The opinion of the court was delivered by: FREDA WOLFSON, Magistrate Judge
Presently before the Court are three separate Motions to
Dismiss Plaintiffs' Class Action Complaint*fn1 pursuant to
Fed.R.Civ.P. 12(b)(6), filed by Defendants Foxtons Inc.,
Foxtons North America, Inc., Foxtons Financial, Inc., and Foxtons
Realtor ("Foxtons Defendants"); Defendants New Century Financial
Corporation and New Century Mortgage Corporation ("New Century
Defendants"); and Worldwide Financial Resources, Inc. ("Financial
Resources"). Plaintiffs' Class Action Complaint alleges
violations of the Real Estate Settlement Procedures Act
("RESPA"); the Truth in Lending Act ("TILA"); the New Jersey
Consumer Fraud Act ("CFA"); the New Jersey Real Estate Sales Full
Disclosure Act ("RESFDA"); breach of contract; breach of the
covenant of good faith and fair dealing; and unjust enrichment.
The Court has jurisdiction over Counts I and II pursuant to
28 U.S.C. § 1331, and over the remaining claims pursuant to
28 U.S.C. § 1367(a). Plaintiffs do not contest dismissal of (1) its
RESPA claim arising under 12 U.S.C. § 2604; or (2) its TILA claim
based upon the failure to provide a Notice of Rescission pursuant
to 15 U.S.C. § 1635, but oppose dismissal of the remainder of
their RESPA and TILA claims. As such, the Court will dismiss
Plaintiffs' claims pursuant to 12 U.S.C. § 2604 and
15 U.S.C. § 1635 as unopposed. For the reasons stated herein, the Court also
will dismiss the remainder of Plaintiffs' RESPA and TILA claims,
with a right to amend. The Court will further deny without
prejudice Defendants' Motions to Dismiss the state law claims,
since I decline to exercise supplemental jurisdiction over
Plaintiffs' state law claims pursuant to 28 U.S.C. § 1367(c)
unless Plaintiffs amend their Complaint to state viable federal
claims. I. BACKGROUND
Defendant Foxtons Realtor, a division of Foxtons North America,
is a residential real estate brokerage firm that conducts
business in New Jersey. Complaint ("Compl.") at ¶¶ 10-12. On
March 16, 2003, Plaintiff Emma Warburton called Foxtons
requesting to see a house listed with Foxtons in Sewell, New
Jersey ("the property"). Id. at ¶ 27. Foxtons told Ms.
Warburton that in order to see the property, she was required to
be pre-qualified for a mortgage. Id. at ¶ 28. Ms. Warburton was
not informed at that time that she would be able to be
pre-qualified by another lender, or that the Foxtons
prequalification process would cost $199.00. Id. at ¶¶ 31-32.
Foxtons then transferred Ms. Warburton to a loan officer from
Foxtons Financial, Inc., a mortgage brokerage firm that is a
wholly owned subsidiary of Foxtons North America, who took her
application over the phone and told her that he would call her
back to let her know whether she was prequalified. Id. at ¶¶
12, 29. About one hour later, the financial loan officer called
Ms. Warburton to tell her that she was approved for a
conventional fixed-rate mortgage at a rate of 5.875%, and that
she would have to pay the $199.00 application fee to complete the
process. Id. at ¶ 32.
Although Plaintiffs did not pay the application fee at that
time, they were permitted to view the property on March 19, 2003.
Id. at ¶ 34. On March 20, 2003, Plaintiffs contacted Foxtons to
place a bid on the property, but were told that their bid would
not be accepted until they paid the application fee. Id. at ¶
35-36. Ms. Warburton provided Foxtons Financial with a credit
card number to pay the fee at that time, and provided all of the
documents required by Foxtons Financial on March 24, 2003. Id.
at ¶ 37-38. On March 25, 2003, Plaintiffs received a letter from Foxtons
Financial, dated March 24, 2003, stating that they had been had
been approved for a mortgage in the amount of $340,000.00. Id.
at ¶ 39 and Exh. 1 to Foxton Defendants' Motion to Dismiss. The
Plaintiffs also received the Contract of Sale on March 25, 2003,
which they executed and faxed to Foxtons' closing coordinator.
