HUELAS v. WELLS FARGO HOME MORTGAGE, INC.

Filing 16

OPINION. Signed by Judge Robert B. Kugler on 8/6/2012. (TH, )

NOT FOR PUBLICATION

(Doc. No. 8)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
___________________________________
:
MICHELLE HUELAS
:
:
Plaintiff,
:
Civil No. 11-7250 (RBK/JS)
:
v.
:
OPINION
:
WELLS FARGO
:
HOME MORTGAGE, INC.
:
:
Defendant.
:
___________________________________ :
KUGLER, United States District Judge:
This matter arises from a mortgage foreclosure dispute filed by Michelle Huelas
(“Plaintiff”) against Wells Fargo Home Mortgage, Inc. (“Defendant”). Presently before the
Court is Defendant’s Motion to Dismiss the Amended Complaint based on Plaintiff’s alleged
failure to state a claim upon which relief may be granted. The Court finds that Plaintiff has
alleged fraudulent activity on the parts of Plaintiff’s broker, Mid Atlantic Capital, LLC (“Mid
Atlantic”), and originating lender, Novastar Mortgage, Inc. (“Novastar”). However, Plaintiff has
neither brought suit against Mid Atlantic or Novastar, nor properly pled the existence of an
agency relationship between those companies and Defendant. Therefore, and for the reasons
discussed below, the Court grants Defendant’s motion.
I. BACKGROUND
On July 23, 2007, Plaintiff executed a mortgage to finance the purchase of 219 Braddock
Ave., Williamstown, NJ 08094 in the principal amount of $189,000. Compl. ¶ 4. Novastar
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acted as the originating lender, Mid Atlantic acted as the mortgage broker, and Defendant
became the mortgage note holder. Id. As Plaintiff does not directly allege any wrongdoing on
Defendant’s part, Plaintiff’s claims must rest on an agency relationship between Defendant and
either Mid Atlantic and/or Novastar.
Plaintiff alleges that she provided Novastar with her 2007 income tax returns, which
indicated that she earned $1,677 per month, and that Defendant’s agents “fraudulently
manipulated and increased the Plaintiff’s monthly income to $4,750.00 [on the stated income
loan application], in an attempt to qualify [] Plaintiff for a higher loan than her verifiable income
could actually support.” Compl. ¶ 50. Further, Plaintiff alleges that the monthly mortgage
payment of $1,677 exceeded her actual monthly income. Compl. ¶ 59.
Additionally, Plaintiff alleges that she requested a fixed rate loan and did not learn that
she received an adjustable rate mortgage (“ARM”) until the day of closing, on or about July 23,
2007. At that time, Novastar issued Plaintiff an Adjustable Rate Promissory Note and a
mortgage contract with an interest rate floor of 10.750% and a maximum adjustment to 17.750%.
Compl. ¶¶ 61-63.
Plaintiff further alleges that on the day of closing, “Defendant’s agents placed hundreds
of pages [of] complicated loan documents in front of the Homeowner and gave her just a few
minutes to read and try to understand and sign the closing documents.” Compl. ¶ 69. Plaintiff
alleges that she expressed concern over the terms of the loan, but feared forfeiture of her already
paid lending fees and being forced to move back into the motel in which her family had been
residing during the application process. Compl. ¶¶ 71-72. Plaintiff contends that the agents told
her that the current loan rate was unimportant because she would be able to refinance the

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mortgage loan in six months. Compl. ¶ 77. Plaintiff states that despite repeated attempts, she
has not since been able to refinance.1 Compl. ¶ 78.
Plaintiff alleges that at the time Defendant accepted the mortgage note, “it knew that
Novastar routinely employed predatory lending tactics in selling residential loan products.”
Compl. ¶ 5. Plaintiff claims that as a result of the actions of Mid Atlantic, Novastar, and
Defendant, Plaintiff suffered damages from increased mortgage payments, loss of equity, and
onerous payment terms. Compl. ¶ 82.
II. LEGAL STANDARD
A. Motion to Dismiss
Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss an action for
“failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). When
addressing a motion to dismiss, “courts accept all factual allegations as true, construe the
complaint in the light most favorable to the plaintiff, and determine whether, under any
reasonable reading of the complaint, the plaintiff may be entitled to relief.” Fowler v. UPMC
Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (quoting Phillips v. Cnty. of Allegheny, 515 F.3d
224, 233 (3d Cir. 2008)). In other words, a complaint survives a Motion to Dismiss if it contains
sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007).
To make this determination, a three-part analysis is needed. Santiago v. Warminster
Twp., 629 F.3d 121, 130 (3d Cir. 2010). First, the court must “tak[e] note of the elements a
1

Plaintiff alleges that Mid Atlantic again served as the broker in her attempted mortgage refinance transactions.
Compl. ¶ 15.

