Case 3:12-cv IEG-BGS Document 1 Filed 12/14/12 Page 1 of 13 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA

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1 Case :-cv-0-ieg-bgs Document Filed // Page of 0 0 Joseph J. Siprut* jsiprut@siprut.com Aleksandra M.S. Vold* avold@siprut.com SIPRUT PC N. State Street, Suite 00 Chicago, Illinois Fax:.. Todd C. Atkins (CASB 0) tatkins@siprut.com SIPRUT PC 0 B Street, Suite 0 San Diego, California 0..0 * Pro Hac Vice Application To Be Submitted Counsel for Plaintiffs and the Proposed Putative Class IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA POONAM KHANNA, on behalf of herself and all others similarly situated, v. Plaintiffs, FREEDOM MORTGAGE CORPORATION, Defendant. Case No. 'CV IEG BGS DEMAND FOR JURY TRIAL Plaintiff Poonam Khanna ( Plaintiff ), individually and on behalf of all others similarly situated, by and through her counsel, brings this Class Action Complaint against Defendant Freedom Mortgage Corporation ( Freedom Mortgage ). Plaintiff, on her own behalf and on behalf of a class of similarly situated individuals, alleges as follows upon personal knowledge as

2 Case :-cv-0-ieg-bgs Document Filed // Page of 0 0 to herself and her own acts and experiences, and, as to all other matters, upon information and belief, including investigation conducted by her attorneys. I. NATURE OF THE ACTION. This action targets a lending practice that has an adverse and discriminatory impact on expectant and new mothers.. At all relevant times, and pursuant to Fannie and Freddie guidelines, Freedom Mortgage requires that any prospective borrower provide proof of income and documentation that the income will continue for at least three years. In addition, Freedom Mortgage rechecks the borrower s income just prior to the closing of the loan to ensure that there have been no negative changes to the borrower s net income.. In making these decisions about loan eligibility, however, Freedom Mortgage rejects applicants who are about to embark on maternity leave even if the borrower s net income remains the same both before and during maternity leave. Instead, Freedom Mortgage simply informs the borrower that the loan cannot close until the period of maternity leave has ended, and the borrower has returned to work.. This policy has the effect of penalizing mothers for having children and availing themselves of maternity leave. As such, this conduct violates the Federal Fair Housing Act ( FHA ), U.S.C. 0 et seq., as well as the Federal Equal Credit Opportunity Act ( ECOA ), U.S.C. et seq. Accordingly, Plaintiff asserts claims on her own behalf and on behalf of the other members of the below-defined Class for violations of the FHA and the ECOA. II. JURISDICTION AND VENUE. This Court has subject matter jurisdiction pursuant to U.S.C., which confers upon the Court original jurisdiction over all civil actions arising under the laws of the United States. --

3 Case :-cv-0-ieg-bgs Document Filed // Page of 0 0. In addition, this Court has original jurisdiction pursuant to U.S.C. (d)(). In the aggregate, Plaintiff s claims and the claims of the other members of the Class exceed $,000,000 exclusive of interest and costs, and there are numerous class members who are citizens of States other than Freedom Mortgage.. Venue is proper in this District pursuant to U.S.C. 0(a)(), (b)(), and (c)() as: a substantial part of the events and/or omissions giving rise to the claims emanated from activities within this District, and Freedom Mortgage conducts substantial business in this District. Specifically, Freedom Mortgage provides financing to first-time homebuyers and current homeowners residing in towns and cities throughout this District, subjecting it to this Court s personal jurisdiction and making it a resident for purposes of venue. III. PARTIES Plaintiff. Plaintiff Poonam Khanna is a natural person and citizen of the State of California. Plaintiff resides in this judicial District. Defendant. Freedom Mortgage is a New Jersey corporation headquartered at 0 Pleasant Valley Avenue, Suite 00, in Mount Laurel, New Jersey. 0. Founded in 0, Freedom Mortgage is a full-service, privately held residential mortgage provider that originates and services residential loans with the backing of Fannie Mae, Freddie Mac, and Ginnie Mae. It is licensed to do business in all 0 states, has approximately 00 to 0 employees, and annual sales of at least $,000,000. / / / / Plaintiff resides in California and, for purposes of diversity of citizenship, is deemed to be a citizen of the State of California. Plaintiff is a permanent and legal resident of the United States and has a green card, but is not yet a citizen of the United States. / (last visited November, 0). --

