SMITH v. THE BANK OF NEW YORK MELLON

Filing 30

OPINION. Signed by Judge Kevin McNulty on 3/18/16. (DD, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

CALVIN SMITH,

Civ. No. 13-3994 (KM) (JBC)
Plaintiff,
OPINION

V.

THE BANK OF NEW YORK
MELLON AS SUCCESSOR
TRUSTEE UNDER NOVA STAR
MORTGAGE FUNDING TRUST,
SERIES 2006-3,
Defendant.

KEVIN MCNULTY, U.S.D.J.:
Calvin Smith,

pro Se,

brought this action against The Bank of New York

Mellon, as Successor Trustee Under Nova Star Mortgage Funding Trust, Series
2006-3 (“Mellon”). Counts 1 through 4 allege violations of the New Jersey Home
Ownership Security Act (“ROSA”); Count 5 alleges a violation of the New Jersey
Consumer Fraud Act (“NJCFA”). Now before the Court is Mellon’s motion (ECF
no. 24) for summary judgment and Smith’s cross motion (ECF no. 28) to strike
Mellon’s Answer.
The evidence fails to raise a material issue of fact as to the viability of
Smith’s claims, and I grant summary judgment to Mellon. Smith’s cross-motion
to strike Mellon’s answer seems to be an alternative formulation of his
opposition to the summary judgment motion, and it too will be denied.
I.

BACKGROUND
On June 9, 2006, Mr. Smith entered into a refinancing transaction for

his home in the amount of $183,750.00. Documents he and his spouse
executed included an Adjustable Rate Note, Mortgage, HUD-1, and TILA

1

disclosure. (MSUMF

¶J

1, 5, 6 (admitted); see also Sc Exs. B through F)’ The

mortgage was executed to MERS as nominee for NovaStar Home Mortgage, Inc.,
and assigned to Nova Star Mortgage, Inc.. (MSUMF ¶J 2,3 (admitted)) The
mortgage was then assigned to Defendant Mellon. (MSUMF

¶

4 (admitted))

On September 20, 2011, Smith filed a civil complaint in Superior Court,
Essex County, No. L-7660-11 (“2011 Cplt”). (MSUMF

¶

7 (admitted)) Named as

defendants in the 2011 Complaint are “Saxon Mortgage Services, Inc. and
Fictitious Party Defendant hereinafter described.” That “fictitious party” is
described as “unknown mortgagee,” and is further described as the party
“intended to be design[atjed by Plaintiff as mortgagee who assigned Saxon
Mortgage Services, Inc. to service subject loan.” (MSUMF
see 2011 Cplt.

¶J

¶J

8, 9, 10 (admitted);

1, 4)

On October 12, 2012, in the 2011 Action, the Hon. Paul J. Vichness,
J.S.C., filed an order denying the “Motion of Defendants Saxon Mortgage
Services, Inc. (“Saxon”) and “Fictitious Party Defendant’ (in actuality, Bank or
New York Mellon, as successor trustee under Novastar Mortgage Funding
Trust, Series 2006-3 for Summary Judgment.” (MSUMF

¶J

11, 12 (admitted))

(SC Ex. C, ECF no. 24-3 at 26) The form of Order appears to have been
submitted by “Attorneys for Defendants.” (Id.)

1

The record will be cited as follows:
2011 Cplt.

Complaint in prior action, ECF no. 24-3 at 18.
2011 Decision = Oral decision, Feb. 13, 2013, 2011 Action, ECF no. 28-4 at 3
2013 Cplt. = Complaint in this action, ECF no. 1-3.
LC = Certification of Sandra Lyew, ECF no. 24-2.
MSUMF
SC

=

=

Mellon Statement of Undisputed Material Facts, ECF no. 24-1
Certification of Stephanie A. Sgambati, ECF no. 24-3
=

Smith Cert.
SSUMF

=

Certification of Calvin Smith, ECF no. 28-2
Smith Counter Statement of Undisputed Material Facts, Response to
Mellon Statement, and Statement of Disputed Facts, ECF no, 28-3
=

