A District Court judge in New Jersey has granted summary judgment in part to a homeowner who claimed her mortgage servicer refinanced her loan and then acted as though it had not, ruling that a contract was formed when the servicer told her the new loan had funded and that three subsequent foreclosure notices were false representations under the Fair Debt Collection Practices Act.
The background: The plaintiff, a retired widow, responded to an advertisement from the defendant, her mortgage servicer, promoting lower rates. She applied and received a Closing Disclosure for a $160,200 loan at 2.375%, dropping her monthly payment from $1,581.45 to $1,124.55. The closing took place at her home on February 8, 2022, with only a notary present. She found numerous errors in the documents, corrected them by hand, and declined to sign two Powers of Attorney that would have let the defendant and its affiliated title company make unilateral changes to the closing paperwork. She testified that the title company’s post-closing manager told her the loan could close without them.
- Six days later, the defendant emailed: “[y]our loan has been funded!” A welcome letter with payment instructions followed.
- Internally, employees were emailing that the Powers of Attorney were “critical to the closing,” but nobody told the plaintiff until about February 22, when a representative said the loan was not funded.
- The plaintiff briefly signed the Powers of Attorney, then withdrew her signature, citing duress, after the revised documents moved the closing date to March. The parties never reached a new agreement.
- She began paying the refinanced amount. The defendant held those payments in a suspense account, sent three Notices of Intention to Foreclose, and reported her as delinquent, which she said cost her credit card applications and other borrowing.
- She sued for breach of contract, violations of the New Jersey Consumer Fraud Act, RESPA, and the FDCPA.
The ruling: Judge Georgette Castner of the District Court for the District of New Jersey held that a contract existed. The application, closing documents, and the defendant’s funding confirmation constituted offer and acceptance. The defendant’s internal debate over the Powers of Attorney did not matter, because a party “is bound by the apparent intention he or she outwardly manifests to the other party,” and its “secret intention” was “immaterial.” No New Jersey law required Powers of Attorney, and no closing document said they were non-negotiable. Liability was established; damages will be calculated later.
- The Consumer Fraud Act claim failed for a reason that cuts the other way: the funding notices “could not mislead Plaintiff into thinking the loan was refinanced, because, as a matter of law, the loan was refinanced.”
- The RESPA claims failed because the plaintiff’s letter challenged the validity of the original loan rather than its servicing, and her only claimed damages were attorneys’ fees, which do not qualify. She also declined to answer the defendant’s cases in reply.
- The foreclosure notices violated Sections 1692e(2) and 1692e(10). Since the FDCPA is a strict liability statute that “does not excuse legal mistakes,” the defendant’s sincere belief that the original loan governed was no defense. The Section 1692f claim was denied as duplicative.
- The judge awarded $500, not the $1,000 maximum, “to reflect the unintentional but three times repeated violations,” and deferred attorneys’ fees because counsel filed no hours affidavit.
