chevrolet-Geo, Inc., 112 F.3d 283, 285 (7th Cir.
1997). Equicredit was not required to make HOEPA
disclosures because the Cunninghams’ loan does not
constitute a high-cost loan under 15 U.S.C. § 1602(aa)(1).
The legal consequences of Moore’s fraud, and the extent
to which the Cunninghams must bear responsibility
for apparently closing their eyes to it, will have to be
sorted out elsewhere.
                                                 AFFIRMED.
8                                        No. 06-2250

A true Copy:
      Teste:

                   ________________________________
                   Clerk of the United States Court of
                     Appeals for the Seventh Circuit




               USCA-02-C-0072—8-14-07