2

The case was tried over a three day period from February 11—13, 2013.
On April 23, 2013, Hon. Michelle Hollar-Gregory, J.S.C., entered an Order and
Judgment in favor of defendant, Saxon Mortgage Services, Inc., and against the
plaintiff, Calvin Smith, on all claims contained in the plaintiff’s civil complaint
initiating this matter.” (SC Ex. D, ECF no. 24-3 at 28)
Smith disputes the scope of this judgment. Mellon, he says, was not
present for the trial, and the judgment signified only that the mortgage owner
was not present. In support, he attaches transcript excerpts of the Judge’s oral
decision, stating, inter alia,
Thought the claims plaintiff alleges may have some merit, they are
of no moment here because the plaintiff has not met his burden of
proof. The proofs are lacking. The plaintiff has not met the burden
of proof as to whether the defendant is the
the owner of the
mortgage and whether the acts complained of can be attributed to
the named defendant, Saxon.
—

And given that, those facts, though the Court may
understand and is not insensitive to the concerns and the claims
raised by the plaintiff, cannot, as a matter of law, decide in the
plaintiff’s favor. Therefore, judgment is for defendant.
I should also note that the plaintiff in his complaint
identified a fictitious party, but it’s incumbent upon the plaintiff, if
there is a named fictitious defendant, that discovery be taken and
that you take steps to identify or secure the identity of any of these
fictitious parties.
There was no argument or any facts that were presente to
in this regard either. So, their
the Court in
judgment entered
in favor the defendant.
—

—

(2011 Decision, delivered Feb. 13, 2013)
Smith states that there was never any testimony; it was a simple case of
dismissal because he had not named the proper party. Smith explains that,
having realized Saxon was not the proper party, he sought guidance about
what to do. (Smith Cert. ¶{5—7)
What he did was refile his action, this time naming Mellon as defendant,
in Superior Court, Essex County, under Docket no. ESX-L-003709-13. on May

3

29, 2013. (2013 Cplt.) Mellon removed the case to federal court, invoking this
court’s diversity jurisdiction under 28 U.S.C.

§ 1332(a).

The 2013 Complaint, now before this Court, alleges that the original
Mortgage Note and Adjustable Rate Rider provide for an initial rate of 11.65%.
The maximum upward adjustment was to be 3% at the end of the first year,
and 1% each year thereafter, to a maximum rate of 18.65%. (2013 Cplt.

¶J 8—

10) These provisions allegedly were not disclosed in the Truth in Lending
disclosure document. (Id.

¶ 11—13)

The 2013 Complaint also alleges that this was a “high-rate mortgage”
within the meaning of HOEPA, 15 U.S.C.

§ 1602aa(1)(B). This allegation is

based on the May 15, 2006, Daily Treasury Long-Term Rate (“DTLTR”) of
5.26%, and a loan interest rate that exceeded that DTLTR by more than 8%.
(2013 Cplt.

¶J 14—15)

The 2013 Complaint asserts four claims under HOSA, N.J. Stat. Ann.

§

46: 1OB-22:
Count 1

Count 2
Count 3
Count 4

—

—

—

—

Direct financing of points and fees in the amount of $6300,
which is in excess of 2% of the total loan amount of
$183,750.00.
Financing points and fees without certification of counseling
from a credit counselor.
Failure to tell plaintiff to comparison shop for lower rates and
fees.
Total of six $20 breach fees, in addition to 5% late charge.

Count 5 cites the NJCFA, without additional allegations.
II.

DISCUSSION
A. Summary Judgment Standard
Federal Rule of Civil Procedure 56(a) provides that summary judgment

should be granted “if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986); Kreschollek v. S. Stevedoring Co., 223 F.3d 202, 204 (3d Cir. 2000).