4 Case :-cv-0-ieg-bgs Document Filed // Page of 0 0 IV. FACTUAL BACKGROUND Guidelines Followed by Mortgage Lenders. As government-sponsored entities created to strengthen American housing and mortgage markets, Fannie Mae and Freddie Mac assist mortgage lenders by securitizing the loans they originate. In this role, Fannie Mae and Freddie Mac have established guidelines governing the conditions under which lenders provide home loans to consumers.. Fannie Mae and Freddie Mac guidelines require that borrowers have enough income to pay for the loan on closing day. In addition, the borrower must demonstrate that her income is likely to continue for a minimum of three years. Beginning in 00, Fannie and Freddie guidelines also required that lenders had to recheck an applicant s income status immediately before the closing.. Thus, if a female applicant goes on maternity leave before the loan closes, that sudden change in status may be flagged in the final stages of the underwriting process, before the loan closes.. Importantly, however, in many situations a borrower will take maternity leave but will experience no decrease in net income. As detailed below, in such cases, because the borrower s income does not decrease, it is unlawful to reject the loan application. 0. Fannie Mae itself has publicly stated that there is nothing in its guidelines that would prohibit a borrower on maternity or paternity leave from qualifying for a mortgage, as long as the borrower had proof at the time of the closing that his or her income would be adequate upon returning to work. The Federal Fair Housing Act. In April of, Congress passed the Fair Housing Act ( FHA ), which was codified as Title VII of the Civil Rights Act. The FHA was enacted to protect the purchaser or (last visited December, 0). --

5 Case :-cv-0-ieg-bgs Document Filed // Page of 0 0 renter of a dwelling from discrimination based upon race, color, religion, sex, and national origin. In, Congress amended the FHA to include disability and familial status as additional protected classes.. In pertinent part, the FHA provides as follows: U.S.C. 0(a). In General. It shall be unlawful for any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status, or national origin.. Accordingly, the FHA affords home purchasers significant protection from discrimination when they are seeking to qualify for a mortgage, and provides for a private right of action.. In addition, the U.S. Department of Housing and Urban Development ( HUD ) has authority to administer and enforce the provisions of the FHA. In this capacity, HUD has stated that the FHA protects borrowers from being discriminated against based on maternity leave if they plan to return to work and can otherwise continue to meet the income requirements to qualify for a loan. In particular, HUD has stated publicly: Pregnancy is not a basis to deny or delay a loan. It s just that simple... Mortgage professionals may verify income and other resources and have eligibility standards but they may not single out women on maternity leave to deny or delay loans that they are otherwise eligible for. The Federal Equal Credit Opportunity Act. In April, Congress passed the Equal Credit Opportunity Act ( ECOA ) in order to bar any creditor from discriminating against any borrower participating in a credit-based (last visited December, 0) (emphasis added). --

6 Case :-cv-0-ieg-bgs Document Filed // Page of 0 0 transaction. Like the FHA, the ECOA explicitly forbids discrimination on the basis of sex and marital status. The ECOA provides, in pertinent part, as follows: U.S.C. (a). It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction () on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); () because all or part of the applicant s income derives from any public assistance program; or () because the applicant has in good faith exercised any right under this chapter.. The ECOA and its implementing regulations make it clear that creditors within the meaning of the statute includes mortgage lenders and brokers. C.F.R. 0.(l)(). Freedom Mortgage s Discriminatory Lending Practices. In or about spring 0, Plaintiff applied and qualified for a home mortgage loan through Freedom Mortgage. At the time, she was employed full-time and earning a steady income.. On July 0, 0, Plaintiff went on maternity leave from her employer. During this time, Plaintiff received disability payments from her employer. The net income she received during her maternity leave was almost identical to the net income that she received during fulltime employment.. After Plaintiff notified Freedom Mortgage that she was on maternity leave, Freedom Mortgage responded by informing her that, despite receiving the same net income during maternity leave, the loan could not close. Freedom Mortgage also informed her that the loan would not be able to close until Plaintiff had returned to work and submitted a pay stub Plaintiff s net disability payments were only $ less per paycheck than her compensation before maternity leave. --

