December 28, 2007
IMPAC FUNDING CORPORATION D/B/A, IMPAC LENDING GROUP, PLAINTIFF-RESPONDENT,
FRANCISCA C. MENDOZA, HER HEIRS, DEVISES AND PERSONAL REPRESENTATIVES AND HIS/HER, THEIR, OR ANY OF THEIR SUCCESSORS IN RIGHT, TITLE AND INTEREST, MR. MENDOZA, HUSBAND OF FRANCISCA C. MENDOZA,*FN1 HIS HEIRS, DEVISES, AND PERSONAL REPRESENTATIVES AND HIS/HER, THEIR, OR ANY OF THEIR SUCCESSORS IN RIGHT, TITLE AND INTEREST, DEFENDANT-APPELLANT.
On appeal from Superior Court of New Jersey, Chancery Division, Bergen County, F-14855-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 5, 2007
Before Judges Payne and Sapp-Peterson.
Defendant, Francisca Mendoza, appeals from an order of summary judgment entered against her in a foreclosure action instituted by plaintiff, Impac Funding Corporation, Mendoza's mortgage lender.
On appeal, Mendoza raises the following arguments:
I. CONTESTED FORECLOSURE CASES ARE SUBJECT TO RULES OF DISCOVERY AS SET FORTH IN GUIDELINES FOR CHANCERY DIVISION JUDGES; TRIAL COURT FAILED TO CONDUCT A FULL AND FAIR HEARING ON THE ISSUE.
II. TRUTH IN LENDING ACT; CONSUMER FRAUD ACT; REAL ESTATE SETTLEMENT PROCEDURES ACT AND COMMON LAW FRAUD PERMIT A BORROWER TO OBTAIN ALTERNATIVE MEANS OF RELIEF; RESCISSION OF LOAN, SET OFFS, RECOUPMENT. TRIAL COURT ERRED BY FAILING TO RULE ON APPELLATE'S RIGHT TO RESCIND AND/OR SEEK OTHER RELIEF.
In response, Impac asserts that the court properly granted summary judgment in its favor in the absence of any disputed issue of material fact, and that any right to rescind the loan that Mendoza may have possessed had expired at the time of her default.
The record reflects that, in order to purchase residential property located in Leonia, Mendoza, a professional concert violinist, obtained a thirty-year adjustable rate loan from Impac in the amount of $382,000, secured by a mortgage, at an initial interest rate of 8.25%. The note required monthly payments of $3,729.16, including insurance and taxes, and permitted acceleration of the principal balance due upon default. Mendoza closed on the loan on October 23, 2002. Dissatisfied with the loan's terms, Mendoza alleges that she unsuccessfully sought to refinance, and in April 2006, after sporadic payments, she entirely ceased efforts to satisfy her loan obligation. Notice of intention to foreclose was provided,*fn2 and a foreclosure action was instituted by complaint filed on August 21, 2006.
Mendoza answered the complaint, counterclaimed and served a demand for production of documents seeking copies of all documents relating to the procurement and servicing of the loan and mortgage, the loan and mortgage documents themselves, disclosure and closing documents and a variety of other materials. In her pro se answer and counterclaim, replete with citations to legal reference sources, statutes and case law, Mendoza alleged mortgage lending and servicing fraud pursuant to unspecified provisions of the federal Fair Debt Collection Practices Act, 15 U.S.C.A. §§1692-92o, the New Jersey Fair Foreclosure Act, N.J.S.A. 2A:50-53, the federal Real Estate Settlement Procedures Act, 12 U.S.C.A. §§2610-17, and the federal Truth in Lending Act, 15 U.S.C.A. § 1601-67f, as well as the common law. As relief, she sought dismissal of the complaint and a judgment in her favor, along with recoupment of alleged overpayments of fees, charges and other related costs; rescission of the loan; and title to the property without further payments on her part.
By motion returnable on January 5, 2007, Impac sought summary judgment and an order striking Mendoza's answer, on the ground that the answer failed to set forth a defense sufficient in law, and dismissing Mendoza's counterclaim. In a statement of material facts, dated November 27, 2006, that accompanied the motion, Impac's counsel stated that Mendoza had made sporadic payments through March 1, 2006, and had made none thereafter. A foreclosure specialist*fn3 certified that $395,881.65 was presently owing on the accelerated loan obligation.
In opposition to summary judgment, Mendoza asserted that discovery from Impac was incomplete and that documentation in support of Impac's motion was "flimsy." Additionally, Mendoza claimed that there was a last minute modification in the terms of the loan, but she was told at the closing that there was nothing she could do to change the papers, except to rescind. Mendoza characterized Impac's tactics as a "bait and switch."
