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Payan v. Greenpoint Mortgage Funding, Inc.

2010 WL 99122 (U.S. Dist. Ct. D. N.J. 2010) (Unpublished)

TRUTH-IN-LENDING ACT — In the Truth-in-Lending Act, certain fees need not be disclosed unless such fees are unreasonable and are not bona fide and the failure to disclose a yield spread pre-payment premium is not a violation of the Act because it is not a material disclosure and also is not an item required to be included as part of the finance charge disclosure requirements.

Utilizing a broker, homeowners refinanced their mortgage. Shortly thereafter, the homeowners came to believe that the loan’s terms where unfavorable. They sued the broker and the lender claiming that the broker, acting on behalf of the lender, had made misrepresentations, including that that the broker could secure an affordable loan. The homeowners also alleged that the lender omitted material information in violation of the Truth in Lending Act (TILA) and the New Jersey Consumer Fraud Act (CFA). The claimed omissions included the “finance charge,” and the “Yield Spread Premium.” They alleged that many of these charges were neither bona fide nor reasonable. In addition, they claimed that they never received the TILA-required “right to rescind” notice. The lender responded that: (a) the borrowers received the required notice; (b) the fees were bona fide and reasonable; and (c) it was not the mortgage broker’s agent.

The District Court dismissed the homeowners’ claims. First, it noted that the TILA states that certain charges do not need to be disclosed unless such fees are unreasonable and are not bona fide. In the instant case, the Court ruled that the homeowners failed to state which charges and fees were not bona fide and unreasonable. Second, the Court found that the lender was able to demonstrate that the charges and fees identified by the homeowners were properly disclosed. Third, it held that a failure to disclose the yield spread pre-payment premium did not violate the TILA because it was neither a “material disclosure” nor an item required for inclusion as part of the finance charge under the TILA (since it was already incorporated into the total finance charge). Fourth, the Court found that the homeowners failed to demonstrate that the broker was the lender’s agent since they failed to explain how and why the lender would be accountable for actions committed by the broker. Fifth, it rejected the homeowners’ claim that they did not receive the notice to rescind since both homeowners signed the notice form and gave it to the lender. Further, it held that the homeowners failed to rebut the presumption that the notice’s signature was theirs.

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