4

In deciding a motion for summary judgment, a court must construe all facts
and inferences in the light most favorable to the nonmoving party. See Boyle v.
Cnty. of Allegheny Pa., 139 F.3d 386, 393 (3d Cir. 1998). The moving party
bears the burden of establishing that no genuine issue of material fact
remains. See Celotex Corp. u. Catrett, 477 U.S. 317, 322—23 (1986). “[Wlith
respect to an issue on which the nonmoving party bears the burden of proof
the burden on the moving party may be discharged by ‘showing’—that is,
pointing out to the district court—that there is an absence of evidence to
support the nonmoving party’s case.” Celotex, 477 U.S. at 325.
Once the moving party has met that threshold burden, the non-moving
party “must do more than simply show that there is some metaphysical doubt
as to material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475
U.S. 574, 586 (1986). The opposing party must present actual evidence that
creates a genuine issue as to a material fact for trial. Anderson, 477 U.S. at
248; see also Fed. R. Civ. p. 56(c) (setting forth types of evidence on which
nonmoving party must rely to support its assertion that genuine issues of
material fact exist). “[U]nsupported allegations

...

and pleadings are insufficient

to repel summary judgment.” Schoch v. First Fid. Bancorporation, 912 F.2d 654,
657 (3d Cir. 1990); see also Gleason v. Norwest Mortg., Inc., 243 F.3d 130, 138
(3d Cir. 2001) (“A nonmoving party has created a genuine issue of material fact
if it has provided sufficient evidence to allow a jury to find in its favor at trial.”).
If the nonmoving party has failed “to make a showing sufficient to establish the
existence of an element essential to that party’s case, and on which that party
will bear the burden of proof at trial,

...

there can be ‘no genuine issue of

material fact,’ since a complete failure of proof concerning an essential element
of the nonmoving party’s case necessarily renders all other facts immaterial.”
Katz u. Aetna Cas. & Sur. Co., 972 F.2d 53, 55 (3d Cir. 1992) (quoting Celotex,
477 U.S. at 322—23).
In deciding a motion for summary judgment, the court’s role is not to
evaluate the evidence and decide the truth of the matter, but to determine

5

whether there is a genuine issue for trial. Anderson, 477 U.S. at 249, 106 S.
Ct. 2505. Credibility determinations are the province of the fact finder. Big
Apple BMW Inc. v. BMW0f N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir.1992).

B.

HOSA

New Jersey’s Legislature enacted HOSA, N.J. Stat. Ann.

§ 46:1OB-22 et

seq., in 2003 to curb abusive mortgage lending practices. The Legislature
particularly targeted “the making of loans that are equity-based, rather than
income-based,” in that they involve “the financing of high points and fees.”
N.J.S.A. 46:1OB—23(a).
To address these abuses, HOSA has listed a number of “prohibited
practices” including the following:
a. No creditor making a home loan shall finance, directly or
indirectly, any credit life, credit disability, credit unemployment or
credit property insurance, or any other life or health insurance, or
any payments directly or indirectly for any debt cancellation or
suspension agreement or contract, except that insurance
premiums or debt cancellation or suspension fees calculated and
paid on a monthly basis shall not be considered financed by the
creditor.
b. [Deleted by amendment, P.L.2004, c. 84].
c. No creditor shall recommend or encourage default on an existing
loan or other debt prior to and in connection with the closing or
planned closing of a home loan that refinances all or any portion of
that existing loan or debt.
d. No creditor shall charge a late payment fee in relation to a home
loan except according to the following rules:
(1) The late payment fee may not be in excess of 5% of the
amount of the payment past due.
(2) The fee may only be assessed by a payment past due for
15 days or more.
(3) The fee may not be charged more than once with respect
to a single late payment. If a late payment fee is deducted
from a payment made on the loan, and such deduction
causes a subsequent default on a subsequent payment, no
late payment fee may be imposed for such default. If a late
payment fee has been once imposed with respect to a
6