A hearing on the motion was held. At the hearing, counsel for Impac argued that Mendoza's answer and counterclaim were identical to those submitted by another defendant in an unrelated foreclosure action heard earlier in the year, and that the pleadings were form in nature. Counsel additionally asserted that no evidence of payment after April 2006 had been provided, and that nothing in the pleadings or Mendoza's subsequent opposition to summary judgment raised an issue of material fact that would defeat summary judgment on the foreclosure complaint.
In response, Mendoza stated that she had not received the closing papers until the day of the closing. At that time, the prepayment penalty had been extended from two to five years, but that she was "pretty desperate" and the change was accepted. Mendoza confirmed that she had made no payments since April 2006, claiming that she was in negotiation to refinance the mortgage at the time, and that she was advised not to make additional payments on the original loan. In response to a question by the court, Impac's counsel stated that the reinstatement figure for the loan was then $30,422.56, plus legal fees of $1,630.64.
At the conclusion of the argument, the motion judge stated that, upon receipt of an executed HUD-1 form from Impac, he would grant summary judgment, finding that he was not satisfied that any of the defenses raised by Mendoza were sufficient to defeat the lender's entitlement to be paid, and that there was no dispute as to the amount due. Upon receipt of the requested HUD-1 form, an order of summary judgment, dated January 16, 2007, was filed.
The HUD-1 form is not included in the record on appeal, and the remaining closing documents, which Impac claims to have supplied in discovery, have been included by Mendoza in only fragmentary form. It is therefore not possible for us to determine independently whether the documentation is deficient or the nature and effect of any deficiencies.
Mendoza moved for reconsideration, alleging her understanding that argument would be continued in four weeks.*fn4
In a supplemental certification in support of her motion, Mendoza acknowledged the receipt of additional pre-closing documents from Impac, but asserted that document discovery remained incomplete. She claimed on the basis of the documents recently received that, although she had been advised that the interest rate on her loan would be 7.25%, she had learned that Impac had locked in a higher rate of 8.25% on October 21, 2002, and no explanation for the "last minute switch" had been provided.
A further hearing was conducted on March 2, 2007, at which time Mendoza raised the issue of the increased interest rate, and she argued that her broker had breached its promise to provide her with the best available loan for which she was qualified. Counsel for Impac responded that Mendoza had acknowledged at closing that the broker was an independent agent that she had retained. Counsel additionally asserted that Mendoza had received all truth in lending documents to which she was entitled. Mendoza, in turn, stated that her personal circumstances required her to proceed with the loan. Following argument, the judge reaffirmed his prior judgment in an order dated March 2, 2007. A final judgment of foreclosure was entered on April 13, 2007.
Although a stay of foreclosure was denied by the motion judge, upon Mendoza's application, we granted such a stay on the condition that Mendoza either post a supersedeas bond in the amount of the mortgage balance or pay to plaintiff, beginning in May 2007, the sum of $4,000 per month to be credited against the total debt obligation. In the event that these conditions were not met, the final judgment of foreclosure would be subject to execution. A further order granting emergent relief, dated August 10, 2007, was entered, requiring adjournment of the foreclosure sale and the submission of Mendoza's monthly payments to counsel for Impac.
On appeal to us, Mendoza argues that, because the foreclosure action involving her property constituted a "contested" case, she was entitled to a case management conference and a schedule for discovery, neither of which was ever provided. Additionally, Mendoza claims that she raised serious claims of fraud, as well as noncompliance with the Real Estate Settlement Procedures Act, Truth in Lending Act, and the Consumer Fraud Act, N.J.S.A. 56:8-1 to -135, and with discovery rules governing the production of documents, that were never meaningfully addressed by the motion judge. Summary judgment, Mendoza claims, was granted without according her the discovery to which she was entitled, under our decision in Associates Home Eq. Servs. v. Troup, 343 N.J. Super. 254 (App. Div. 2001), in order to enable her to prove her claim of predatory lending. In an additional argument, Mendoza claims a right of rescission pursuant to the Truth in Lending Act, 15 U.S.C.A. 1635, and the right of set-off or recoupment pursuant to Troup and other cases, as well as the Consumer Fraud Act.
We reject Mendoza's arguments. In essence, she complains that the interest rate on her loan rose from 7.25% at the time of her loan application to 8.25% at the time of closing. However, at the time of the mortgage loan application, Mendoza was advised of her right to lock in her interest rate and points, upon submission of a complete application or at any time up to ten days before closing, if the loan program she selected permitted a lock-in. Mendoza has provided no evidence that she sought to lock in her interest rate, but was denied that ability. Nor has she presented any evidence that would suggest that the rate of 8.25% that she was eventually charged was unconscionable or imposed in violation of state or federal law. Moreover, Mendoza's arguments before the motion judge disclose her awareness of the change in rate at the time of the closing, her knowledge at that time of the right to rescind the loan, and her determination not to do so because of personal considerations. Indeed, Mendoza continued to pay off the loan for a period from December 2002, when the first loan payment was due, until April 2006, when Mendoza intentionally defaulted.*fn5 As a consequence, even if a right of rescission existed and Mendoza had not been advised of that right at the time of closing, see 15 U.S.C.A. §1635(a), the three-year period for rescission that might otherwise be available to her has lapsed. See 15 U.S.C.A. §1635(f) and (i) (establishing time periods). Although 15 U.S.C.A. §1635(e) exempts residential mortgage transactions from these rescission provisions, Heuer v. Forest Hill State Bank, 728 F. Supp. 1199, 1200-01 (D.Md. 1989), aff'd, 894 F.2d 402 (4th Cir. 1990), we will treat the three-day and three-year periods as operative for purposes of gauging the timeliness of Mendoza's claims. Even under these standards, her claim fails. Moreover, we note the absence of any evidence to support an argument that Mendoza complained to Impac regarding its practices and was rebuffed.
