The United States District Court for the District of New Jersey recently granted a motion for summary judgment to a mortgage lender and servicer, among others, on the plaintiffs’ claims that arose from their allegation that the lender unilaterally had increased their interest rate at the closing.  See Thomas v. Jersey Mort. Co., 2016 WL 4705449 (D.N.J. 2016).  The plaintiffs commenced the federal action on January 29, 2013, two days after the sheriff’s sale of their home pursuant to the entry of final judgment of foreclosure in the state court foreclosure action.  In the state court action, the plaintiffs did not deny having defaulted on the mortgage payments, but instead argued that the action was barred because the lender had increased the interest rate on the loan without their knowledge immediately before the closing.  The state court granted summary judgment to the servicer, finding that there was no showing of fraud or misrepresentation, and a final judgment of foreclosure was subsequently entered.  In the present action, the Court sua sponte determined that there exists an issue of subject matter jurisdiction, and found that the final judgment of foreclosure decided many of the matters that the plaintiffs presented in the federal action.  Applying the Rooker-Feldman doctrine, the court held that the state foreclosure judgment necessarily decided many of the claims now brought by the plaintiffs, including the validity of the note and mortgage, the default, and the mortgagee’s right to foreclose.  “To hold—as the [plaintiffs] ask this Court to do—that the defendants defrauded them about the interest rate or violated TILA would potentially invalidate the foreclosure judgment.”  To the extent that the plaintiffs’ federal action contained any claims that were independent of the merits of the foreclosure, the Court determined that “[c]laims that survive scrutiny under Rooker-Feldman may nevertheless be barred by parallel doctrines of res judicata” and the entire controversy doctrine.  Finally, the Court found that the loan closed on October 18, 2006, and the action was brought over six years later, on January 31, 2013; therefore, any of the remaining claims were barred by the statute of limitations.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.