Compl. at ¶ 40. The seller completed the contract on March 29,
2003; on March 30, 2003, Plaintiffs gave Foxtons a $5,000.00
deposit, and received a copy of the fully executed contract.
Id. at ¶ 41.
On March 26, 2003, Plaintiffs requested a first mortgage for
80% and a second mortgage (a line of credit) for 10%, instead of
the $340,000 loan referenced in the March 24 letter. Id. at ¶
42. Plaintiffs then scheduled a closing date for May 30, 2003.
Id. at ¶ 43. Also on March 26, 2003, Plaintiffs received an
updated Good Faith Estimate from Foxtons of a 5.875% interest
rate on the loan. Id. at ¶ 44.
On May 19, 2003, Plaintiffs received a call from Foxtons
Financial notifying them that Fannie Mae had not accepted their
loan, but that Foxtons would get a loan from another lender.
Id. at ¶ 47. As such, the Foxtons representative asked for
updated pay stubs and bank statements. Id. Plaintiffs allege
that until that time, they were unaware that Foxtons was having
difficulty obtaining a lender for the mortgage. Id. at ¶ 46.
Foxtons called Plaintiffs on May 21, 2003 to tell them that
their loan had not yet been accepted, but was able to tell them
on May 25, 2003 that they had finally located a lender. Id. at
¶¶ 48, 49. On May 27, 2003, Plaintiffs received a telephone call
from a representative of Defendant Worldwide Financial Resources
("Financial Resources"), who told them that they were not able to
provide the loan at a fixed rate of 5.875%. Id. at ¶ 50. The
Financial Resources representative told Plaintiffs that because of the number of
inquiries on their credit, the best rate that they could offer
was a 2-year Adjustable Rate Mortgage at a rate of 8.75%, and
that he needed updated financial information. Id.
On May 30, 2003, Plaintiffs closed on their mortgage loan with
New Century Mortgage Corporation, the approving lender. HUD-1
Settlement Statement attached as Foxtons Defendants Exh. 3 and
Plaintiffs Exh. 2 ("HUD-1"). According to the HUD-1, among the
"Items Payable in Connection with Loan," were a $500.00
application fee and a 2% yield spread premium paid by New Century
to Financial Resources. Id. at 2.
Plaintiffs argue that the Foxtons Defendants real estate
marketing and loan brokering practices were "unscrupulous," and
that Plaintiffs and other members of the class were victimized
through a scheme that ties real estate services with loan
financing services to enhance profits. They argue that by failing
to disclose fees, Foxtons makes itself more attractive to
homebuyers, and put itself in a position to gain a commission
that it might not have earned had the homebuyers been aware of
these additional fees, in particular, the $199.00
prequalification fee, the $500.00 application fee, and the
alleged commission paid in the form of a yield spread premium
from the mortgage lender.
Plaintiffs also allege that Foxtons encourages home buyers to
utilize their in-house financial services by immediately
transferring potential buyers to Foxtons Financial, which takes a
loan application over the telephone. Compl. at ¶ 24. Foxtons
allegedly neither informs potential buyers that it is affiliated
with Foxtons Financial, nor advises them of their ability to
obtain prequalification from another lender. Id. Plaintiffs
maintain that Foxtons offers consumers mortgage loans at interest
rates that Foxtons agrees to honor upon receipt of certain documents, but fails to take the actions necessary to provide the
loans at the rates and terms disclosed. Id. at ¶ 25.
Plaintiffs also argue that when Foxtons is unable to fulfill
the promises that it allegedly made to induce the sale and market
its loan brokering services, it will pass off potential
homebuyers to other brokers and lenders, for which it receives a
commission in the form of a yield spread fee. Id. at ¶ 26. When
it does so, Foxtons benefits from lenders offering higher
mortgage rates, because it receives a percentage of the loan as
commission. Id. at ¶ 7. Homebuyers are allegedly not notified
of the switch to a higher interest rate loan until days prior to
closing. Id. at ¶ 6. With respect to the non-Foxtons
Defendants, Plaintiffs allege that the "in processing Plaintiffs'
loans, the non-Foxtons defendants failed to comply with
disclosure laws to the detriment of the Plaintiffs," and
generally engaged in fraudulent and deceptive practices. Id. at
¶ 8; Plaintiffs' Opposition Brief ("Pl. Opp. Br.") at 1.