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Manor Mortgage Corp. v. Giuliano, 251 N.J. Super. 13, 596 A.2d 763 (App.Div. 1991)

Some mortgage broker agreements require the borrower to pay the broker fee if the borrower decides to cancel or not proceed with the transaction. In a non-purchase money loan -- i.e., one subject to the three-day right to cancel under TILA -- such a provision contradicts the rescission notice and is illegal. Manor Mortgage Corp. v. Giuliano, 251 N.J. Super. 13, 596 A.2d 763 (App.Div. 1991).

This is because all compensation payable by the borrower to mortgage brokers is now defined as a finance charge, and upon exercise of the right to rescind the borrower is relieved of liability for all finance charges. If the broker made the loan in its name, under the industry practice commonly known as "table funding," the broker is a creditor and any attempt by the broker to collect a finance charge is a TILA violation.

Manor Mortgage, supra (mortgage broker sued for fee after borrower rescinded; court not only held that broker could not recover fee, but where broker qualified as "creditor" because loan was issued in its name, found that attempt to collect fee amounted to a refusal to rescind and awarded statutory damages and attorney’s fees).

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