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plaintiff must plead to state a claim.” Id. (quoting Iqbal, 129 S.Ct. at 1947). Second, the court
should identify allegations that, “because they are no more than conclusions, are not entitled to
the assumption of truth.” Id. (quoting Iqbal, 129 S.Ct. at 1950). Finally, “where there are wellpleaded factual allegations, a court should assume their veracity and then determine whether they
plausibly give rise to an entitlement for relief.” Id. (quoting Iqbal, 129 S.Ct. at 1950). This
plausibility determination is a “context specific task that requires the reviewing court to draw on
its judicial experience and common sense.” Iqbal, 129 S.Ct. at 1949. A complaint cannot
survive where a court can only infer that a claim is merely possible rather than plausible. Id.
B. Leave to Amend
Where a plaintiff has already amended the complaint or defendants have filed a
responsive pleading, the plaintiff may further amend the complaint only with leave of the court.
Fed. R. Civ. P. 15(a); Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000). However, the rule is
not absolute: leave to amend is inappropriate where it would cause undue delay, the amendment
is motivated by bad faith or a dilatory motive, the amendment would cause prejudice, or the
amendment is futile. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir.
1997). “Futility” means that the complaint, as amended, would fail to state a claim upon which
relief could be granted. In assessing “futility,” the District Court applies the same standard of
legal sufficiency as applies under Rule 12(b)(6).” Id. (citing 3 Moore's at ¶ 15.08[4], at 15-81
(3d ed. 2000)).
Leave to amend is rarely applied sua sponte. Fletcher-Harlee Corp. v. Pote Concrete
Contractors, Inc., 482 F.3d 247, 252 (3d Cir. 2007). In Fletcher-Harlee, the Third Circuit held
that “in ordinary civil litigation it is hardly error for a district court to enter final judgment after

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granting a Rule 12(b)(6) motion to dismiss when the plaintiff has not properly requested leave to
amend its complaint.” Id. at 253; see id. at 252-53 (stating that the court “rarely applied the sua
sponte amendment rule outside of the context of a civil rights case . . . . In non-civil rights cases,
the settled rule is that properly requesting leave to amend a complaint requires submitting a draft
amended complaint.”).
III. PROCEDURAL POSTURE
When considering a motion to dismiss, a court may not generally “consider matters
extraneous to the pleadings.” In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d
Cir. 1997). However, if the Court exercises its discretion and permits a party to present matters
outside the pleadings, the Court must (1) convert the motion to dismiss into one for summary
judgment, and (2) allow the parties a reasonable opportunity to present all material pertinent to
such a motion under Federal Rule of Civil Procedure 56. See Fed. R. Civ. P. 12(b). An
exception to this general rule is that the Court may consider (1) exhibits attached to the
complaint, (2) matters of public record, and (3) all documents that are integral to or explicitly
relied upon in the complaint without converting the motion to dismiss into one for summary
judgment. Angstadt v. Midd-W. Sch. Dist., 377 F.3d 338, 342 (3d Cir. 2004).
Defendant has provided a Certification of Daniel W. Lageman, one of Defendant’s
attorneys, in support of its motion. The Certification contains nineteen exhibits: (1) the Contract
for Sale, dated June 12, 2007, (2) the Uniform Residential Loan Application, dated only by the
interviewer (and not Plaintiff) on June 14, 2007, (3) the Mortgage Loan Origination Agreement
with Mid Atlantic, dated June 25, 2007, (4) the Mortgage Broker Business Contract with Mid
Atlantic, dated June 25, 2007, (5) the Mortgage Loan Commitment Form, dated June 25, 2007,

