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Carmen v. Metrocities Mortgage Corp.

2009 WL 1416038 (U.S. Dist. Ct. D. N.J. 2009) (Unpublished)

MORTGAGES; RESPA; ASSIGNEES — Under the FTC Holder Rule, the assignee of a mortgage may be liable for its assignor’s RESPA violations, but an assignee’s liability under the New Jersey Consumer Fraud Act for violations in the Truth In Lending Act is limited.

A husband and wife refinanced their home mortgage. They then claimed that their mortgage broker had made false statements about the loan and that they had relied upon those statements to their detriment. They also claimed that the bank-lender agreed to pay the broker a fee and this was not disclosed to them until the day of closing. According to the couple, this increased the cost of their loan. The terms of this fee, they contend, were intentionally concealed within the “morass of loan documents.” They further alleged that the assignee of the loan demanded a mortgage payment that had already been paid. Based on these claims, they sued the lender and the assignee of the loan. In their suit, they asserted that the lender had violated the New Jersey Consumer Fraud Act (CFA). The original lender and the assignee filed a motion to dismiss.

The United States District Court dismissed claims that the lender had violated the Truth-in-Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA), and the Home Ownership and Equity Protection Act (HOEPA) because each claim was barred by a one-year statute of limitations. It ruled that the borrowers could revive these causes of action if they filed an amended complaint specifically alleging how the lenders fraudulently concealed their TILA, RESPA, and HOEPA violations in a manner that would justify tolling of the statute. As to the TILA and HOEPA claims, the Court held that to the extent these claims were not barred by the statute of limitations, the borrowers did not need to provide any detailed allegations to state a valid claim. It also held that the borrowers could amend their complaint. If they did, and alleged TILA violations that were apparent on the face of the disclosure statement, they would have a valid claim to hold an assignee liable under the statute. As to the RESPA claims against the assignee, the Court held that, to the extent not barred by the statute of limitations, the “FTC Holder Rule” would make the assignee liable for its assignor’s RESPA violations. Thus, the Court ruled that an assignee could be a proper party to be sued under RESPA. As to the CFA claims against the assignee, the Court held that, although the borrowers’ allegations that the assignee might support a breach of contract claim, a mere breach does not violate the CFA. In addition, allegations of credit defamation were not enough to give rise to a CFA claim. Nevertheless, the Court permitted the borrowers to amend their complaint to explain how each defendant may have violated the CFA.

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