The United State District Court for the District of New Jersey recently denied a lender’s motion to dismiss a claim under the Homeowners Protection Act (“HPA”) because the lender reappraised the value of the mortgaged property when the secured loan was modified. SeeFried v. JPMorgan Chase & Co., 2016 WL 347314 (D.N.J. Jan. 28, 2016). In the case, the plaintiff purchased a home with a loan from the defendant in 2007. Because the loan-to-value exceeded 80%, the plaintiff was required to purchase private mortgage insurance (“PMI”). The defendant provided the plaintiff with a disclosure that stated the PMI would automatically terminate on March 1, 2016, when the balance of the loan had been scheduled to reach 78% of the original value of the property. In 2011, the plaintiff modified the loan, after which the loan balance was scheduled to reach 78% of the original value of the property in July 2014. The defendant, however, informed the plaintiff that her PMI would not terminate until 2026. After repeated inquiries from the plaintiff, the defendant stated that the property had been reappraised during the modification for significantly less than its value at the time of the purchase, and the defendant was using the new appraised value to determine when the PMI would terminate.
The plaintiff then filed a putative class action, alleging violations of the HPA, breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, negligent misrepresentation, violation of the New Jersey Consumer Fraud Act, and violation of the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act. The defendant filed a motion to dismiss all claims. Though the Court found that the HPA expressly preempted all of the other claims and dismissed them, it denied the motion to dismiss the claim under the HPA. The Court found that, unless an updated appraisal of the property was a term and condition of the modification, the defendant could not use this new appraised value to determine the PMI termination date pursuant to the HPA. See 12 USC 4902. Moreover, though the HPA has a two-year statute of limitations and the plaintiff filed her complaint almost three years after the defendant informed her of the 2026 PMI termination date, the statute of limitations did not begin to run until more than a year later, when the defendant finally informed her that it was using the new appraisal to calculate the termination date. Therefore, the complaint was not barred under the statute of limitations.
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