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(6) the Private Mortgage Insurance Disclosure, dated June 25, 2007, (7) the Good Faith Estimate
of Closing Costs, dated June 25, 2007, (8) the Truth-in-Lending Disclosure Statement prepared
by Mid Atlantic, dated June 25, 2007, (9) the Request for Verification of Rent or Mortgage,
dated July 3, 2007, (10) the Employment Verification Form, dated July 9, 2007, (11) the deed,
dated July 23, 2007, (12) the New Jersey Homeownership Act analysis, dated July 23, 2007, (13)
the Uniform Residential Loan Application, dated July 23, 2007, (14) the Settlement Statement,
dated July 23, 2007, (15) the federal Truth-in-Lending Disclosure Statement prepared by
Novastar, dated July 23, 2007, (16) the Occupancy and Financial Status Affidavit, dated July 23,
2007, (17) the Borrower’s Certification, signed by Plaintiff but undated, (18) the Adjustable Rate
Note, dated July 23, 2007, and (19) the mortgage contract, dated July 23, 2007.2 The parties do
not dispute that all of the above documents were signed by Plaintiff. The Court now discusses
whether each of these documents may be considered on Defendant’s Motion to Dismiss.
As Plaintiff’s Complaint concerns her purchase of the property known as 219 Braddock
Avenue, Defendant’s Exhibit 1, the contract of sale, is integral to the Complaint. Compl. ¶ 4. In
the Complaint, Plaintiff explicitly refers to the “loan application” attached as Defendant’s
Exhibit 2; therefore, the Court may consider this document in the pending Motion to Dismiss.
Compl. ¶ 50. Plaintiff also alleges that Novastar “employed, owned, managed and/or
contracted” Mid Atlantic to serve as a broker in a refinance transaction and as a party to the
alleged fraudulent lending. Thus, Defendant’s Exhibits 3, 4, 5 and 9 are properly considered by
the Court, since these documents are integral to this alleged relationship. Compl. ¶ 15.

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Defendant’s Exhibits 18 and 19 are duplicate copies of Plaintiff’s Exhibits A and B.

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As Plaintiff explicitly refers to the Good Faith Estimate and Truth-in-Lending Statement,
Defendant’s Exhibits 7 and 8 will also be considered in the Motion to Dismiss. Compl. ¶ 64.
Plaintiff further alleges that “Defendant’s agents placed hundreds of pages [of] complicated loan
documents in front of Homeowner [on July 23, 2007,] and gave her just a few minutes to read
and try to understand the closing documents.” Compl. ¶ 69. Defendant’s Exhibits 11-17, dated
July 23, 2007, are thus appropriate because they are explicitly referred to in the Complaint.
Defendant’s Exhibits 6 (Private Mortgage Insurance Disclosure)3 and 10 (Employment
Verification Form)4 are not exhibits attached to Plaintiff’s Complaint, matters of public record,
or integral to or explicitly relied upon in the Complaint, and thus are inappropriate for
consideration on a motion to dismiss because they constitute “matters outside the pleadings.”
Aspdin v. Foggia, CIV.A. 10-6490 MLC, 2011 WL 4859910 (D.N.J. Oct. 13, 2011). This Court
will therefore exclude these exhibits from consideration at this time.
IV. DISCUSSION
Plaintiff is pursuing six counts against Defendant. In the first count, a civil conspiracy
claim, Plaintiff contends that Defendant acted in concert and in agreement with Novastar and/or
Mid Atlantic in committing fraud, misrepresentation and predatory lending. Second, Plaintiff
alleges that the conduct of Defendant’s agents violates the New Jersey Consumer Fraud Act,
N.J.S.A. 56:8-1, et seq., thereby voiding Plaintiff’s mortgage. Third, Plaintiff claims she is
entitled to declaratory relief pursuant to N.J.S.A. 2A:16-51, et seq. Fourth, Plaintiff makes a
promissory estoppel claim, arguing that she relied on the statements and promises of Defendant
3

Plaintiff’s need to purchase private mortgage insurance prior to closing is not at issue or even mentioned in the
Complaint.
4
Even though the document attached is titled the “Employment Telephone Verification Form: non self-employed,”
the form simply states that the corporation “Spiritual Touch” was registered with the Camden County Clerk on
October 31, 2001, and provides no other relevant information.