particular late payment, no such fee shall be imposed with
respect to any future payment which would have been timely
and sufficient, but for the previous default.
(4) No fee shall be charged unless the creditor notifies the
borrower within 45 days following the date the payment was
due that a late payment fee has been imposed for a
particular late payment. No late payment fee may be
collected from any borrower if the borrower informs the
creditor that nonpayment of an installment is in dispute and
presents proof of payment within 45 days of receipt of the
creditor’s notice of the late fee.
(5) The creditor shall treat each and every payment as posted
on the same date as it was received by the creditor, servicer,
creditor’s agent, or at the address provided to the borrower
by the creditor, servicer, or the creditor’s agent for making
payments.
e. No home loan shall contain a provision that permits the creditor,
in its sole discretion, to accelerate the indebtedness. This provision
does not prohibit acceleration of the loan in good faith due to the
borrower’s failure to abide by the material terms of the loan.
f. No creditor shall charge a fee for informing or transmitting to any
person the balance due to pay off a home loan or to provide a
release upon prepayment. Payoff balances shall be provided within
seven business days after the request.
N.J.S.A. 46:1OB—25. Those Section 25 prohibitions apply to all home loans.
ROSA places additional restrictions that apply, not to all home loans, but
only to certain loans designated as “high-cost home loans.”
“High-cost home loan” means a home loan for which the principal
amount of the loan does not exceed $350,000, which amount shall
be adjusted annually to include the last published increase of the
housing component of the national Consumer Price Index, New
York-Northeastern New Jersey Region, in which the terms of the
loan meet or exceed one or more of the thresholds as defined in
this section.
N.J. Stat. Ann.

§ 46:1OB—24 (definitions).

The “thresholds” defining a high-cost loan are as follows:
“Threshold” means any one of the following two items, as defined:
(1) “Rate threshold” means 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
7

Ownership and Equity Protection Act of 1994,” Pub.L. 103-325 (15
U.S.C. s. 1602(aa)), and the regulations promulgated by the Federal
Reserve Board, including 12 C. F.R. s.226.32, without regard to
whether the loan transaction is or may be a “residential mortgage
transaction,” as defined in 12 C.F.R. s.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; or
(b) the lesser of 6% of the total loan amount or $1,000, if the
total loan amount is less than $20,000, and 6% if the total
loan amount is $20,000 or more but less than $40,000.
“Total loan amount” means the principal of the loan minus those
points and fees as defined in this section that are included in the
principal amount of the loan.
N.J. Stat. Ann.

§ 46: 1OB—24 (definitions) [bracket interpolation added].

If a loan meets the definition of a high-cost home loan, ROSA imposes
the following additional limitations and prohibited practices:
a. No high-cost home loan shall contain a scheduled payment that
is more than twice as large as the average of earlier scheduled
payments. This provision shall not apply when the payment
schedule is adjusted to the seasonal or irregular income of the
borrower.
b. No high-cost home loan shall include payment terms under
which the outstanding principal balance will increase at any time
over the course of the loan because the regular periodic payments
do not cover the full amount of interest due.
c. No high-cost home loan shall contain a provision that increases
the interest rate after default. This provision shall not apply to
interest rate changes in a variable rate loan otherwise consistent
with the provisions of the loan documents, provided the change in
the interest rate is not triggered by the event of default or the
acceleration of the indebtedness.
d. No high-cost home loan shall include terms under which more
than two periodic payments required under the loan are
consolidated and paid in advance from the loan proceeds provided
to the borrower.

