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Paretti v. Citimortgage, Inc.

A-6261-04T1 (N.J. Super. App. Div. 2007) (Unpublished)

CONSUMER FRAUD ACT; MORTGAGES; MORTGAGE RECORDING ACT — When it costs the borrower less money to cancel a mortgage than the lender would have charged, the borrower has no ascertainable loss recoverable under the Consumer Fraud Act even though the Mortgage Recording Act requires the lender to take care of the cancellation, and if the borrower has not given the statutory notice to its lender before the borrower causes the mortgage to be cancelled, the lender is not liable to its borrower for attorney’s fees.

A borrower refinanced his home mortgage. The bank sent a payoff letter that did not include the recording charges to cancel the mortgage. After the loan was paid off, the bank wrote to the borrower saying that the bank would send the discharge to the county recording office. There was a second letter in with the first. It said that the bank would only send the mortgage for discharge “if that practice were consistent with individual state guidelines.” To add to the confusion, on the same day, the bank sent the borrower a third letter together with the original mortgage endorsed for cancellation, and instructed the borrower to send it, himself, for recording. The borrower wrote a check for the discharge fee and forwarded the discharge of mortgage to the county clerk’s office, where it was recorded.

Eight months later, the borrower sued the bank for violating both the Mortgage Recording Act and the Consumer Fraud Act based on the bank’s failure to cause the mortgage to be discharged within thirty days after the loan was paid off. Under the Mortgage Recording Act, when a mortgage loan is paid in full, the lender is required to cause the mortgage to be cancelled of record with the county recording officer within thirty days of receipt of all fees to be paid by the borrower. The bank must also provide the borrower with a copy of the transmittal letter to the county recording officer. The bank is permitted to list, in the mortgage loan payoff letter, the amount of the recording fee and can add a $25 fee of its own to record the cancellation. If a bank does not comply with the statute, a borrower may send the bank a written default notice. If the bank does not discharge the mortgage within fifteen days after receipt of the notice, it is subject to statutory penalties. If, as a result of the bank’s noncompliance, a borrower is required to file suit to cancel the mortgage, the bank is liable for the borrower’s attorney’s fees and costs. The bank is not liable for attorneys’ fees unless the borrower first gave the bank twenty days’ notice before filing suit.

Here, the borrower claimed that because the bank did not comply with the statute, he was entitled to the statutory penalties and attorneys’ fees. The bank countered that the borrower failed to provide it with the required fifteen-day default notice before penalties could be imposed. The bank also argued that the borrower was not entitled to attorneys’ fees pursuant to the Mortgage Recording Act because the mortgage had already been discharged of record before the suit was filed. It further claimed that the borrower was not entitled to damages under the Consumer Fraud Act because he did not have an ascertainable loss.

The lower court granted the bank’s motion for summary judgment, and the borrower appealed. With respect to the violation of the Mortgage Recording Act, the Appellate Division found that the borrower did not provide the bank with fifteen days’ written notice, which is a prerequisite for the imposition of penalties against the bank. The Court also agreed that, while no notice is required before a borrower may sue to have a mortgage cancelled of record, twenty days’ notice is required in order to recover attorneys’ fees. It noted that, in any event, the mortgage was cancelled of record eight months before the suit was filed. Further, the Court rejected the borrower’s argument that the lawsuit was filed because the bank was required by statute to submit the original mortgage endorsed for cancellation for recording as opposed to a “satisfaction,” “discharge,” or “release” of mortgage.

With respect to the Consumer Fraud claim, the borrower’s Court found that the borrower could not establish any ascertainable loss arising out of the bank’s failure to abide by the statute. The Court noted that had the bank forwarded the mortgage for cancellation, as was required by the Mortgage Recording Act, it could have charged the recording cost plus a $25 surcharge. By recording the discharge himself, the borrower avoided the surcharge. The Court also held that the borrower’s attorney’s fees in bringing the lawsuit did not qualify as an ascertainable loss. The relief sought in the complaint was to require the bank to cancel the mortgage of record, but the mortgage was actually discharged eight months before the lawsuit was filed.


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