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and its agents to her detriment. Fifth, Plaintiff alleges that Defendant intended that Plaintiff rely
on fraudulent misrepresentations regarding the loan transaction. Finally, Plaintiff contends that
Defendant is a legal assignee of a high-cost mortgage and Note and that Defendant’s actions
make it liable under N.J.S.A. 46:10B-27.
A. Agency Relationship
Plaintiff rests her Complaint on the allegation that Defendant is liable for the allegedly
fraudulent actions of Mid Atlantic and Novastar in originating Plaintiff’s mortgage loan. Compl.
¶ 91. Since Plaintiff has not pointed to any evidence of an express agency relationship, it would
seem that Plaintiff must prove the existence of an apparent agency relationship between
Defendant and Mid Atlantic and/or Novastar in order to establish Defendant’s liability. To prove
the existence of apparent agency, one must establish that: (1) the appearance of authority has
been created by the conduct of the alleged principal and not solely by the conduct of the putative
agent; (2) a third party has relied on the agent's apparent authority to act for a principal; and (3)
the reliance was reasonable under the circumstances. Mayflower Transit, LLC v. Prince, 314 F.
Supp. 2d 362, 374 (D.N.J. 2004) (citing Mercer v. Weyerhaeuser Co., 735 A.2d 576 (App. Div.
1999) (internal citations omitted)). If such facts are alleged, a court must subsequently examine
the “totality of the circumstances” to determine whether an apparent agency relationship existed
even though the principal did not have direct control over the agent. Sears Mortg. Corp., 634
A.2d 74, 80 (N.J. 1993).
Plaintiff has failed to plead facts to support the assertion that Defendant was an agent of
Mid Atlantic or Novastar. Therefore, in the absence of such facts, the Court cannot conclude
that such an agency relationship existed.

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1. Count I: Conspiracy
The Third Circuit has held that in New Jersey the tort of civil conspiracy contains four
elements: (1) a combination of two or more persons; (2) a real agreement or confederation with a
common design; (3) the existence of an unlawful purpose, or of a lawful purpose to be achieved
by unlawful means; and (4) proof of special damages. Morganroth & Morganroth v. Norris,
McLaughlin & Marcus, P.C., 331 F.3d 406, 414 (3d Cir. 2003). However, “not every
conspirator must commit an overt act in furtherance of the conspiracy, so long as at least one
does.” Id. at 415. Here, because Plaintiff has alleged that Novastar and/or Mid Atlantic
committed overt acts, Plaintiff need not demonstrate that Defendant committed an overt act in
furtherance of the conspiracy.
In D & D Assocs. v. Bd. Of Educ., the defendant’s motion for summary judgment was
granted when Plaintiff failed to (1) provide any evidence suggesting that one or more of the
defendants entered into an agreement to commit an unlawful act or engaged in any discussions
that could be construed as an agreement, (2) specifically identify an unlawful act that any
defendant committed in furtherance of the alleged conspiracy, and (3) identify its “special”
damages. No. Civ. 03–1026, 2007 WL 4554208, at * 29 (D.N.J. Dec. 21, 2007).
Plaintiff alleges that Defendant had an agreement and “acted in concert with its agent,
Novastar, and its agent, Mid Atlantic, when committing fraud, misrepresentation and predatory
lending.” Compl. ¶¶ 91-92. Plaintiff further alleges that “Defendant had knowledge of, or acted
in concert with the originating lenders to perpetuate fraud and predatory lending tactics upon the
Plaintiff in an effort to earn profits through the sale of Plaintiff’s loan in the secondary mortgage
market.” Pl. Mem. of Law at 27.

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As in D & D Assocs., Plaintiff makes only vague and conclusory allegations that
Defendant, Novastar and Mid Atlantic were parties to a conspiracy agreement. These allegations
fail to raise Plaintiff’s claim to relief above a speculative level. See Twombly, 550 U.S. at 545.
Therefore, Defendant’s Motion to Dismiss Count I is granted.
2. Count II: Violation of the New Jersey Consumer Fraud Act
To state a claim under the Consumer Fraud Act (CFA), a plaintiff must allege: “(1)
unlawful conduct by the defendant; (2) an ascertainable loss on the part of the plaintiff; and (3) a
causal relationship between the defendant's unlawful conduct and the plaintiff's ascertainable
loss.”5 N.J.S.A. § 56:8-1; Dabush v. Mercedes-Benz USA, LLC, 874 A.2d 1110, 1115 (N.J.
Super. Ct. App. Div. 2005).
Plaintiff alleges that the acts of Defendant’s agents violated the New Jersey Consumer
Fraud Act (CFA), N.J.S.A. § 56:8-1 et seq. Specifically, Plaintiff contends that:
Defendant’s conduct was the act, use or employment of an unconscionable commercial
practice as set forth above includ[ing] deception, fraud, false pretense, false promise,
misrepresentation or the knowing concealments, suppression or omission of material
facts with the intent that Homeowner rely upon such concealment, suppression or
omission in connection with the mortgage transaction herein.
Compl. ¶ 102.
Plaintiff claims that Defendant’s actions caused her to suffer an ascertainable loss
including “attorney fees, costs, [and] interest on a predatory loan.” Id. Plaintiff argues in the

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Under the CFA, “unlawful conduct” is defined as:
The act, use or employment by any person of any unconscionable commercial practice, deception, fraud,
false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of
any material fact with intent that others rely upon such concealment, suppression or omission, in
connection with the sale or advertisement of any merchandise . . . whether or not any person has in fact
been misled, deceived or damaged thereby[.] . . . .