S

e. Without regard to whether a borrower is acting individually or on
behalf of others similarly situated, any provision of a high-cost
home loan agreement that allows a party to require a borrower to
assert any claim or defense in a forum that is less convenient,
more costly, or more dilatory for the resolution of a dispute than a
judicial forum established in this State if the borrower may
otherwise properly bring a claim or defense or limits in any way
any claim or defense the borrower may have is unconscionable and
void.
f. A creditor shall not make a high-cost home loan unless the
creditor has given the following notice, or substantially similar
notice, in writing, to the borrower, acknowledged in writing and
signed by the borrower not later than the time the notice is
required under the notice provision contained in 12 C.F.R.
s.226.3 1(c).
NOTICE TO BORROWER
YOU SHOULD BE AWARE THAT YOU MIGHT BE ABLE TO
OBTAIN A LOAN AT A LOWER COST. YOU SHOULD SHOP
AROUND AND COMPARE LOAN RATES AND FEES.
MORTGAGE LOAN RATES AND CLOSING COSTS AND FEES
VARY BASED ON MANY FACTORS, INCLUDING YOUR
PARTICULAR CREDIT AND FINANCIAL CIRCUMSTANCES,
YOUR EMPLOYMENT HISTORY, THE LOAN-TO-VALUE
REQUESTED AND THE TYPE OF PROPERTY THAT WILL
SECURE YOUR LOAN. THE LOAN RATE AND FEES COULD
ALSO VARY BASED ON WHICH CREDITOR OR BROKER YOU
SELECT.
IF YOU ACCEPT THE TERMS OF THIS LOAN, THE CREDITOR
WILL HAVE A MORTGAGE LIEN ON YOUR HOME. YOU COULD
LOSE YOUR HOME AND ANY MONEY YOU PUT INTO IT IF YOU
DO NOT MEET YOUR PAYMENT OBLIGATIONS UNDER THE
LOAN.
YOU SHOULD CONSULT AN ATrORNEY-AT-LAW AND A
QUALIFIED INDEPENDENT CREDIT COUNSELOR OR OTHER
EXPERIENCED FINANCIAL ADVISOR REGARDING THE RATE,
FEES AND PROVISIONS OF THIS MORTGAGE LOAN BEFORE
YOU PROCEED. A LIST OF QUALIFIED COUNSELORS IS
AVAILABLE BY CONTACTING THE NEW JERSEY
DEPARTMENT OF BANKING AND INSURANCE.
YOU ARE NOT REQUIRED TO COMPLETE THIS LOAN
AGREEMENT MERELY BECAUSE YOU HAVE RECEIVED THIS
DISCLOSURE OR HAVE SIGNED A LOAN APPLICATION.

9

REMEMBER, PROPERTY TAXES AND HOMEOWNERS
INSURANCE ARE YOUR RESPONSIBILITY. NOT ALL
CREDITORS PROVIDE ESCROW SERVICES FOR THESE
PAYMENTS. YOU SHOULD ASK YOUR CREDITOR ABOUT
THESE SERVICES.
ALSO, YOUR PAYMENTS ON EXISTING DEBTS CONTRIBUTE
TO YOUR CREDIT RATINGS. YOU SHOULD NOT ACCEPT ANY
ADVICE TO IGNORE YOUR REGULAR PAYMENTS TO YOUR
EXISTING CREDITORS.
g. A creditor shall not make a high-cost home loan to a borrower
who finances points and fees in connection with a high-cost home
loan without first receiving certification from a third-party
nonprofit credit counselor, approved by the United States
Department of Housing and Urban Development and the
Department of Banking and Insurance, that the borrower has
received counseling on the advisability of the loan transaction or
completing another substantial requirement developed by the
department.
h. A creditor shall not pay a contractor under a home-improvement
contract from the proceeds of a high-cost home loan, unless the
instrument is payable to the borrower or jointly to the borrower
and the contractor, or, at the election of the borrower, through a
third-party escrow agent in accordance with terms established in a
written agreement signed by the borrower, the creditor, and the
contractor prior to the disbursement.
i. A creditor shall not charge a borrower any fees or other charges
to modify, renew, extend, or amend a high-cost home loan or to
defer any payment due under the terms of a high-cost home loan.

j.

A creditor shall not charge a borrower points and fees in
connection with a high-cost home loan if the proceeds of the highcost home loan are used to refinance an existing high-cost home
loan held by the same creditor as note holder.

k. Notwithstanding any other law to the contrary, a creditor
making a high-cost home loan that has the legal right to foreclose
shall use the judicial foreclosure procedures of this State so long
as the property securing the loan is located in this State.
1. No creditor making a high-cost home loan shall directly or
indirectly finance points and fees in excess of 2% of the total loan
amount.
N.J. Stat. Ann.

§

46:1OB-26.

10

C.

Analysis
1.

“High-Cost Home Loan” (Counts 1, 2, and 3)

Counts 1, 2, and 3, though they do not carefully cite the statutory
sections of HOSA on which they rely, clearly invoke the restrictions and
limitations that HOSA imposes on “high-cost home loans.” See N.J. Stat. Ann.

§

46: 1OB-26. Count 1 alleges direct financing of points and fees in the amount of
$6300, which is “in excess of 2% of the total loan amount,” see N.J. Stat. Ann.