7 Case :-cv-0-ieg-bgs Document Filed // Page of 0 0 confirming that she had done so. Freedom Mortgage s position was memorialized in a written communication to Plaintiff, in which Freedom Mortgage stated: Loan can t close until borrower has returned to work full time and paystub confirming return to work has been received. 0. Plaintiff s period of leave was temporary, as she intended to return to work fulltime. In addition, her net income remained precisely the same during her period of leave and enabled her to meet the income requirements for the loan. Freedom Mortgage nonetheless refused to proceed with the loan.. Because Plaintiff client s income did not drop, and she was otherwise qualified for the loan, Freedom Mortgage s per se policy decision to cancel the loan pending Plaintiff s return from maternity leave discriminates on the basis of sex and familial status. V. CLASS ACTION ALLEGATIONS. Plaintiff brings Counts I and II, as set forth below, on behalf of herself and as a class action, pursuant to the provisions of Rules (a), (b)(), and (b)() of the Federal Rules of Civil Procedure on behalf of a Class defined as: All women in the United States who were denied a home loan by Freedom Mortgage based on maternity leave (the Class ). Excluded from the Class are Freedom Mortgage and its subsidiaries and affiliates; all persons who make a timely election to be excluded from the Class; governmental entities; and the judge to whom this case is assigned and any immediate family members thereof.. Certification of Plaintiff s claims for classwide treatment is appropriate because Plaintiff can prove the elements of his claims on a classwide basis using the same evidence as would be used to prove those elements in individual actions alleging the same claims.. Numerosity Federal Rule of Civil Procedure (a)(). The members of the class are so numerous that individual joinder of all Class members in impracticable. On information and belief, there are thousands of consumers who have been affected by Freedom Mortgage s wrongful conduct. The precise number of the Class members and their addresses is presently unknown to Plaintiff, but may be ascertained from Freedom Mortgage s books and --

8 Case :-cv-0-ieg-bgs Document Filed // Page of 0 0 records. Class members may be notified of the pendency of this action by recognized, Courtapproved notice dissemination methods, which may include U.S. mail, electronic mail, Internet postings, and/or published notice.. Commonality and Predominance Federal Rule of Civil Procedure (a)() and (b)(). This action involves common questions of law and fact, which predominate over any questions affecting individual Class members, including, without limitation: a. whether Freedom Mortgage engaged in the conduct as alleged herein; b. whether Plaintiff and the other Class members are entitled to actual, statutory, or other forms of damages, and other monetary relief and, if so, in what amount(s); and c. whether Plaintiff and other Class members are entitled to equitable relief, including but not limited to injunctive relief and restitution.. Typicality Federal Rule of Civil Procedure (a)(). Plaintiff s claims are typical of the other Class members claims because, among other things, all Class members were comparably injured through the uniform misconduct described above.. Adequacy of Representation Federal Rule of Civil Procedure (a)(). Plaintiff is an adequate representative of the Class because her interests do not conflict with the interests of the other Class members she seeks to represent; she has retained counsel competent and experienced in complex class action litigation; and Plaintiff intends to prosecute this action vigorously. The Class members interests will be fairly and adequately protected by Plaintiff and her counsel.. Declaratory and Injunctive Relief Federal Rule of Civil Procedure (b)(). Freedom Mortgage has acted or refused to act on grounds generally applicable to Plaintiff and the other Class members, thereby making appropriate final injunctive relief and declaratory relief, as described below, with respect to Class members as a whole. --

9 Case :-cv-0-ieg-bgs Document Filed // Page of 0 0. Superiority Federal Rule of Civil Procedure (b)(). A class action is superior to any other available means for the fair and efficient adjudication of this controversy, and no unusual difficulties are likely to be encountered in the management of this class action. The damages or other financial detriment suffered by Plaintiff and the other Class members are relatively small compared to the burden and expense that would be required to individually litigate their claims against Freedom Mortgage, so it would be impracticable for Class members to individually seek redress from Freedom Mortgage s wrongful conduct. Even if Class members could afford individual litigation, the court system could not. Individualized litigation creates a potential for inconsistent or contradictory judgments, and increases the delay and expense to all parties and the court system. By contrast, the class action device presents far fewer management difficulties, and provides the benefits of single adjudication, economy of scale, and comprehensive supervision by a single court. VI. CLAIMS ALLEGED COUNT I Violation of 0(a) of the Fair Housing Act (On behalf of the Class) 0. Plaintiff incorporates by reference the allegations contained in Paragraphs - as though fully set forth herein.. The FHA prohibits discrimination on the basis of sex or familial status, among other protected categories. U.S.C. 0(a).. The FHA applies to any entity whose business includes engaging in residential real estate-related transactions. U.S.C. 0(a).. Moreover, the FHA defines residential real estate-related transaction as, among other things, the making or purchasing of loans or providing other financial assistance... for purchasing, constructing, improving, repairing, or maintaining a dwelling[.] U.S.C. 0(b). --

