In re New Century TRS Holdings, Inc., 495 B.R. 625

Background

In Sept. 2006 the Longos refinanced their home via an independent broker (Nick Street); New Century funded an adjustable‑rate loan for $365,000. Closing was conducted by a notary who rushed the Longos and did not leave copies of the signed documents.
Longos later discovered prepaid finance charges and other items they found surprising; they allege broker told them to disregard New Century pre‑closing disclosures and that some application signatures/income were falsified or inflated.
New Jersey regulators found New Century double‑charged an $850 application fee and ordered a refund; the Trustee concedes an $850 unsecured claim for that amount.
The Longos filed an unsecured claim in the New Century bankruptcy asserting TILA, HOEPA, RESPA, HOSA, CFA, forgery and related claims; Trustee objected. The claim was initially expunged but reinstated for evidentiary hearing; court held hearing and requested post‑hearing briefs.
The court found New Century provided pre‑settlement TILA disclosures, the loan did not qualify as HOEPA/HOSA high‑cost, RESPA disclosure violations provide no private damages remedy, and the broker was not New Century’s agent; court awarded only limited TILA statutory damages and the $850 refund concession.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1. Pre‑settlement TILA/ §1638 disclosure adequacy	Longos say disclosures were improper/misleading and copies were not provided at closing	New Century produced pre‑settlement disclosures; broker’s statements are separate and broker was not its agent	Court: New Century provided required pre‑settlement disclosures; any reliance/damages would be because of broker, not New Century; no actual damages shown for §1638(b) violations
2. TILA §1635 right‑to‑rescind notice	Longos say they did not receive notice at closing and thus retained rescission rights/are entitled to remedies	New Century says notices were provided pre‑closing and any failure was not attributable to lender; Longos declined to rescind when offered	Held: Longos rebutted delivery presumption but did not prove actual damages or intent to rescind; nevertheless entitled to statutory TILA damages for failure to give right‑to‑rescind notices — court awards $1,000
3. Applicability of HOEPA/HOSA (high‑cost loan rules)	Longos assert loan was high‑cost and required extra disclosures/notice	New Century’s Section 32/HOSA worksheets show APR and fees below statutory triggers	Held: Loan did not meet HOEPA or HOSA thresholds; extra disclosures not required
4. RESPA & New Jersey Consumer Fraud Act (CFA) / broker agency	Longos allege RESPA failures, forged HUD‑1, and that New Century is liable for broker’s misrepresentations under CFA via agency/apparent authority	Trustee/New Century: RESPA disclosure violations provide no private damages; HUD‑1 not signed; broker was independent (no actual or apparent agency)	Held: RESPA claims dismissed (no private remedy); no evidence of forged HUD‑1; broker was not New Century’s agent and there is no CFA liability for New Century for broker’s alleged misconduct

Key Cases Cited

In re Allegheny Int'l Inc., 954 F.2d 167 (3d Cir. 1992) (allocation of burdens in objection to proof of claim)
Vallies v. Sky Bank, 591 F.3d 152 (3d Cir. 2009) (detrimental reliance required to recover actual damages under TILA)
Peters v. Jim Lupient Oldsmobile Co., 220 F.3d 915 (8th Cir. 2000) (four‑part test for causation/detrimental reliance under TILA)
Baker v. Sunny Chevrolet, Inc., 349 F.3d 862 (6th Cir. 2003) (statutory damages not available for §1638(b) timing/form violations)
U.S. v. Petroff‑Kline, 557 F.3d 285 (6th Cir. 2009) (detrimental reliance may be shown by proof borrower would not have taken loan)
Morilus v. Countrywide Home Loans, Inc., 651 F.Supp.2d 292 (E.D. Pa. 2008) (broker‑lender relationship did not establish agency absent lender control)
Bosland v. Warnock Dodge, Inc., 964 A.2d 741 (N.J. 2009) (elements and scope of New Jersey Consumer Fraud Act)