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Payan v. Greenpoint Mortgage Funding

January 6, 2010

JOHN AND MARIA PAYAN, INDIVIDUALLY AND AS H/W, PLAINTIFFS,
v.
GREENPOINT MORTGAGE FUNDING, INC., AMERICAN MORTGAGE, INC., KAREN MCHALE INDIVIDUALLY AND/OR D/B/A AMERICAN MORTGAGE,: INC., HOMEQ SERVICING CORPORATION, AND JOHN DOES 1-10, DEFENDANTS.



The opinion of the court was delivered by: Hillman, District Judge

OPINION

Plaintiffs, John and Maria Payan, sought to finance the purchase of their new residence by obtaining a loan subject to a mortgage on their property. With the assistance of their mortgage brokers, American Mortgage, Inc. and Karen McHale, plaintiffs obtained a loan from Litton Loan Servicing, LP. However, because the loan did not feature the favorable terms that plaintiffs had sought and could not be refinanced in a timely manner, plaintiffs, relying on the suggestion of their broker, refinanced into another loan with GreenPoint Mortgage Funding, Inc. ("GreenPoint"). After they had entered into the mortgage loan with GreenPoint, plaintiffs learned that the loan's terms also were unfavorable to them and detrimental to their interests.

On December 31, 2008, plaintiffs filed a complaint in this Court against GreenPoint, American Mortgage, McHale, Litton Loan Servicing LP and its general partner, Litton GP, LLC (collectively, "Litton"), and Homeq Servicing Corporation ("Homeq"), who handled the administration of the loan.*fn1 Among their allegations, plaintiffs averred that defendants misrepresented and failed to disclose material information in relation to the mortgage loans, thereby violating several statutes including the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., and the New Jersey Consumer Fraud Act ("CFA"), N.J.S.A. § 56:8-1 et seq. In response to plaintiffs' claims, GreenPoint filed a Motion for Judgment on the Pleadings, which is presently the sole matter before this Court.

For the reasons expressed below, GreenPoint's Motion for Judgment on the Pleadings will be granted, but plaintiffs' claims will be dismissed without prejudice. Plaintiffs will have fourteen (14) days from the date of this Opinion to file an amended complaint.

I. JURISDICTION

This Court exercises subject matter jurisdiction over plaintiffs' remaining federal claim pursuant to 28 U.S.C. § 1331 and may exercise supplemental jurisdiction over any related state law claims pursuant to 28 U.S.C. § 1367.

II. BACKGROUND*fn2

Plaintiffs sought to finance the purchase of their new residence by obtaining a loan subject to a mortgage on their property. To facilitate the loan, plaintiffs relied on American Mortgage and McHale, an employee of American Mortgage, to act as its mortgage broker. By April 2006, plaintiffs were scheduled to finalize a loan that American Mortgage and McHale (collectively, "broker") had obtained for them.

According to plaintiffs, however, problems arose surrounding the loan. Originally scheduled for April 24, 2006, the closing was rescheduled for April 17, 2006. Despite repeated requests and the closing's imminency, the broker failed to provide plaintiffs in advance with pertinent details regarding the loan, such as the monthly payment, interest rate, and closing costs. In addition, McHale did not appear at the closing to assist plaintiffs as she had promised to do. Because certain documents were not forwarded to the title company, the closing was delayed further on April 17th. Moreover, the loan did not include all of the terms that were promised to plaintiffs. Via telephone, plaintiffs spoke with McHale who assured plaintiffs that they should sign the papers and that the loan would be refinanced within thirty days to comport with their expectations. As a result of that conversation, plaintiffs signed the documents at closing and purchased the property. At some point after the closing, Homeq assumed the administration of the loan, including collecting, monitoring, reporting, and remitting loan payments.

Assurances notwithstanding, the broker could not refinance the loan as plaintiffs had expected and desired. Nevertheless, the broker informed plaintiffs of another loan which might be more favorable to them but with slightly higher monthly payments. Plaintiffs accepted the broker's suggestion and, in November 2006, the broker, according to plaintiffs' complaint, "refinanced Plaintiffs into a complex, negative amortization, Payment-Option, Adjustable Rate Mortgage through [GreenPoint], without disclosure of the details and terms of the loan, just advising Plaintiffs that the program was similar to the COSI loan" they wanted from the outset. The loan was in the amount of approximately $256,500 and was secured by a mortgage on plaintiffs' property.

Plaintiffs were unaware of the agreement's terms until they received monthly mortgage statements. Upon learning of the terms, plaintiffs contacted GreenPoint, who informed them that their loan was nothing like the COSI loan they had sought to obtain. Contrary to the broker's representations, the second monthly statement from GreenPoint indicated that plaintiffs' interest rate increased from 2.5% to 9.25% and that monthly payments rose from $1,365 to $2,400.

Plaintiffs refinanced out of the loan in 2007. Thereafter, on December 31, 2008, plaintiffs filed a complaint in this Court against GreenPoint, American Mortgage, McHale, Homeq, and Litton.*fn3 Among the allegations set forth in their complaint, plaintiffs aver that American Mortgage and McHale made several material misrepresentations to them, including that the broker could secure plaintiffs an affordable loan featuring the best possible terms given plaintiffs' circumstances. Germane to the present matter, plaintiffs also allege that GreenPoint violated the TILA by failing to make material disclosures concerning the "amount financed," the "finance charge," and the "annual percentage rate," among other pertinent information. Similarly, plaintiffs claim that GreenPoint failed to disclose charges and fees for which plaintiffs ultimately bore the cost, such as the "'Yield Spread Premium'" ("YSP"), and that a number of those charges and fees were neither bona fide nor reasonable. In addition, plaintiffs state that GreenPoint did not provide each of them with two copies of the notice of the right to rescind as is mandated by the TILA. Finally, plaintiffs seem to intimate that GreenPoint failed to enforce its own underwriting guidelines, resulting in the issuance of a mortgage loan on which plaintiffs were destined to default, and that some sort of agency relationship may have existed between defendants, including GreenPoint and the broker.

Plaintiffs conclude that had defendants acted appropriately and in accordance with their duties and responsibilities, "the loan would not have closed, or, if it did, it would have closed upon different more beneficial terms." As a consequence of this misconduct, plaintiffs seek, among other remedies, to rescind the mortgage loan ...


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