Mendoza also complains that the loan prepayment penalty was increased from two to five years by Impac - an increase that was also known to Mendoza at the time of closing when she determined to proceed with the loan transaction, rather than to rescind. Mendoza claims that the imposition of any penalty was an illegal act, and that the imposition of the higher penalty was a part of Impac's alleged bait and switch tactics.
N.J.S.A. 46:10B-2 provides that: "Prepayment of a mortgage loan may be made by or on behalf of a mortgagor at any time without penalty." Prior to July 1, 2003, this statute was preempted by 12 C.F.R. §560.220, which placed state-chartered creditors engaged in alternative mortgage transactions, including issuance of adjustable rate mortgages, 12 U.S.C.A. §3802(1)(A), on an equal footing with their federal counterparts by extending to state lenders the terms of 12 C.F.R. §560.34, which permits prepayment penalties, and by preempting any state law that precluded such charges. See Glukowsky v. Equity One, Inc., 180 N.J. 49, 57-62 (2004) (discussing history of federal regulations), cert. denied, 543 U.S. 1049, 125 S.Ct. 864, 160 L.Ed. 2d 770 (2005). On September 26, 2002, 12 C.F.R. §560.220 was amended to remove 12 C.F.R. §550.34 from the list of federal regulations applicable to state-chartered housing creditors, "finding that a creditor's ability to assess prepayment fees was 'not essential or intrinsic to the ability to offer alternative mortgages.'" Glukowsky, supra, 180 N.J. at 62 (quoting Alternative Mortgage Transaction Parity Act; Preemption, 67 Fed. Reg. 60,562, 60,544 (2002)). However, the effective date of this revision was July 1, 2003, and thus after the closing on Mendoza's loan. See 67 Fed. Reg. 76304 (2002). As a consequence, the imposition of a prepayment penalty by Impac does not appear to have been illegal.
Further, our review of the facts, construed in the light most favorable to Mendoza, Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998), does not suggest any other basis for entitlement to relief by her in this case. As we have noted, Mendoza did not take advantage in a timely fashion of the opportunities presented to her to rescind her mortgage loan, and the prepayment penalty provisions of which Mendoza now complains have expired.
"The only material issues in a foreclosure proceeding are the validity of the mortgage, the amount of the indebtedness, and the right of the mortgagee to resort to the mortgaged premises. Great Falls Bank v. Pardo, 263 N.J. Super. 388, 394 (Ch. Div. 1993) (citing Central Penn Nat'l. Bank v. Stonebridge, Ltd., 185 N.J. Super. 289 (App. Div. 1982). In Troup, we modified Stonebridge by holding that, because in a mortgage foreclosure action the amount due on the mortgage is at issue, "it would be fundamentally unfair and contrary to the remedial goals expressed by [the fair housing and civil rights] statutes to preclude the recoupment remedy simply because it is invoked in a foreclosure proceeding." 343 N.J. Super. at 272-73.
Nonetheless, in the present case, Mendoza has presented for our consideration no substantial grounds upon which a recoupment remedy could be based. At most, she has demonstrated a change in terms at the time of closing that she failed to remedy by rescinding the mortgage loan either at closing or within the three-year period that followed. Mendoza argues that if she had been afforded adequate discovery, a basis for her claims would be evident. However, it appears that all relevant documentation was available to her, at the latest, at the time of her motion for reconsideration. Even assuming that some technical violations may have occurred, we perceive nothing in the record to suggest that Mendoza is entitled to any form of monetary relief. Mendoza, a well-educated woman, has asserted no lack of opportunity to obtain favorable loan terms or lack of negotiating capacity. When confronted with a loan different from that which she expected, she nonetheless determined to proceed to closing, not wishing to contest the loan's terms in a timely fashion. We decline to permit a late challenge, premised upon such slight evidence, at the present time. We recognize that Mendoza is proceeding pro se. Nonetheless, that status does not relieve her of the obligation to provide us with an adequate record demonstrating an entitlement to the remedy sought, and a legal basis for granting that remedy.
We regard the remainder of Mendoza's arguments to lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).