N.J. Stat. Ann. § 56:8-2 (West 1976).

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alternative that “Defendant acted with deliberate ignorance of the fraudulent inducement and
predatory lending tactics employed by its agent and co-conspirator, all to its financial gain.”
Compl. ¶ 103.
The Court finds that Plaintiff’s claim contains sufficient elements and facts, with regard
to Mid Atlantic and Novastar, to plead “unlawful conduct” under the CFA concerning her
mortgage origination. However, as noted above, Plaintiff must demonstrate the existence of an
agency relationship between Defendant and Mid Atlantic and/or Novastar in order to causally
relate her ascertainable loss to the conduct of Defendant. As Plaintiff has not done so, the Court
grants Defendant’s Motion to Dismiss as to Count II.
3. Count III: Declaratory Relief Under N.J.S.A. 2A:16-51, et seq.
Plaintiff asserts that she is entitled to declaratory relief under N.J.S.A. 2A:16-51, et seq.
for the above violations of the CFA or fraud allegedly committed by Defendant. As discussed in
subsection IV.A., supra, before the right to declaratory relief can be addressed Plaintiff must first
establish that an agency relationship between Defendant and Mid Atlantic and/or Novastar
existed. Therefore, the Court grants Defendant’s Motion to Dismiss as to Count III.
4. Count V: Fraud
To establish common-law fraud, a plaintiff must show there was: (1) a material
misrepresentation of a presently existing or past fact; (2) knowledge or belief by the defendant of
its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the
other person; and (5) resulting damages.” Walid v. Yolanda for Irene Couture, Inc., 40 A.3d 85,
90 (N.J. Super. Ct. App. Div. 2012) (quoting Gennari v. Weichert Co. Realtors, 691 A.2d 350,
367 (N.J. 1997)).

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Plaintiff claims that Mid Atlantic and Novastar knowingly misrepresented and omitted
material facts relating to the loan transaction, and that Defendant knew of those falsities and
intended that they be relied on. Compl. ¶¶ 125-129. Plaintiff further alleges that she was
justified in relying on those misrepresentations and omissions, which were the factual cause of
the harm suffered. Compl. ¶¶ 131-133.
Plaintiff has sufficiently pled the elements of a common-law fraud claim as to Mid
Atlantic and Novastar. However, as Plaintiff has not established the existence of an agency
relationship between Defendant and Mid Atlantic and/or Novastar, the Court grants Defendant’s
Motion to Dismiss as to Count V.
5. Count IV: Promissory Estoppel
In order to establish promissory estoppel, four elements must be demonstrated: (1) a clear
and definite promise by the promisor; (2) the promise must be made with the expectation that the
promisee will rely thereon; (3) the promisee must in fact reasonably rely on the promise, and (4)
detriment of a definite and substantial nature must be incurred in reliance on the promise. Pop's
Cones, Inc. v. Resorts Int'l Hotel, Inc., 704 A.2d 1321, 1324 (N.J. Super. Ct. App. Div. 1998).
Plaintiff contends that (1) she relied on the oral and written statements and/or promises of
Defendant’s agents, Mid Atlantic and Novastar, regarding the true terms of the mortgage, (2)
Defendant expected such reliance, (3) her reliance was reasonable, and (4) she relied on these
statements to her detriment. Compl. ¶¶ 117-120. Although the parol evidence rule and Statute
of Frauds would normally bar the admission of such evidence where a written document to the
contrary exists, such written documents are voidable in the case of fraudulent inducement.
Timken Silent Automatic Corp. v. Vetrovec, 119 N.J.L. 500, 503 (N.J. 1938) (finding oral

