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Ngwa v. Castle Point Mortgage

August 20, 2008


The opinion of the court was delivered by: Andrew J. Peck, United States Magistrate Judge


Plaintiff Vera Ngwa brings this action against, inter alia, defendants Castle Point Mortgage, Inc., Heather Gearin, and Royal Settlement Services, Inc. (collectively, the "Castle Point Defendants" or the "defendants"), alleging violations of the Truth In Lending Act ("TILA"), New York General Business Law § 349, New York Banking Law § 589, Real Estate Settlement Procedures Act ("RESPA"), and New York Judiciary Law §§ 484 and 495. (Dkt. No. 24: 2d Am. Compl. ["Compl."] ¶ 1.) Ngwa also seeks damages for negligence and fraud and rescission of the mortgage at issue. (Compl. ¶ 1.)

The parties have consented to decision of this case by a Magistrate Judge pursuant to 28 U.S.C. § 636(c). (Dkt. No. 9.)

Presently before the Court is the Castle Point Defendants' motion to dismiss the complaint pursuant to Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure (Dkt. No. 16: Defs. Notice of Motion), on the grounds that: (1) Ngwa's first and second causes of action fail to state a TILA claim because defendants made all necessary disclosures before consummation of the mortgage transaction (Dkt. No. 18: Defs. Br. at 2-4); (2) Ngwa's third and fourth causes of action pursuant to New York General Business Law allege acts that do not fit the objective definition of "deceptive acts or practices" and are "baseless, non-actionable breach of fiduciary duty allegations" (Defs. Br. at 11-13); (3) Ngwa's fifth cause of action fails because New York Banking Law § 589 "does not contain any specific requirements or prohibitions, and does not mention excessive fees" (Defs. Br. at 14-15); (4) Ngwa's sixth cause of action for fraud "is not pled with the requisite particularity" (Defs. Br. at 4-11); (5) Ngwa's seventh cause of action fails to state an unconscionability claim because the alleged facts defeat any claim of procedural or substantive unconscionability (Defs. Br. at 16-18); (6) Ngwa's negligence claim (eighth cause of action) fails "to allege that a duty existed, or [allege] any facts which would support the existence of such a duty" (Defs. Br. at 18-19); (7) Ngwa's RESPA claim (ninth cause of action) fails to allege which fees "were not reasonable or bonafide," and Ngwa does not indicate which provision of RESPA was violated (Defs. Br. at 19-20); and (8) Ngwa's tenth cause of action fails to state a claim for unauthorized practice of law because nothing in New York Judiciary Law §§ 484 or 495 "addresses the issue of a non-attorney acting as settlement or closing agent in a mortgage transaction" (Defs. Br. at 20-21).

For the reasons set forth below, Castle Point/Royal's motion to dismiss (Dkt. No. 16) is GRANTED, as follows: Ngwa's federal claims (under TILA and RESPA, the first, second and ninth causes of action) are dismissed with prejudice and plaintiff Ngwa's remaining state-law claims are dismissed without prejudice.


The facts alleged in Ngwa's complaint*fn1 are assumed to be true for purposes of this motion, and will be set forth herein without use of the preamble "Ngwa alleges."

The Parties

Ngwa resides and owns property located at 10 West 123rd Street, New York, New York. (Dkt. No. 24: Compl. ¶ 4; Dkt. No. 17: Grace Aff. ¶ 2 & Exs. C-H.)

Defendant Heather Gearin is a "loan officer" for defendant Castle Point, a company that makes mortgage loans. (Compl. ¶¶ 6-7.) Defendant Royal derives fees in connection with title services for mortgage loans and acts as a "Settlement Company" or "Closer" in connection with real estate closings. (Compl. ¶ 15.) Royal served as "Closing Agent" on the subject mortgage loan transaction. (Compl. ¶ 19.) Castle Point's principals are the majority owners of Royal. (Compl. ¶ 16.)

The Mortgage Loan

On or about July 5, 2005, Option One Mortgage Corporation issued a mortgage loan to Ngwa for $910,000, secured by her residential property at 10 West 123rd Street. (Dkt. No. 24: Compl. ¶ 27.) The Option One adjustable rate loan imposed an interest rate no greater than 9.8% but no less than 6.8%, with an initial fixed interest rate of 6.8% for the first two years. (Compl. ¶ 28.) The Option One mortgage required Ngwa to make a monthly payment of approximately $6,035. (Compl. ¶ 28.) In or about December 2006, Ngwa defaulted on the Option One mortgage, with a balance of $986,779.27, and was the subject of a foreclosure action. (Compl. ¶ 27.)

In December 2006, Ngwa received a "cold call[]" from Gearin, on behalf of Castle Point, offering to refinance Ngwa's existing mortgage. (Compl. ¶ 27.) After Ngwa informed Gearin of her current income, Gearin told Ngwa that she qualified for a refinanced loan from Castle Point with more favorable payment terms than her Option One loan. (Compl. ¶ 31.) Gearin stated that she could refinance Ngwa's existing mortgage loan for "'just over one million dollars'" with a lower interest rate and smaller monthly payments than Ngwa's Option One mortgage. (Compl. ¶ 30.) Additionally, Gearin explained to Ngwa that Castle Point's refinance loan was "'the only way' that [Ngwa] would be able to 'save her home'" and that the proposed loan would result in the satisfaction of her current mortgage and a "'significant cash out' for [Ngwa's] 'benefit.'" (Compl. ¶¶ 32-33.) Based upon Gearin's representations, Ngwa decided to refinance her mortgage loan with Castle Point. (Compl. ¶ 34.)

