The New Jersey Appellate Division recently affirmed a trial court’s decision that granted a foreclosing lender summary judgment and struck the borrower’s answer and counterclaim in which the borrower made predatory lending allegations. See Deutsche Bank Nat’l Tr. Co. as Tr. of IndyMac INDX Mortg. Tr. 2007-AR19, Mortg. Pass-Through Certificates, Series 2007-AR19 v. Merz, 2019 WL 4940213 (N.J. Super. Ct. App. Div. Oct. 8, 2019). In the case, the lender issued a loan to the borrower in 2007 that was secured by a mortgage on the borrower’s home. The borrower defaulted in 2010 and the lender brought this action in 2015. The borrower counterclaimed under the Consumer Fraud Act (the “CFA”) and alleged that the lender or its predecessor in interest engaged in predatory lending practices, including convincing the borrower to enter into an adjustable rate loan he could not afford and inflating the appraised value of the property. The trial court granted the lender’s motion for summary judgment and struck the borrower’s answer and counterclaim.
On appeal, the Court affirmed. First, the Court found that although the CFA is subject to a six-year statute of limitations, the claim “is preserved under the doctrine of equitable recoupment, which allows a defendant to assert an otherwise stale CFA claim and avoid the statute of limitations, "where, . . . the defendant uses the claim ‘as a shield by way of counterclaim’ instead of ‘as a sword.’" Thus, the borrower’s counterclaim was timely even though it was not raised until eight years after the subject transaction. Second, the Court found that the borrower had not set forth sufficient evidence to defeat the summary judgment motion. Among other things, the Court noted that the borrower was able to make monthly payments for three years before defaulting and did not raise any predatory lending allegations until this action. Moreover, the Court found that the borrower did not proffer anything more than conclusory allegations and “evidence in the media” of predatory practices, and that the borrower clearly benefited from the loan because “the record shows the proceeds from the subject loan were used to pay off [the borrower’s] prior liens and credit card debts as well as provide [the borrower] with $18,000 in cash at closing.” Accordingly, the Court found that the trial court had properly dismissed the borrower’s counterclaim.