10 Case :-cv-0-ieg-bgs Document Filed // Page 0 of 0 0. As an originator and servicer of residential mortgages to individuals, Freedom Mortgage engages in residential real estate-related transactions within the meaning of the FHA. Freedom Mortgage is therefore subject to the FHA.. Freedom Mortgage s policy and practice of rejecting loan applications when a female applicant is about to embark on maternity leave, despite that the applicant s income during the period of leave remains at qualifying levels, violates the FHA, because the conduct constitutes discrimination based upon the borrowers sex and/or familial status.. The FHA provides a private right of action to consumers who have been aggrieved by a violation of U.S.C. 0(a). Specifically, such an aggrieved person may commence a civil action in an appropriate United States district court or State court not later than years after the occurrence or the termination of an alleged discriminatory housing practice[.] U.S.C. (a)()(a).. The FHA further provides that any consumer aggrieved by any violation of U.S.C. 0(a) may recover actual and punitive damages, and permanent or temporary injunctive relief. U.S.C. (c)(). In addition, the consumer may recover reasonable attorney s fees and costs at the court s discretion. U.S.C. (c)().. Plaintiff and each of the other members of the Class have suffered injuries as a result of Freedom Mortgage s violation of U.S.C. 0(a), including the time and expense associated with pursuing alternative loans.. Plaintiff, on behalf of herself and the Class, therefore seeks redress as provided by U.S.C. (c), including actual, statutory, and punitive damages, injunctive relief, and attorney s fees and costs. COUNT II Violation of (a) of the Equal Credit Opportunity Act (On Behalf of the National Class) 0. Plaintiff incorporates by reference the allegations contained in Paragraphs - as though fully set forth herein. -0-

11 Case :-cv-0-ieg-bgs Document Filed // Page of 0 0. The ECOA prohibits credit discrimination on the basis of sex or marital status, among other protected categories. U.S.C. (a)().. The ECOA regulates the conduct of any creditor, which includes any person who regularly extends, renews, or continues credit including mortgage brokers. U.S.C. (a)(e). The ECOA s implementing regulations further specify that mortgage brokers that do not participate in credit decisions are still regarded as creditors for purposes of the ECOA s prohibition against credit discrimination. C.F.R. 0.(l)().. Freedom Mortgage is a creditor within the meaning of the ECOA, and is subject to ECOA.. Freedom Mortgage s policy and practice of rejecting loan applications when a female applicant is about to embark on maternity leave, despite that the applicant s income during the period of leave remains at qualifying levels, violates ECOA, because the conduct constitutes discrimination based upon the borrowers sex and/or marital status.. The ECOA provides a private right of action to consumers who have been aggrieved by a violation of U.S.C. (a). Specifically, [a]ny creditor who fails to comply with any requirement imposed under this subchapter shall be liable to the aggrieved applicant for any actual damages sustained by such applicant acting either in an individual capacity or as a member of a class. U.S.C. e(a).. The ECOA further provides that any creditor found to have violated U.S.C. (a) shall be liable to the aggrieved consumer for actual damages and for punitive damages in an amount not greater than $0, except that in the case of a class action the total recovery under this subsection shall not exceed the lesser of $00,000 or per centum of the net worth of the creditor. U.S.C.A. e(b). In addition, the court will award costs and a reasonable attorney s fee if the plaintiff prevails in the action. U.S.C.A. e(d). --

12 Case :-cv-0-ieg-bgs Document Filed // Page of. Plaintiff and each of the other members of the Class have suffered injuries as a result of Freedom Mortgage s violation of U.S.C. (a), including the time and expense associated with pursuing alternative loans.. Plaintiff, on behalf of herself and the Class, therefore seeks redress as provided by U.S.C.A. e, including actual, statutory, and punitive damages, equitable relief, and attorney s fees and costs. VII. JURY DEMAND 0 0 Pursuant to Federal Rule of Civil Procedure (b), Plaintiff demands a trial by jury of all claims in this Complaint so triable. VIII. REQUEST FOR RELIEF WHEREFORE, Plaintiff, individually and on behalf of the other members of the Class proposed in this Complaint, respectfully requests that the Court enter an Order awarding the following relief: A. Declaring that this action may be maintained as a class action, certifying the Class as requested herein, and appointing the undersigned counsel as Class Counsel; B. Enjoining Freedom Mortgage from the unlawful practices and statutory violations asserted herein; C. An Order awarding actual damages, in an amount to be determined at trial; D. An Order awarding statutory and punitive damages, and injunctive relief, pursuant to the FHA, and the ECOA; E. An Order awarding attorneys fees and costs pursuant to the FHA, and the ECOA; F. Such other and further relief as may be just and proper. Dated: December, 0 Respectfully submitted, POONAM KHANNA, on behalf of herself and all others similarly situated, By: /s/ Todd C. Atkins One of the Attorneys for Plaintiff And the Proposed Putative Class --

13 Case :-cv-0-ieg-bgs Document Filed // Page of 0 Joseph J. Siprut* jsiprut@siprut.com Aleksandra M.S. Vold* avold@siprut.com SIPRUT PC N. State Street, Suite 00 Chicago, Illinois Fax:.. Todd C. Atkins tatkins@siprut.com SIPRUT PC 0 B Street, Suite 0 San Diego, California 0..0 * Pro Hac Vice Application To Be Submitted 0--, v. 0 --