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RUTH NADLER and STEPHEN NADLER v. BANK OF AMERICA

November 30, 2010

RUTH NADLER AND STEPHEN NADLER,
PLAINTIFFS,
v.
BANK OF AMERICA, N.A.,
DEFENDANT.



The opinion of the court was delivered by: Thomas P. Griesa U.S.D.J.

OPINION

In this action, plaintiffs Ruth and Stephen Nadler claim that Bank of America violated the disclosure requirements of the Truth in Lending Act, 15 U.S.C. § 1601 et seq. ("TILA"). Bank of America moves to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6), on the ground that the Bank's accurate disclosure at the time of closing is not in dispute, and therefore the complaint fails to state any violation of TILA as a matter of law.

This motion is granted.

BACKGROUND

This case arises because the Nadlers claim that they were improperly charged what is called a loan discount fee. The following facts, alleged in the complaint, are assumed to be true for the purposes of deciding this motion to dismiss.

In April 2009, the Nadlers sought a loan of $600,000 from Bank of America in order to buy a residential cooperative apartment in Manhattan. After the Nadlers' offer for the coop was accepted, the Bank issued a Federal Truth-In-Lending Disclosure Statement pursuant to TILA, as implemented by Federal Reserve Board Regulation Z. 12 C.F.R. § 226.17(b). A copy of the April 26, 2009 Disclosure Statement is attached to the complaint and shows that no "loan discount fee" is to be paid.

On April 27, 2009, the Bank issued a Real Estate Loan Commitment Letter to the Nadlers, approving their loan. A copy of the Commitment Letter is attached to the complaint and shows that no "discount points" would be charged. Additionally, this commitment letter stated that "the interest rate and points" would expire on June 22, 2009.

On June 9, 2009, the Bank issued a second commitment letter, a copy of which is attached to the complaint. The letter states that "the interest rate and points" would expire on June 22, 2009. Additionally, the letter shows that .125% in "discount points" would be charged. Based on the $600,000 loan amount, this would yield a fee of $750.00.

The closing for the Nadlers' coop occurred on July 29, 2010, after the expiration dates of the commitment letters. The HUD-1 Uniform Settlement Statement, executed at the closing pursuant to TILA and Regulation Z, shows that $2,500 would be charged as a "loan discount." At the closing, the Nadlers protested the discrepancy in charges for Discount Points between the June commitment letter ($750) and the HUD-1 Uniform Statement ($2,500). Despite these objections, however, the Nadlers proceeded with the closing, and consequently paid $2,500 for Discount Points.

The claim of wrongdoing in the complaint is that the Disclosure Statement and the two Commitment Letters were improper, because none of these documents disclosed the Discount Points that were ultimately charged. However, the Nadlers do not dispute that the Bank accurately disclosed the actual Discount Points at the time of closing.

Defendant, who filed the present motion on July 2, 2010, now moves to dismiss on the grounds that the Complaint fails to state any violation of TILA as a matter of law.

DISCUSSION

In considering a motion to dismiss, factual allegations in the complaint must be taken as true, Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164 (1993), and all reasonable inferences must be drawn in plaintiff's favor. Hernandez v. Coughlin, 18 F.3d 133, 136 (2d Cir. 1994). In order to survive a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a complaint must plead enough facts "to state a claim for relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547 (2007).

Under TILA, a lender must disclose the terms of the loan "before the credit is extended." 15 U.S.C. § 1638a(2)(A); 15 U.S.C. § 1638(b)(1). Regulation Z specifies that this disclosure is to occur "before consummation of the transaction." 12 C.F.R. § 226.17(b). It is well settled that "consummation" occurs "when a borrower signs the loan documents and becomes obligated to pay." Ngwa v. Castle Point Mortg., Inc., No. 08cv0859, 2008 WL 3891263 at *9 (S.D.N.Y. Aug. 20, 2008) ("This Court agrees that disclosure at the closing, not the day before the ...


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