In late December 2006 and in early January 2007, Ngwa provided Castle Point/Gearin and Royal respectively with relevant income information and "executed tax income/income record authorizations" to permit the Castle Point Defendants to obtain her income information from the Internal Revenue Service and related tax authorities. (Compl. ¶¶ 35-36, 49.)

On December 29, 2006, Ngwa received "initial disclosure" documents from Castle Point, indicating the principal balance of the refinance loan as $1,135,000, with an adjustable interest rate, to be secured by Ngwa's home. (Compl. ¶¶ 37-38, 109.) Additionally, the initial disclosure documents indicated that Ngwa's monthly payment obligation under the loan would be $11,965.19.

(Dkt. No. 22: Harrison Aff. Ex. 2: "Initial Disclosure" documents at CPM 000158.) The first document, entitled "Federal Application Policy and Disclosure Notices," included a "Rescission Notice," which stated, "If you are refinancing your primary residence, you[r] loan is subject to a three (3) business day Right of Rescission. Funds will not be disbursed until the fourth (4) business day after closing. Sundays and legal holidays are not counted in determining the rescission period." (Harrison Aff. Ex. 2: Initial Disclosure documents at CPM 000146.) The "initial disclosure" packet also contained a "Uniform Residential Loan Application," a "LIBOR Adjustable Rate Mortgage (ARM) Disclosure," describing the features of her adjustable rate mortgage program, and a "Consumer Handbook on Adjustable Rate Mortgages." (Harrison Aff. Ex. 2: Initial Disclosure documents at CPM 000149, 000163, 000169-73.) Neither Gearin nor Castle Point explained the "initial disclosure" documents to Ngwa. (Compl. ¶ 45.) The Initial Disclosure documents did not disclose the loan's Annual Percentage Rate, Finance Charge, Amount Financed, Total of Payments or Total Number of Payments. (Compl. ¶¶ 39-43.) According to the complaint, the Initial Disclosure documents "did not contain a 'Truth in Lending Statement', as mandated by the Truth In Lending Act." (Compl. ¶ 44.)

Soon after, Gearin called Ngwa and advised her to sign the documents and return them to Castle Point in order to enable Ngwa to "close" on the proposed loan. (Compl. ¶ 46.) Gearin reiterated that the proposed loan was the "'only way'" for Ngwa to "'save'" her home, and that the loan was a "'good deal'" with "'easily'" affordable monthly payments that might "'qualify'" Ngwa for even more favorable terms if she "remained current on [her] loan for one year." (Compl. ¶ 47.)

Based on Gearin's representations, Ngwa agreed to proceed with Castle Point's proposed loan. (Compl. ¶ 48.)

Gearin advised Ngwa that she did not have to be represented by an attorney at the loan closing. (Compl. ¶ 52.) On January 25, 2007, Royal held the loan "closing" at Ngwa's residence and the Royal representative, who was unaware of the specific information concerning the loan, presented Ngwa with numerous documents to sign. (Compl. ¶¶ 50-51, 55-56.) Ngwa received documents entitled: (1) "Mortgage;" (2) "Adjustable Rate Rider;" (3) "U.S. Department of Housing and Urban Development [Settlement] Statement" ("HUD Statement"); (4) "Federal Truth-In-Lending Disclosure Statement;" and (5) "Uniform Residential Loan Application" (Compl. ¶ 57; see also Compl. ¶¶ 58-59.)

The Mortgage indicated that Castle Point's loan contained a principal balance of $1,165,000,*fn2 "plus interest and other amounts that may be payable." (Compl. ¶ 59; Harrison Aff. Ex. 5: Mortgage ¶ E.) The "'Adjustable Rate Note'" stated that Ngwa was obligated to pay a yearly 11.875% interest rate subject to change, but "will not be greater than 17.875% or less than 6.500%." (Compl. ¶¶ 62, 65; Harrison Aff. Ex. 6: Adjustable Rate Note ¶¶ 2, 4(D).) According to the "Adjustable Rate Note," Ngwa's initial monthly payments were to be $11,871.36, subject to "change." (Compl. ¶ 63; Harrison Aff. Ex. 6: Adjustable Rate Note ¶ 3(B).) The "Adjustable Rate Rider" attached to the "Mortgage" stated that Ngwa's interest rate "may change on the first date of February, 2012, and on that day every 6th month thereafter" but "'will[] never be increased or decreased on any single Change Date by more than . . . (2.000%)' from the rate of interest [Ngwa was] paying 'for the preceding 6 months.'" (Compl. ¶¶ 70, 73; Harrison Aff. Ex. 5: Adjustable Rate Rider ¶¶ 4(A), 4(D).)

The "Truth-In-Lending Disclosure Statement" included information regarding the loan's "Annual Percentage Rate," "Finance Charge," "Amount Financed," "Total of Payments," "payment schedule," "Variable Rate Feature,"and notified Ngwa that she was "giving a security interest" in her residential property at 10 West 123rd Street. (Compl. ¶¶ 75-81; Harrison Aff. Ex. 7: Truth-In-Lending Disclosure Statement at 1.)

Additionally, Ngwa received a "HUD Statement" reflecting the charges associated with her loan including a $46,000 "Loan Origination Fee" to Castle Point; a $595 "Application Fee" to Castle Point; a $795 "Processing Fee" to Castle Point; a $375 "Settlement or closing fee" to Royal;*fn3 a $350 "Title examination" fee to Royal; a $3,153*fn4 "Title Insurance" charge to Royal; $83,131.40 "Total Settlement Charges;" and a ...

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