§ 46:1OB-26(l); Count 2 alleges financing points and fees without certification
of counseling from a credit counselor, see N.J. Stat. Ann. § 46: 1OB-26(g); and
Count 3 alleges failure to tell plaintiff to comparison shop for lower rates and
fees, an apparent reference to the required NOTICE TO BORROWER, see N.J.
Stat. Ann.

§ 46:1OB-26(fl.

The threshold issue, then, is whether Smith’s loan is a “high-cost home
loan.” Based on the undisputed evidence, I find that it is not, and that the
restrictions of N.J. Stat. Ann.

§ 46:1OB-26 therefore do not apply.

Section 1OB-24 defines a “high-cost home loan.” It is quoted in full
above, but its test has been summarized as follows:
To qualify as a “high-cost home loan” under the ROSA the
principal amount of the home loan
[1] must not exceed a certain amount, and
[2] “the terms of the loan [must] meet or exceed one or more of the
thresholds as defined in this section.” N.J.S.A. § 46:1OB-24.
Longo v. First Nat. Mortgage Sources, No. CIVA 07-4372 MLC, 2009 WL 313334,
at *4 (D.N.J. Feb. 6, 2009), opinion reinstated in part, No. CIV. A. 07-4372 MLC,
2010 WL 415330 (D.N.J. Jan. 29, 2010) (numbering and line breaks added for
clarity).
The Smith loan obviously meets the first test. The “certain amount” that
a high-cost loan cannot exceed, initially set at $350,000, is adjusted annually
by the New Jersey Department of Banking and Insurance. In 2006 that
maximum amount was $383,682.60. (SC Ex. H, ECF no. 24-3 at 56 (Bulletin
11

05-24 of NJ Dep’t of Banking and Insurance)) The principal amount of Smith’s
loan, consummated in 2006, was $183,750, well beneath that limit.
The second test requires that the loan “meet or exceed one of the
thresholds” defined in N.J. Stat. Ann.

§ 46:1OB-24, quoted at pp. 7—8,

supra.

The first threshold is the “Rate Threshold.” That means that the annual
percentage rate “at the time the loan is consummated” must exceed the Home
Ownership and Equity Protection Act (“HOEPA”) threshold. In 2006, that Rate
Threshold (i.e., the Daily Treasury Long-Term Rate plus 8Yo) equaled at least
13.2 1%.2 The initial interest rate for Smith’s loan was 11.65%, and the APR
was 12.671%.
The second threshold is the “total points and fees threshold.” For a loan
exceeding $40,000, like this one, that 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 4.5% of the total loan amount. N.J. Stat. Ann.

§ 46: 1OB-24, quoted at

pp. 7—8, supra (Mellon points out that the threshold was 5% in 2006, see SC
Ex. G, ECF no. 24-3 at 47, but it makes no difference to the result.)
See N.J. Stat. Ann. § 46: 1OB-24; 12 C.F.R. § 226.32. Smith states, and Mellon
admits, that the Daily Treasury Long-Term Rate on May 15, 2006, was 5.26%. It is
possible to quibble, as defendant does, over whether the applicable rate is the May
rate or the one for the preceding month, but it makes no difference to the result. The
Treasury Department’s online historical data show that the Daily Treasury Long-term
Rate for May 15, 2006, was 5.37%; for April 17, 2006, it was 5.2 1%.
https: / /www. treasury. gov / resource-center / data-chart-center / interestrates / Pages /TextView. aspx?data=longtermrateYear&year=2006. Elsewhere, Mellon
cites a rate for 30-year Treasuries of 5.08%. Again, it makes no difference; the initial
APR would remain well below the threshold.
2

See LC Ex. E, ECF no. 24-2 at 36 (TILA disclosure of APR). The applicable rate
is the one “at the time the loan is consummated.” N.J. Stat. Ann. § 46: 1OB-24
(definition of “Rate threshold”).

