The opinion of the court was delivered by: Hon. Joseph H. Rodriguez
MEMORANDUM OPINION & ORDER
This matter is before the Court on a motion to remand pursuant to 28 U.S.C. § 1441(c) filed by Defendants Victor and Enoabasi Ukpe. The Court heard oral argument on the motion on October 14, 2009, and the record of that proceeding is incorporated here. For the reasons expressed on the record that date, as well as those articulated below, the motion to remand will be granted.
In ruling on whether a cause of action should be remanded to the state court from which it was removed, the court must assume as true all factual allegations in the plaintiff's complaint. See Steel Valley Auth. v. Union Switch & Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987), cert. dismissed sub nom. Am. Standard, Inc. v. Steel Valley Auth., 484 U.S. 1021 (1988) (internal citations omitted);*fn1 see also Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1985) (citing Pullman Co. v. Jenkins, 305 U.S. 534, 537 (1939) (stating that defendant's right to remove is determined from the plaintiff's pleading at the time of removal)).
Plaintiff Bank of New York as Trustee for the Certificate Holders CWABS, Inc. filed a two-count Foreclosure Complaint against the Defendants, husband and wife, in the Superior Court of New Jersey, Chancery Division, Atlantic County on March 13, 2008. Through its attorneys, Phelan Hallinan and Schmieg, P.C., Plaintiff sought a determination of the amount due on a July 29, 2005 note that Defendants executed to America's Wholesale Mortgage to secure a $224,000 purchase money mortgage on their home located at 717 S. Seventh Avenue, in Galloway, New Jersey, along with possession of the Galloway property. On or about April 25, 2008, Defendants filed an Answer, Affirmative Defenses, and Counterclaims in State court. Defendants also filed, but allegedly did not serve, a Third Party Complaint on or about October 24, 2008.
Specifically, it was alleged that Mr. Ukpe met Third-Party Defendant Robert Childers early in 2005, when he gave Childers a ride in his taxi cab. At the time, Childers was a broker for Third-Party Defendant Morgan Funding Corporation. Childers represented that he could assist Mr. Ukpe in obtaining a loan to purchase a home; for fifteen years prior to that time, the Ukpes had rented a home for their family, which at the time included five children under the age of ten. Based on the Ukpes' credit scores and income, Childers sent the Ukpes a pre-approval letter, indicating that they could obtain a conventional mortgage from Morgan Funding Corporation for up to $152,000.
The Ukpes determined that they could not find a home large enough for their family for under $152,000, but they found a home they liked for $224,000. They allege that Childers encouraged them to consider houses priced at more than their pre-approved $152,000 because they had "good credit." Indeed, Childers obtained a mortgage for the Ukpes from America's Wholesale Lender. The Ukpes were informed that they could put down just $1,000 to buy their house, but they allegedly were not informed that they could increase their down payment to lessen their mortgage.
America's Wholesale Lender allegedly sent the Ukpes mortgage applications, which were mostly blank, and informed them that they should sign and date the documents. Later, the Ukpes discovered that the applications allegedly were falsified to represent that their income was $9,000 per month.
Mr. Ukpe states he was concerned when he received notice that the interest rate on his mortgage would be 8.225%, but Childers allegedly assured him that the interest rate would be less at closing. Shortly before that time, Mr. Ukpe was informed that he would have a variable interest rate for the first three years, and then an interest rate of 7.975%; but after closing, he learned that they had an interest-only loan for three years, and then an adjustable rate mortgage. The Ukpes sought to rescind the loan, but allegedly were persuaded by Morgan Funding and Childers that if they maintained three months of good payments, they would be financed into a lower fixed interest rate. When they called America's Wholesale Lender after three months, however, they were told that they had to be with the lender six months before they could refinance. After six more months, the Ukpes allegedly were told they had to wait another year before refinancing. At about the same time, the Ukpes were informed that Childers had been fired from Morgan Funding.
Additionally, the Ukpes had been informed that taxes were being escrowed as part of their monthly mortgage payments, but initially they allegedly were not. As such, the Ukpes fell behind in their taxes, and were then informed that their monthly mortgage payments would increase by $900 to allow for escrow funding. They were then unable to maintain their mortgage payments.
The Truth In Lending Act (TILA) counterclaim alleged that the disclosures provided to the Ukpes misled them by providing a thirty-year amortization schedule at an interest rate of 8.5%. The Ukpes also alleged they were not given the mandated Right-to-Cancel documents. Moreover, they alleged they were discriminated against on the basis of race, as they are Nigerians, because they allegedly qualified for a loan with better terms. Finally, they alleged that Morgan Funding was paid yield spread premiums, origination, and other fees that it arguably should not have been.
In the Third Party action, the Ukpes alleged common law fraud, consumer fraud, unconscionability, violations of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 (RESPA), the Fair Housing Act, 42 U.S.C. § 3601 (FHA), and the Equal Credit Opportunity Act 15 U.S.C. § 1691 (ECOA), negligent misrepresentation, and negligent lending by various Third-Party Defendants in obtaining a mortgage for the Ukpes. The Amended Answer, Affirmatives Defenses, Counterclaims, and Amended Third Party Complaint was filed in State court on or about March 11, 2009. It alleged, among other things, common law fraud, consumer fraud, unconscionability, and that Bank of New York failed to comply with New Jersey's Fair Foreclosure Act and Fair Consumer Act. It also alleged as bases for the Third-Party Complaint, among other grounds, common law fraud, unconscionability, negligent lending, violations of the New Jersey Consumer Fraud Act, N.J. Stat. Ann. § 56:8-1 (NJCFA), FHA, and ECOA. A Second Amended Answer, Affirmatives Defenses, Counterclaims, and Amended Third Party Complaint was filed in State court on March 20, 2009. It added the Phelan firm as a Third-Party Defendant and alleged, among other things, common law fraud, unconscionability, negligent lending, and violations of the NJCFA, FHA, ECOA, and the Fair Debt Collection Practices Act, 15 U.S.C. § 1692.
Several case management orders were entered by the Honorable William C. Todd III in State court, including an Order permitting the filing of the Third-Party Complaint. In addition, Judge Todd denied the Plaintiff's motion for summary judgment to strike the Ukpes' Answer on November 26, 2008. Judge Todd again denied summary judgment on January 21, 2009, based upon argument that the the Ukpes' mortgage and note to Plaintiff had been falsely notarized. Pursuant to Judge Todd's Orders, an Amended Third Party Complaint was filed on or about March 10, 2009.
The State court judge had ordered additional discovery and a plenary hearing to determine issues regarding allegedly false acknowledgments relied upon by the Phelan law firm in pursuing the foreclosure, as well as potential conflicts of interest in the assignment of the mortgage and note upon which the foreclosure action is based; he scheduled the hearing for April 20, 2009. Specifically, Defendants had argued that the foreclosure complaint was based on a fraudulent assignment of a mortgage note from Mortgage Electronic Registration Systems, Inc. to Plaintiff. It was argued that Francis Hallinan, a partner at the Phelan firm, executed the assignment in his capacity as a MERS officer, while the Phelan firm was a vendor to MERS, the assignor; the Phelan firm also represents the Plaintiff in this foreclosure action, as well as the mortgage servicer, Countrywide Home Loans Servicing, LP. The three Phelan firm named partners, including Hallinan, own Full Spectrum Holdings, which is comprised of Full Spectrum Legal Services, Inc. (FSLS) and Land Title Services. The in-house notary for FSLS, Thomas Strain, testified ...