12

testimony admissible when the execution of a contract was fraudulently induced). In this case,
“the evidence is admitted, not in order to enforce the contract, but rather to avoid it, or as here, to
prosecute a separate action predicated upon the fraud.” Ocean Cape Hotel Corp. v. Masefield
Corp., 164 A.2d 607, 611 (N.J. Super. Ct. App. Div. 1960).
Here, Plaintiff has properly alleged that her contract with Mid Atlantic and Novastar is
voidable. However, as previously discussed, Plaintiff must first establish that an agency
relationship between Defendant and Mid Atlantic or Novastar existed before Plaintiff can state a
claim for promissory estoppel against Defendant. Therefore, the Court grants Defendant’s
Motion to Dismiss as to Count IV.
B. Count VI: Assignee Liability Under the New Jersey Homeownership Security Act
Finally, Plaintiff contends that because she received a “high-cost home loan” pursuant to
N.J.S.A. § 46-10B-27, Defendant, as an assignee of Plaintiff’s mortgage and Note under the New
Jersey Homeownership Security Act (HOSA), is liable for all claims against the original broker
and lender. Compl. ¶¶ 135-137.
Under the HOSA, a high-cost home loan is defined as a home loan for which the
principal amount of the loan does not exceed $350,000, and the annual percentage rate (APR)

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meets or exceeds either the “rate threshold” or the “total points and fees threshold” as defined in
N.J. Stat. Ann. § 46:10B-24.6 The “rate threshold” is exceeded if:
[T]he annual percentage rate at consummation of the transaction will exceed by more
than 10 percentage points the yield on Treasury securities having comparable periods of
maturity on the fifteenth day of the month immediately preceding the month in which the
application for the extension of credit is received by the creditor.
15 U.S.C.A. § 1602 (West 2012); see N.J. Stat. Ann. § 46:10B-24 (West 2004).
According to the Truth-in-Lending Disclosure Statement (Def.’s Ex. 8), dated June 25,
2007, Plaintiff’s APR was set at 11.039%. It is unclear when Plaintiff signed the loan
application, since the application appears only to be dated by the interviewer on June 14, 2007
(Def.’s Ex. 2). As such, the Court will consider two Treasury Security publication dates to
calculate the rate threshold: May 15, 2007, on which the rate was 4.88%, and June 15, 2007, on
which the rate was 5.26%. See Daily Treasury Yield Curve Rates, U.S. DEP’T OF TREASURY,
http://www.treasury.gov/resource-center/data-chart-center/interestrates/pages/TextView.aspx?data=yieldYear&year=2007 (last visited July 27, 2012). Under
either calculation, Plaintiff’s APR of 11.039% does not exceed by 10 percentage points the yield
on Treasury securities for that period.
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The HOSA defines these thresholds as follows:
(1) “Rate threshold”: the annual percentage rate of the loan at the time the loan is consummated such that
the loan is considered a “mortgage” under section 152 of the federal “Home Ownership and Equity
Protection Act of 1994,” Pub.L. 103-325 (15 U.S.C. § 1602(aa)), and the regulations promulgated by the
Federal Reserve Board, including 12 C.F.R. § 226.32, without regard to whether the loan transaction is or
may be a “residential mortgage transaction,” as defined in 12 C.F.R. § 226.2(a)(24).
(2) “Total points and fees threshold” means that the total points and fees payable by the borrower at or
before the loan closing, excluding either a conventional prepayment penalty or up to two bona fide discount
points, exceed:
(a) 4.5% of the total loan amount if the total loan amount is $40,000 or more; . . . .

N.J. Stat. Ann. § 46:10B-24 (West 2004).

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Plaintiff’s APR also fails to exceed the “total points and fees threshold” under the HOSA.
Plaintiff’s settlement statement (Def.’s Ex. 14) indicates that Plaintiff paid a total of $7,426.75 in
fees before the loan closing, which does not exceed 4.5% of the total loan amount.7 Therefore,
because Plaintiff’s APR does not exceed either of the rate thresholds within the HOSA,
Plaintiff’s claim fails as a matter of law. Accordingly, Defendant’s Motion to Dismiss Count IV
is granted.
IV. CONCLUSION
For the foregoing reasons, Defendant’s Motion to Dismiss Counts One through Six of
Plaintiff’s Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) is
GRANTED. An accompanying Order shall issue today.

Dated:

/s/ Robert B. Kugler
_
ROBERT B. KUGLER
United States District Judge

8/06/2012

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4.5% of the “total loan amount” would be equal to $8,505 ($189,000 x 4.5%). The total loan amount is defined as
the principal of the loan minus all points and fees that are included in the principal amount of the loan. N.J. Stat.
Ann. § 46:10B-24 (West 2004). Plaintiff presents no information to suggest that the principal amount on the loan
was less than $189,000 (minus all deducted points and fees) at the loan closing.

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