Smith objects that the APR escalated, but that is an inevitable consequence of
the adjustable interest rate, which was fully disclosed. The interest rate, which is
lower than the APR, would never be lower than the initial rate of 11.65%. At the first
semiannual change date, it could be increased to a maximum of 14.650% (i.e., an
increase of 3%). Thereafter, increases or decreases on each change date could not
exceed 1%. The interest rate could never exceed 18.650%. (LC Ex. A, ECF no. 24-2 at
6 (Note ¶ 4))
12

The “total loan amount” (principal minus points and fees) is $183,750

—

$6300, or $177,450. Smith alleges that the points and fees charged for his loan
totaled $6300. That $6300 points and fees figure amounts to about 3.55% of
the total loan amount. It therefore does not surpass the 4.5% “total points and
fees threshold” that would make this a “high-cost home loan.”
Because this loan meets neither threshold, it is not a high-cost home
loan. Because it is not a high-cost home loan, it is not subject to the strictures
of N.J. Stat. Ann.

§

46:1OB-26. Counts 1, 2, and 3 all allege violations of

46: 1OB-26, which does not apply to this loan as a matter of law.
Because Mellon is entitled to judgment as a matter of law, I will grant
Mellon’s motion for summary judgment as to Counts 1, 2, and 3.

2.

$

20 Breach fees (Count 4)

Count 4 alleges a violation of the HOPA section 25 prohibited practices;
these apply to all home loans, not just to high-cost loans. According to the
Complaint, Smith was charged the following “breach fees,” which were allegedly
illegal under HOPA:

Date

Amount of Breach Fee

1/21/2008

$20

2/18/2008

$20

6/3/2008

$20

7/15/2008

$20 x 3
Total

(Cplt.

¶J

=

=

$60

$120

22-26; see SSUMF, ECF no. 28-5 at 26—27 (account history statements)

The breach fees, says Smith, were illegal because they were charged in
addition to a 5% late charge. The reference appears to be to N.J. Stat. Ann.
46: 1OB-25(d)(1):
d. No creditor shall charge a late payment fee in relation to a home
loan except according to the following rules:
13

§

(1) The late payment fee may not be in excess of 5% of the
amount of the payment past due.

There is no evidence that these “breach fees” were late payment fees.
That three such fees were incurred in July 2008 tends to suggest that they
were not, but it is simply impossible to tell.
Smith has not met his burden of production to create a material issue of
fact as to this claim. Mellon’s motion for summary judgment is granted as to
Count 4.
3.

NJCFA

Count 5 alleges a violation of the New Jersey Consumer Fraud Act. “To
state a claim under the CFA, a plaintiff must allege: ‘(1) unlawful conduct by
the defendants; (2) an ascertainable loss on the part of the plaintiff; and (3) a
causal relationship between the defendant’s unlawful conduct and the
Plaintiffs’ ascertainable loss.” Mladenov v. Wegmans Food Markets, Inc., 124 F.
Supp. 3d 360 (D.N.J. 2015) (quoting Frederico v. Home Depot, 507 F.3d 188,
202 (3d Cir.2007) (citing Cox v. Sears Roebuck & Co., 138 N.J. 2, 23—24, 647
A.2d 454 (1994)).
This NJCFA claim fails as to the first element, “unlawful conduct.” This
count of the Complaint alleges no additional facts, but simply incorporates the
earlier allegations of the Complaint. At his deposition, Smith acknowledged
that this fraud claim was based on the HOPA violations alleged in Counts 1—4.
(See SC Ex. E, ECF no. 24-3 at 34-35) So it stands or falls with the HOPA
claims, as to which I have already granted summary judgment to the
defendant. Because the HOPA claims are inadequate in their own right, they
cannot furnish the “unlawful conduct” that may be the basis of a NJCFA claim.
As to Count 5, then, summary judgment is granted to Mellon.
4.

Res Judicata

Mellon asserts that all the claims in this action were extinguished by the
judgment in the 2011 action. I found enough ambiguity in the parties and

14

claims decided there to forgo this ground, see pp. 2—4, and consider Smith’s
claims on the merits.

III.

CONCLUSION
For the reasons set forth above, Mellon’s motion for summary judgment

is GRANTED. Smith’s cross-motion to strike Mellon’s Answer, asserted as part
of his opposition to Mellon’s summary judgment motion, is DENIED. An
appropriate Order follows.

Dated: March 18, 2016

HON. KEVIN

15

CNULTY, U.
,U.
3